Perpetual Corporate Trust Limited v Tsiamoulis

1. [1]

   This matter arises from an action for possession of property under a registered mortgage. Pursuant to a notice of motion filed 3 April 2024 (“the Motion”), the matter for me to determine is whether a more recently joined party to these proceedings – Ms Judy Louey, a mortgage broker, and the first defendant to the second cross-claim (“SCC”) brought by Perpetual Corporate Trust Limited (“Perpetual”) (also the plaintiff in the substantive action) – should have the SCC, so far as it relates to her, dismissed pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) and/or the inherent jurisdiction of the Court. In the alternative, orders are sought to strike out certain paragraphs of the SCC pursuant to r 14.28 of the UCPR. The relief claimed by Perpetual against Ms Louey is damages for breach of warranty of authority, and further or in the alternative, damages for negligence. This has come about because the defendant to Perpetual’s substantive claim, Ms Zacharenya Tsiamoulis, contends that she never met Ms Louey (her purported mortgage broker), did not sign any of the mortgage documentation, including a related loan agreement, and that her signature has been forged.

2. [2]

   Also for my determination is whether proposed additional relief sought by Perpetual against Ms Louey in a Proposed Amended Second Cross Claim (“PASCC”) in the nature of damages pursuant to s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”), is statute barred. It can be noted at this point that an attempt by Ms Louey to have separate questions determined in relation to the mortgage, and an interlocutory application to have the defence of Ms Tsiamoulis struck out was refused by Davies J when the matter was before him for directions in the Possession List on 3 May 2024.

3. [3]

   I note that the defendant to Perpetual’s substantive claim, Ms Tsiamoulis, took no active part in the hearing of the Motion, but arranged for a solicitor, Mr Tzovaras, to observe. I further note that that Seek Home Loans Pty Ltd (“Seek”) (the second defendant to the SCC) took no active part in these proceedings, and Perpetual had earlier indicated to Davies J that Perpetual is considering a discontinuance against Seek.

Background

1. [4]

   By statement of claim filed on 5 July 2019, the plaintiff, Perpetual (as lender and mortgagee) sues Ms Tsiamoulis (as the apparent borrower and mortgagor) (the defendant) seeking orders for possession of a property situated at Chester Hill NSW 2162 (“the Property”), judgment in the sum of $815,099.03 being the amount outstanding under the Facility as at 31 May 2019, and interest on that sum.

2. [5]

   It is claimed that on or about 27 November 2014, La Trobe Financial Services Pty Ltd (“La Trobe”) agreed on behalf of Perpetual to provide credit in the sum of $776,000 to Ms Tsiamoulis, by way of a Letter of Offer purportedly signed by Ms Tsiamoulis on 9 December 2014. This was secured by a first registered mortgage also purportedly executed by Ms Tsiamoulis on 9 December 2014.

3. [6]

   Ms Tsiamoulis asserts by way of defence and cross-claim that:

4. [7]

   In answer to Ms Tsiamoulis’ “forgery defence”, Perpetual amended its claims against Ms Tsiamoulis as set out in the Further Amended Statement of Claim (“FASOC”), filed on 14 March 2024, to include alternative claims for:

5. [8]

   Ms Tsiamoulis defends Perpetual’s alternative claims on the following bases as set out in her defence to the FASOC (“Ms Tsiamoulis’ Defence”), filed 2 April 2024:

6. [9]

   By SCC filed on 19 January 2024, the second cross-claimant, Perpetual, has sued Ms Louey in respect of the loan purportedly made by Perpetual to Ms Tsiamoulis. As noted above, the SCC pleads actions in negligence and breach of warranty of authority.

7. [10]

   Ms Louey relies in support of the Motion on three affidavits of Mr James Berg sworn, respectively, on 3 April 2024, 15 April 2024 and 24 May 2024 and tenders the exhibits to those affidavits.

8. [11]

   Perpetual relies on two affidavits of Mr Justin Bates sworn 30 April 2024 and 28 May 2024, together with an affidavit of Ms Tsiamoulis dated 13 November 2023.

9. [12]

   On 12 April 2024, Ms Louey filed a defence to the SCC which, among other defences, raised the Limitation Act 1969 (NSW) as a defence to Perpetual’s cross-claim.

10. [13]

    On 29 April 2024, Perpetual served the PASCC, which incorporates an additional cross-claim against Ms Louey for misleading and deceptive conduct, and a reply to Ms Louey’s defence (“Perpetual’s Reply”) which raised s 55 of the Limitation Act.

11. [14]

    On 1 May 2024, Ms Louey served a proposed amended notice of motion seeking additional orders striking out Ms Tsiamoulis’ Defence, striking out Perpetual’s Reply, and seeking the determination of 3 separate questions with respect to the proper construction of Perpetual’s mortgage.

12. [15]

    The Motion was listed for directions before Davies J on 3 May 2024, at which time Ms Louey sought leave to amend the Motion to seek the relief set out in the proposed amended notice of motion. His Honour Justice Davies:

Uncontested Facts

1. [16]

   Certain facts are uncontroversial, and Ms Tsiamoulis admits:

   1. (1)

      the mortgage was registered;

   2. (2)

      Perpetual paid:

2. [17]

   Annexure “A” to registered mortgage AJ142655B (“the Mortgage”) states:

3. [18]

   From 18 December 2014 to November 2018, loan repayments were made to Perpetual from Ms Tsiamoulis’ La Trobe Financial Loan account.

4. [19]

   In December 2018, loan repayments ceased.

Ms Louey’s submissions

1. [20]

   In short, Ms Louey applies for summary dismissal of the SCC under UPCR r 13.4, or alternatively the striking out under UCPR r 14.28 of most of the SCC. It is contended that the SCC is premised on two fatal defects, and that taken at its highest, it is “manifestly groundless” and “so obviously untenable that it cannot succeed”.

2. [21]

   First, it is submitted, properly construed, the Mortgage secured the monies of $776,000 advanced to Ms Tsiamoulis. Second, it is submitted, the SCC is statute barred.

3. [22]

   Ms Louey contends the following:

   1. (1)

      It is well-established that under the Torrens System, registration of a forged mortgage “confers an indefeasible title on the mortgagee, provided that the mortgagee has not been party or privy to the fraud and no other exception to indefeasibility applies”. The interest of a registered mortgagee is an interest in the land, albeit there remains the question, “what is the quantum of the indefeasible interest?” – or, as it was put by Campbell J in Small v Tomassetti [2001] NSWSC 1112; (2001) 12 BPR 22,253 (“Tomassetti”) at [9], “indefeasibility for what?”.

   2. (2)

      Registration of a forged Torrens title mortgage validates not only the mortgagee’s charge over the land but also the mortgagor’s personal promise (“covenant”) to pay embodied in the forged mortgage. Ordinarily, a personal covenant to repay is protected by indefeasibility upon registration.

   3. (3)

      The construction of the Mortgage (including Annexure “A”) is a question of law that admits of only one answer; there is only one true construction. The Mortgage (including Annexure “A”) is akin to an “old style” mortgage which contains an express obligation to repay the stated sum and the terms of repayment.

   4. (4)

      The principles of construction to be applied are those applicable to a registered instrument.

   5. (5)

      The relevant meaning is that which the language of the document, read in light of its context (the entire text of the document as well as any other document referred to in the text of the document), and the purpose of the document, would convey to a reasonable person in the position of the makers of the document.

   6. (6)

      The Mortgage (including Annexure “A”) is a traditional form of mortgage in that it refers to the principal sum advanced, of $776,000, and contains an acknowledgement that it has been received. Irrespective of forgery of Ms Tsiamoulis’ signature on the Letter of Offer and Memorandum of Provisions AF726834, and on its proper construction, the Mortgage charges the repayment obligation of Ms Tsiamoulis to Perpetual, of $776,000, against the Property.

   7. (7)

      Ms Tsiamoulis’ defence, that by reason of forgery of her signature the Mortgage is a nullity or secures $nil, is manifestly hopeless.

   8. (8)

      Ms Tsiamoulis’ defence to the amended statement of claim and Perpetual’s SCC, which is premised on the success of Ms Tsiamoulis’ forgery defence, are both bound to fail.

4. [23]

   Ms Louey contends that a cause of action “founded on contract (including quasi contract)” is not maintainable if brought after the expiration of six years running from the date on which the cause of action first accrues to the plaintiff.

5. [24]

   It is contended that since Collen v Wright (1857) 120 ER 241 at p 245, breach of an agent’s warranty of authority has been viewed as an action in contract. That an action for breach of warranty of authority is founded on contract (including quasi-contract) is supported by the textbooks, and the highest authority including in the High Court of Australia.

6. [25]

   The three elements of the cause of action are:

   1. (1)

      assertion of authority;

   2. (2)

      inducement by asserting; and

   3. (3)

      a transaction which but for that assertion the other party would not have entered into.

7. [26]

   Ms Louey further contends that the result of the cause of action being classified as contractual is the strict liability customarily placed on parties who make contractual promises, with the consequence that the damages for which a defendant is liable are those required to put the plaintiff in the position in which he would have been had the warranty been made good, that is, had the representation of authority been true.

8. [27]

   It is contended that taking Perpetual’s case at its highest, the breach of warranty of authority of Ms Louey occurred not later than 18 December 2014. The cause of action for breach of warranty of authority is, therefore, statute barred.

9. [28]

   Ms Louey points to the six year limitation period under s 14(1)(b) of the Limitation Act 1969 (NSW) for “a cause of action founded on tort”, and under s 12GF of the ASIC Act, for a claim founded on misleading or deceptive conduct. Ms Louey contends that for economic loss there has to be some actual measurable damage, beyond that which is regarded as negligible, and even though further damage continues to accrue. Time begins to run when the loss or damage is suffered, and it makes no difference that the plaintiff is unaware of the true position.

10. [29]

    Ms Louey also submits that there is no general rule that time does not begin to run until a claimant discovers, or could have discovered upon making a reasonable enquiry, that they have suffered loss.

11. [30]

    Ms Louey argues:

    1. (1)

       A mortgage granted to secure the repayment of a loan may be conceptualised as giving to the lender a chance of being able to recoup the loan from the sale of the mortgaged property, in the event of a borrower defaulting on the repayment of the loan. A commercial opportunity which has some value, which is lost, is compensable in tort and under statute for misleading and deceptive conduct. A commercial opportunity will be of value where there is a substantial, and not a merely speculative, prospect that a benefit will be acquired or a detriment avoided.

    2. (2)

       Taking Perpetual’s case at its highest, Perpetual’s claim is for a loss of commercial opportunity to sue on a chose in action, i.e., a registered mortgage, in the form of Annexure “A”, which incorporated the terms of the Letter of Offer, and Memorandum of Provisions AF726834, as signed by Ms Tsiamoulis.

    3. (3)

       If there were a forgery of Ms Tsiamoulis’ signature on the Letter of Offer, and Memorandum of Provisions AF726834, then Perpetual “lost some right of value, some chose in action of reality and substance” which had “some value (not being a negligible value)”, in that the Mortgage did not, due to the forgery of Ms Tsiamoulis’ signature, incorporate the Letter of Offer and Memorandum of Provisions AF726834 (but only to the extent that efficacy of the Memorandum of Provisions AF726834 is dependent on signing by Ms Tsiamoulis).

    4. (4)

       Where a claimant would have entered into some other agreement on more beneficial terms but for the impugned conduct, so that it can be said that entry into that agreement has caused the claimant to lose the opportunity to make that more beneficial bargain, the claimant suffers loss and damage upon entry into the agreement. Taking Perpetual’s case at its highest, Perpetual suffered loss of a commercial opportunity, which had some value, not later than 18 December 2014.

12. [31]

    Ms Louey asserts that it is the “clearest of cases” that Perpetual’s claim in negligence, and misleading or deceptive conduct, is statute barred under the s 14(1)(b) of the Limitation Act, and s 12GF(2) of the ASIC Act, respectively.

13. [32]

    Ms Louey further contends that Perpetual’s Reply is deficient, does not comply with the rules of pleading, and ought to be struck out, albeit this was part of the proposed amended notice of motion which was disallowed by Davies J. She makes five points:

    1. (1)

       Perpetual’s Reply does not comply with the principles for pleading, and providing particulars, of fraud. Section 55 of the Limitation Act has two limbs. The word “fraud” in s 55(1)(a) and “fraudulently” in s 55(1)(b), refers to “conduct involving some form of dishonesty or moral turpitude”, where “what is involved [is] a consciousness that what is being done is wrong or that to take advantage of the relevant situation involves wrongdoing”. Fraud must be pleaded distinctly and with particularity. Where fraud is alleged, the need for sufficiently clear and precise pleadings and particulars is especially acute. Particulars of fraud must be exactly given. A pleading of fraud must allege not only the acts involved, but that they were done in a manner that involves fraud. The Court is careful not to find fraud unless it is distinctly pleaded and proved. Perpetual’s Reply pleads only a conclusion of “fraudulent concealment” and does not identify the material facts to support the fraud, or fraudulent concealment, nor that the acts were done in a manner that involves fraud.

    2. (2)

       Perpetual’s Reply pleads a cause of action in misleading and deceptive conduct which is required to be pleaded in the SCC:

    3. (3)

       Perpetual’s Reply is silent as to Ms Louey’s state of mind and does not plead that, as a material fact, Ms Louey had any state of mind with respect to the representations alleged to have been made, let alone dishonesty, or moral turpitude, in the sense of consciousness of wrongdoing.

    4. (4)

       The High Court of Australia, contends Ms Louey, has mandated that a case of fraud cannot properly be seen as a “fallback claim” to misleading and deceptive conduct; where a claim in fraud will necessarily focus attention upon what was intended to be conveyed by the maker of the statement; and must make plain that it is alleged that the person who made the statement knew it to be false or was careless as to its truth or falsity.

    5. (5)

       Finally, having regard to the contents of the affidavit Perpetual obtained from Ms Louey, which was served on Ms Tsiamoulis by Perpetual before the filing of the SCC, it is difficult to discern how it is that Perpetual could possibly assert that there are reasonable grounds for a belief that there is available material, by which fraud, or fraudulent concealment, could be proved against Ms Louey.

14. [33]

    In oral submissions, Ms Louey also raised for consideration the operation of s 56C of the Real Property Act 1900 (NSW) as at 1 December 2014. It is contended that this provision creates a statutory obligation for Perpetual to verify the identity of the borrower. The question was raised at the hearing as to whether or not this obligation could be delegated. Ms Louey argued that even if it were to be found it could be delegated, the pleading against Ms Louey would have to identify the material facts showing she concealed Perpetual’s cause of action in a fraudulent way.

15. [34]

    Ms Louey argues Perpetual’s Reply ought to be struck out and any allegation of “fraud”, or “fraudulent concealment”, if it is shown that there is proper basis to plead, and particularise, such an allegation, would need to be re-pleaded in an amended second cross-claim.

Perpetual’s submissions

1. [35]

   Perpetual submits that the Motion is essentially put on two bases:

2. [36]

   Perpetual submits that the Motion should be dismissed for the following reasons:

3. [37]

   Perpetual submits that the success or failure of Ms Tsiamoulis’ defence will turn upon the Court’s construction of Perpetual’s mortgage. It is contended that the position is not as clear and unarguable as submitted on behalf of Ms Louey.

4. [38]

   Whether the Perpetual mortgage secures anything will turn upon the construction of the Perpetual mortgage as a whole, including Annexure A to the Perpetual mortgage and the terms of the Mortgage Memorandum AF726834 as incorporated. Rather than being an “old form” or “old fashioned form” of mortgage, it is a “hybrid” form mortgage. The argument was put as follows at the hearing:

5. [39]

   Perpetual points to Perpetual Trustees Victoria Ltd v Cox [2014] NSWCA 328 (“Cox”) as a case involving a similar point for determination. In that case, there was a forged signature on a payment direction (rather than, as here, an allegation of a forged signature on the underlying loan agreement), and which involved an “old fashioned form” of mortgage in almost precisely the same terms as Annexure A to the mortgage in this case. Justice Leeming extracted the relevant part of the mortgage at [36] as follows:

6. [40]

   In Cox, the Court rejected Perpetual’s construction of the mortgage and found that the monies advanced were not secured by Perpetual’s mortgage (in a case where there was a signed loan agreement). Leeming JA (with Macfarlan and Emmett JJA agreeing) stated at [72] and [74]-[75]:

7. [41]

   Perpetual submits that Cox has been applied by this Court in other decisions where, as a matter of construction, monies advanced under an “old fashioned form of” mortgage (including to a bank account in the borrower company’s name) have been found not to be secured by a registered mortgage, citing Winau Aust Pty Ltd & Ors v LCC Property Development Pty Limited & Ors [2020] NSWSC 434.

8. [42]

   It is contended by Perpetual that Ms Tsiamoulis’ defence will require the Court to determine matters of fact, including whether Ms Tsiamoulis’ signature was forged, the circumstances and nature of the advances made by Perpetual, and whether, on a proper construction of Perpetual’s mortgage, such amounts are secured. Such matters cannot properly, and it is contended, ought not in any event, be determined summarily.

9. [43]

   Perpetual makes clear that it is not suggested by Perpetual that Ms Tsiamoulis will succeed in her defence of Perpetual’s claim, or that Ms Tsiamoulis has good (or even average) prospects of success. However, Ms Tsiamoulis’ defence should not be summarily determined, but rather should be determined at final hearing.

10. [44]

    Perpetual further submits that Ms Louey’s first argument says nothing about the interest which has accrued under the Perpetual loan agreement, and which may be unrecoverable in the event Ms Tsiamoulis succeeds in establishing that her signature on the Perpetual loan agreement was forged. Loss suffered by Perpetual as a consequence of an inability to recover such interest would form part of any damages claim against Ms Louey.

11. [45]

    Finally, Perpetual submits that dismissing the SCC whilst leaving Ms Louey’s defence on foot would leave Perpetual in the invidious position of proceeding to a final hearing where it would face the risk of being unsuccessful against Ms Tsiamoulis and be unable to purse any remedies against Ms Louey. Perpetual ought not be put in such position.

12. [46]

    Perpetual contends that the Limitation Act argument should be rejected for three reasons, as follows:

13. [47]

    Perpetual argues that the Limitation Act does not create a statutory bar to claims in a way which affects the Court’s jurisdiction. Rather, the Limitation Act provides statutory defences which may be relied upon by a defendant to resist certain relief being granted by the Court. It is contended that the High Court has expressed a general reluctance to determine issues relating to limitation of actions except in the clearest of cases, stating, by majority, in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 at p 533 :

14. [48]

    Perpetual submits this is not the clearest of cases. Not enough is known about the damage sustained to Perpetual and the circumstances in which they were sustained to justify a confident answer to questions of limitation on a summary basis. It is put that some claims will only fall for determination if certain claims fail, and certain factual determinations are made. Further, if Perpetual has suffered damage as a consequence of the debt, a determination of what damage was suffered will depend upon the determination of both Perpetual’s subrogation claim and Perpetual’s claim for monies had and received, and a number of ancillary matters.

15. [49]

    Perpetual argues that not only is the claim brought by Perpetual against Ms Louey in negligence not a claim which is clearly statute barred, it is strongly arguable that the claim is not statute barred by reason of the following:

16. [50]

    As to the claim for breach of warranty of authority, Perpetual submits that it is not entirely clear whether an action for breach of warranty of authority is an action in contract, quasi-contract or tort, albeit the balance of authority appears to favour the conclusions that it is a contractual or quasi-contractual action.

17. [51]

    Perpetual contends that there is apparently no clear authority as to how the Limitation Act operates with respect to a claim for breach of warranty of authority. It is at least arguable, submits Perpetual, that given the nature of the cause of action, the Limitation Act ought not apply to an action for breach of warranty of authority as it might to more conventional causes of action for breach of contract. One such argument would be that to apply the Limitation Act where the breach of warranty was not known or knowable until the expiration of the limitation period would be manifestly unjust. The Limitation Act ought not be construed such that it gives rise to a plainly unjust outcome. Quoting Deane J in Hawkins v Clayton (1988) 164 CLR 539, the legislature could not have intended that a cause of action should be barred by lapse of time during a period in which the wrongful act itself effectively precluded the institution of proceedings.

18. [52]

    In Perpetual’s Reply, Perpetual pleaded that if Ms Tsiamoulis is successful in establishing that she did not know anything about the Perpetual Loan, that she did not authorise Ms Louey to apply for the Perpetual Loan and that she did not sign the Perpetual Loan or Perpetual Mortgage, then:

19. [53]

    Perpetual states that in this case, Perpetual does not plead an action in fraud, but rather that its available cause of action was fraudulently concealed by Ms Louey, specifically that Ms Louey’s false representations concealed the relevant facts that:

20. [54]

    Perpetual claims that both the representations and the failure to correct those representations concealed material facts going to Perpetual’s claims against Ms Louey. Perpetual argues that the earliest time it could have discovered its causes of action against Ms Louey was on or around 23 April 2019 when a letter was sent by Ms Tsiamoulis’ then solicitor to solicitors for La Trobe (who managed the loan between Perpetual and Ms Tsiamoulis) indicating that the loan application and mortgage documentation was forged.

21. [55]

    Perpetual notes that it does not advance these allegations independently of Ms Tsiamoulis’ defence, but rather raises and relies upon them solely to the extent they are made out by Ms Tsiamoulis at final hearing (for example, as a critical part of Ms Tsiamoulis’ defence to Perpetual’s alternative claims).

22. [56]

    Further, Perpetual responds to the criticisms made of Perpetual’s Reply in the submissions made on behalf of Ms Louey that:

23. [57]

    Perpetual asserts that the Court ought not strike out Perpetual’s claims on the basis of s 55 of the Limitation Act at this summary stage. The question should appropriately be determined at final hearing as they are claims not obviously statute barred.

24. [58]

    Accordingly, Perpetual argues that the Motion should be dismissed with costs. And pursuant to UCPR 18.6, the Court ought to grant Perpetual leave to file the PASCC, and if necessary to amend Perpetual’s Reply as sought above at [56(c)].

Perpetual’s proposed additional claim for relief in the Proposed Amended Second Cross Claim (PASCC)

1. [59]

   As noted above, I am also to determine if additional relief claimed in the PASCC is statute barred, paragraph 1(c) being expressed as follows:

2. [60]

   The gravamen of the Particulars relied upon in relation to this claim are that on or about 17 November 2014, Ms Louey made certain representations to La Trobe as agent for Perpetual, and to Perpetual (referred to as the Warranty of Authority Representation; the Cash-out Purpose Representation and the Refinance Purpose Representation). Further, that in November 2014, Ms Louey represented to La Trobe that she had met Ms Tsiamoulis in person on or about 6 November 2014 in the context and for the purpose of verifying Ms Tsiamoulis’ identity for the purpose of applying for a loan (the Identification Representation). In reliance on those representations, Perpetual entered into a loan contract and advanced money under the loan agreement. The first three representations were false; in that, Ms Tsiamoulis had not authorised Ms Louey to apply for a home loan with La Trobe, did not seek to borrow funds to refinance an existing mortgage and did not seek to draw additional funds for the purpose of paying for a wedding. The Identification Representation was false; in that, Ms Louey had not met in person with Ms Tsiamoulis for the purposes of verifying her identify.

Legal Principles

1. [61]

   Ms Louey first relies upon r 13.4 of the UCPR, the summary dismissal provision, which provides:

2. [62]

   Whilst a particular sub-paragraph has not been nominated, I assume Ms Louey relies upon r 13.4(b).

3. [63]

   The principles applicable to a summary dismissal application pursuant to r 13.4 of the UCPR are well settled. They impose a high threshold for an applicant to meet. For a summary dismissal application to succeed, there must be a high degree of certainty about the ultimate outcome, if the matter proceeded in the ordinary way: Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [57] and Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27 at [46].

4. [64]

   That threshold will be met if the claims pleaded are so obviously untenable that they cannot possibly succeed or are manifestly groundless, so that going to trial would involve useless expense: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 at pp 129-130. That does not mean, as Barwick CJ observed at p 130, that argument "perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed".

5. [65]

   Once it appears that there is a real question to be determined, whether of fact or law, and that the rights of the parties depend upon it, then it is not competent for the court to summarily dismiss the action. Summary intervention is reserved for cases involving “groundless claims” and must be “very clear indeed”: Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1 at p 91 (per Dixon J).

6. [66]

   In O’Brien v Bank of Western Australia Ltd [2013] NSWCA 71 at [3], Macfarlan JA, with whom Beazley P agreed, identified the following relevant principles gleaned from the decision of the High Court of Australia in Spencer v Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28:

7. [67]

   As stated by Kirby P in Wickstead v Browne (1992) 30 NSWLR 1; [1992] NSWCA 272 at pp 5–6 (subsequently endorsed on appeal (High Court of Australia, Deane, Toohey and Gaudron JJ, 30 April 1993, unrep) and since cited with approval: see, for example, Bakewell v Anchorage Capital Master Offshore Ltd [2019] NSWCA 199 at [37]-[41] (per Bell P, Macfarlan and White JJ agreeing)) common experience teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence.

8. [68]

   Further, it was also observed by the Court of Appeal in Penthouse Publications v McWilliam [1991] NSWCA 222 that on an application of this nature, the Court should adopt a “liberal construction” of the statement of claim (at p 5), and should summarily dismiss the proceeding only if it is plain to the Court that “on no reasonable view of the attacked pleading is there any point in allowing the case to go to trial” (at p 6). More recently, the Court of Appeal in HNOE Limited v Angus & Julia Stone Pty Ltd [2024] NSWCA 271, explored these principles in detail.

9. [69]

   It has also been observed that even where the viability of a claim depends on a proposition of law apparently precluded by existing authority, that is not necessarily the end of the matter, as existing authority may be overruled, qualified or further explained: Spencer at [25] (per French CJ and Gummow J).

10. [70]

    The Court may determine the application having regard to evidence adduced by the parties: UCPR, r 13.4(2). However, if such evidence is received, the Court must not make findings of fact based on that evidence unless there is no other evidence which might emerge during the further conduct of the proceedings which could add to or qualify such findings: Bass v Permanent Trustee Co Limited (1999) 198 CLR 334; [1999] HCA 9 at [50] (per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ).

11. [71]

    Ms Louey also puts forward an alternative case under r 14.28 which provides:

12. [72]

    In State of New South Wales v Williams [2014] NSWCA 177; (2014) 242 A Crim R 22 at [71], Emmett JA (Macfarlan and Simpson JJA agreeing) summarised the applicable principles for striking out a pleading (albeit in the context of an application to strike out a defence) as follows:

Consideration

1. [73]

   Ms Louey contends her argument as to indefeasibility will inevitably succeed and thus the SCC will inevitably fail (and thus should be summarily dismissed or struck out) whether or not Ms Tsiamoulis’ signature was forged on the loan agreement. The argument proceeds this way: if Ms Tsiamoulis’ signature was not forged, the loan agreement forms part of the mortgage, and indefeasibility flows. If it is forged, that part of Annexure A which refers to the loan agreement would simply be notionally excised.

2. [74]

   I am not of the view that this argument should be determined summarily. There is not a high degree of certainty that the argument in relation to the indefeasibility of the mortgage will inevitably succeed. My reasons are as follows.

3. [75]

   First, underpinning the two alternative strands of the argument is a factual determination which can only be determined at a substantive hearing where Ms Tsiamoulis’ defence can be tested.

4. [76]

   Second, to contend that in the absence of any factual finding, the Court could assume the loan agreement (which is not protected by registration) is forged and then to notionally excise that part of Annexure A which refers to the Memorandum of Provisions AF726834 and by incorporation, the loan agreement, would potentially deprive Perpetual of its claim to interest, which is not insignificant. As at May 2024, the total amount owing, including interest and fees, was over $1.5 million. Ms Louey contended in oral submissions that interest could be an implied term based on Reserve Bank rates, but also referred to a loan in a non-commercial situation where there is a mortgage to simply repay the principal. In my view, the issue of Perpetual’s claim to interest is clearly one which needs appropriate ventilation at a final hearing.

5. [77]

   Third, I am not satisfied to a high degree of certainty of the outcome based on the argument of notional excision. Ms Louey’s argument is that even if Ms Tsiamoulis’ signature on the loan agreement was forged:

6. [78]

   However, on the face of the Mortgage it is at least arguable that the mortgage document together with Annexure A should properly be read as a whole. It can be remembered that Annexure A included the following:

7. [79]

   One can note that the words which I have italicised may well have the effect that the part of the sentence following the words “together with” cannot, on its plain reading, obviously be excised. One can also note that the words “this obligation” and “is” connote a singular obligation.

8. [80]

   If Annexure A is read as a whole, in my view there is an available argument (should there be a yet-to-be-determined factual finding that the loan agreement was forged), that none of Perpetual’s interests are protected by indefeasibility. The argument, in short, is that within the Mortgage Memorandum of Provisions AF726834W (itself a registered document, and a copy of which is contended by Ms Tsiamoulis to include her forged signature), are certain definitions which refer to another document including the following:

9. [81]

   The loan agreement document is also contended by Ms Tsiamoulis to include her forged signature. This document is not registered, and if fraudulently signed is of no effect. As such, there is an argument that this adversely affects the indefeasibility of the registered documents which incorporate it.

10. [82]

    Such an argument is in part based on Cox. It is true that the facts of Cox are not on all fours with the facts of this case. In Cox, the “Mortgage” was defined to mean “the Mortgage Form including all schedules and annexures and this document”, and the “Mortgage Form” was defined to mean “the form of mortgage that You have executed that refers to and incorporates this document”. In that decision at [38], Leeming JA stated “The Mortgage was thereby defined by reference to documents, rather than its juridical status as a creature of statute amounting to a charge on the land”. Cox also involves the non-payment of money under a payment direction which was found to be forged, and payment was made to an account which was not that of the mortgagors.

11. [83]

    Notwithstanding those differences, however, in my view the general principles set out in Cox provide an arguable basis that the two pages of the Mortgage, which includes Annexure A, are to be read as a whole. This in turn means that the potentially forged loan agreement is arguably incorporated, which thus may undermine Perpetual’s indefeasibility.

12. [84]

    It can also be noted that in Tomassetti, the face of the mortgages specified not only the sum secured by the mortgage but, unlike this case, also the date of repayment and the interest rate: see [13]–[14]. On the particular construction of the mortgages in that case, Campbell J found the mortgagee had indefeasible title to secure the principal and interest. That outcome can be compared to the case of PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 (“Maradona”) cited in Tomassetti. In Maradona, the mortgagor had executed a guarantee (and also the mortgage) at a time when she lacked capacity. The mortgage secured, inter alia, sums of money which were owing to the mortgagee by the mortgagor and any other indebted person or either of them. Justice Giles found that the mortgagee was indefeasibly entitled to a mortgage but a mortgage which secured nothing. As stated in Tomassetti at [12]:

13. [85]

    I have also considered Printy v Provident Capital Limited [2007] NSWSC 287 and the additional cases discussed therein. As observed at [34]:

14. [86]

    I have considered the submission from Ms Louey that this is a “discrete question of law” which has only one correct answer. The argument was put in oral submission as follows:

15. [87]

    The contention that each question of law has only one correct answer (Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [60]) and that I can therefore make a determination taking the evidence of the defendant at its highest is not an appropriate approach in this case (cf HNOE Limited at [58], where there were no facts to be determined, and there was a clear legal outcome). As Dixon J stated in Dey at pp 91–92:

16. [88]

    The argument in relation to indefeasibility in the circumstances of this case is debateable. So much is not only obvious from the previous paragraphs, but also from the fact that Perpetual, who is the plaintiff in this matter, contends that that is the case. Further, I accept the force of Perpetual’s argument that it is not appropriate to summarily dismiss Ms Tsiamoulis’ defence in a hearing which does not involve her.

17. [89]

    A cause of action founded on contract (including quasi-contract) cannot be maintained if brought after the expiration of six years running from the date on which the cause of action first accrues to the plaintiff: Limitation Act, s 14(1)(a).

18. [90]

    As has been made clear by the High Court of Australia in Wardley, it is generally undesirable, except in the clearest of cases, to determine limitation questions in advance of hearing the action because it is usually the case that insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question.

19. [91]

    As noted above, it is contended by Ms Louey that since Collen, a breach of warranty of authority allegation has been regarded as akin to an action in contract or quasi-contract and, taking Perpetual’s case at its highest, the breach of warranty of authority of Ms Louey occurred not later than 18 December 2014, and thus it is clearly statute barred.

20. [92]

    I note that the weight of authority, as conceded by Perpetual, is that a breach of warranty of authority is akin to a breach of contract or quasi-contract. Further, it would appear that contrary to Perpetual’s contention, there is authority (for instance Sims v Commonwealth of Australia (2022) 109 NSWLR 546; [2022] NSWCA 194 at [147]-[152]) as to how the Limitation Act operates with respect to a claim for breach of warranty of authority.

21. [93]

    However, in my view, it is at least arguable that a breach of warranty of authority may not be known or knowable until after the expiration of the Limitation Act period, thus being prevented from pursuing such an action could be argued to be manifestly unjust. At a final hearing, should the issue arise on the facts as found, an argument could be mounted on the basis of what Deane J stated in Hawkins at pp 589–590, that the Limitation Act ought not be construed such that it gives rise to a plainly unjust outcome where the wrongful act itself effectively precluded the bringing of proceedings. Although I acknowledge that such a principle has apparently, to date, been confined to allegations of misconduct against solicitors for negligence, as noted above at [69], existing authority may be overruled, qualified or further explained: Spencer.

22. [94]

    Further, and more importantly, it is not clearly demonstrated that an argument pursuant to s 55(1)(b) of the Limitation Act based on fraudulent concealment is bound to fail. To the extent that it is submitted by Ms Louey that the claim of fraudulent concealment is inadequately pleaded, such a deficiency could readily be remedied by the provision of leave to replead in the terms indicated by Perpetual above at [56(c)]. In my view, it is appropriate to grant leave to replead in those terms in order to make the allegation abundantly clear.

23. [95]

    It is in this context that I observe that Ms Louey’s criticisms of Perpetual’s Reply fail to acknowledge the arguments made by Perpetual summarised above at [52]–[56] that the contention of fraudulent concealment made by Perpetual arises directly from the defence filed by Ms Tsiamoulis. It is directed at the limitation point and picks up the words of the Limitation Act, s 55(1)(b). For convenience I set out the terms of s 55:

24. [96]

    As stated in Seymour v Seymour (1996) 40 NSWLR 358 at p 372 (Mahoney ACJ, Meagher JA and Abadee AJA agreeing), in order to rely on s 55 of the Limitation Act and fraudulent concealment:

25. [97]

    I am of the view that such an issue should be determined at a final hearing after evidence has been heard and factual findings made.

26. [98]

    As to the claim of negligence, there is also a six year limitation period for “a cause of action founded on tort”: Limitation Act, s 14(1)(b).

27. [99]

    I accept Perpetual’s argument that it is arguable that a claim in negligence is not statute barred, because a tortious action does not accrue until damage is sustained: Commonwealth v Cornwell (2007) 229 CLR 519; [2007] HCA 16 at [5]. To determine the time at which a tortious action accrues, damage must be actual damage of a measurable kind and prospective or contingent damage is insufficient: Wardley at pp 528, 531–532; and there is an available argument that causes of action for tortious conduct giving rise to a lender entering into a contract to loan money may not accrue until the point in time at which recoupment becomes impossible: Hunt & Hunt v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; [2013] HCA 10 at [32]; Hawkins at p 601.

Perpetual’s proposed additional claim for relief for misleading and deceptive conduct

1. [100]

   There is also a six year limitation period for claims founded on misleading and or deceptive conduct: ASIC Act, s 12GF(2). Even though I cannot see an equivalent section to s 55 of the Limitation Act which would directly apply to s 12GF, this issue was not fully argued before me.

2. [101]

   I note the comments by O’Bryan J in Reilly v Australia and New Zealand Banking Group Limited (No 2) [2020] FCA 1502 at [20]:

3. [102]

   In my view, it is appropriate that the limitation argument in relation to this claim (which also requires a determination of when loss or damage was sustained) be dealt with at a final hearing, once the factual findings have been made. I do not consider this to be the clearest of cases which would make it appropriate to determine the limitation question at this interlocutory stage. In my view, it is appropriate to fully explore the limitation question in light of the evidence adduced at a final hearing.

Conclusion

1. [103]

   For the above reasons, I am of the view that the Motion should be dismissed. Costs should follow the event.

2. [104]

   I give leave to Perpetual to amend the SCC as indicated above at [56(c)]. Given I am of the view that the claim of misleading and deceptive conduct is not necessarily statute barred, it can be included in the Proposed Amended Second Cross Claim.

Orders

1. [105]

   I make the following orders:

   1. (1)

      The Notice of Motion of 3 April 2024 is dismissed.

   2. (2)

      Leave is granted to Perpetual to amend paragraph 4(d) of Perpetual’s Reply to the Second Cross Claim of 29 April 2024, such that an additional subparagraph is inserted in the following terms:

   3. (3)

      Leave is granted to Perpetual to include in the Proposed Amended Second Cross Claim, the claim of misleading and deceptive conduct pursuant to s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth).

   4. (4)

      Ms Louey is to pay the costs of this Notice of Motion.