National Australia Bank v Sayed (No. 9)

1. [1]

   The First Defendant/Cross-Claimant, Bill Sayed, applies by Motion filed 28 March 2017 to amend his cross-claim yet again. Many but not all of the proposed amendments are opposed but all of the substantive amendments are opposed.

The background

1. [2]

   The background is set out in my judgment National Australia Bank v Sayed (No. 5) [2016] NSWSC 669 at [2]-[26]. Briefly, the Bank brought possession proceedings in May 2010 against Mr Sayed and his wife seeking possession of one of two properties mortgaged to the Bank to secure two loans made at the same time. That property was their home at Woonona. The Bank had obtained possession of a development property at Corrimal consisting of two adjoining lots and sold it. Mr Sayed brought a cross-claim alleging, inter alia, breach of the Bank’s duty as a mortgagee exercising its power if sale. The proceedings were ultimately settled but the Cross-Claim did not form part of the settlement. The issue in the present application, as in earlier ones, is what claims in the Cross-Claim remained to be determined after the settlement.

2. [3]

   In Sayed (No. 5) which concerned an application to file a further amended cross-claim, I found relevantly for the present application that the reintroduction at that time of claims concerning the Woonona property and the cross-collaterisation should not be permitted. I did that by reason of the judgment of the Court of Appeal in Sayed v National Australia Bank Limited [2013] NSWCA 304 and the judgment of Harrison AsJ in National Australia Bank Limited v Sayed (No 4) [2015] NSWSC 420.

3. [4]

   For other reasons I was not prepared to grant leave to Mr Sayed to file the proposed amended cross-claim. Accordingly, his Notice of Motion to do so was dismissed.

4. [5]

   Subsequently, Mr Sayed sought leave to file a further amended cross-claim. I heard that application on 5 September 2016 and gave judgment on 13 September 2016: National Australia Bank v Sayed (No. 6) [2016] NSWSC 1253.

5. [6]

   The issue on that application was whether Mr Sayed should be permitted to plead, as part of his claim for the sale of Corrimal at an undervalue, that the Bank wrongly treated the two lots making up the Corrimal land as landlocked. For the reasons I gave in that judgment I declined to permit Mr Sayed to add that pleading. I did, however, grant leave to him to file a further amended cross-claim in a form which I identified.

6. [7]

   The prior iteration of the cross-claim, called Amended First Cross-Claim, was filed on 18 August 2015. The cross-claim for which I granted leave in Sayed (No. 6) was the Further Amended First Cross-Claim filed 25 October 2016.

7. [8]

   At a directions hearing on 15 February 2017 Mr Lucarelli of counsel for the Bank drew my attention to two matters appearing in the Further Amended Cross-Claim which he submitted I had not permitted to be pleaded in Sayed (No. 5) and Sayed (No. 6). The first of these was a pleading in paragraph 32 which asserted that:

8. [9]

   The second was paragraph 42 under the heading “Unconscionable conduct – ASIC Act 2001”:

9. [10]

   I heard argument in relation to the appropriateness of those two paragraphs or portions of paragraphs remaining in the further amended cross-claim in the light of my two earlier judgments. I then gave judgment striking out paragraphs 32, 42 and 43 of the cross-claim as well as the words in paragraph 33(k) “including MMJ’s assumption of landlocking”: National Australia Bank v Sayed (No. 8) [2017] NSWSC 89.

10. [11]

    In that judgment I said this:

11. [12]

    I directed that any application to amend the cross-claim in relation to those two matters should be made by notice of motion filed 15 March 2017 and made returnable before me on 17 March with the time for service abridged. The parties were agreeable to that course.

12. [13]

    On 7 March 2017 my Associate received an email from Mr Sayed asking for a two week extension of the time to file the notice of motion because of a death in the family. The Bank did not oppose that extension and it was granted.

13. [14]

    The further amended first cross-claim that Mr Sayed sought leave to file contained amendments which went beyond those two areas that I had identified in Sayed (No. 8). However, the Bank took no objection to the amendments on that basis.

14. [15]

    I will first note the amendments proposed by Mr Sayed to which the Bank did not object.

15. [16]

    I will now deal with the proposed amendments to which the Bank objected. References to an existing paragraph or existing wording is a reference to the Further Amended Cross-Claim filed 25 October 2016.

16. [17]

    The existing wording of this paragraph was this:

17. [18]

    Mr Sayed proposes to strike out the words “and his wife Mrs Sayed”. The Bank objects because it says that the advance was demonstrably made to Mr and Mrs Sayed as the loan agreement makes clear. Mr Sayed informed me that he thought the words ought to be removed because on a previous occasion I had indicated that a reference to Mrs Sayed elsewhere in an earlier form of the cross-claim should be removed. However, the circumstances were different. In that earlier form of the cross-claim Mr Sayed (who is the sole cross-claimant) was purporting to assert that the interests of Mrs Sayed had been affected by some action on the Bank.

18. [19]

    Paragraph 8 should not be amended.

19. [20]

    Paragraph 17 in its existing form relevantly read:

20. [21]

    Paragraph 26 in its existing form read:

21. [22]

    Mr Sayed seeks to amend by removing the reference to MERC being NAB’s agent in each case. He says that that is because it is not necessary to assert that NAB carried out certain actions by its agent. The agent’s acts will be the acts of NAB. The Bank opposes the amendments on the basis of a finding I made in Sayed (No. 6) at [4] that MERC was in fact NAB’s agent.

22. [23]

    In my opinion, the amendment should not be permitted. The position is not as straightforward as Mr Sayed asserts because of the particular nature of the agreement between NAB and MERC whereby MERC acted as a principal. Further, in other places in the existing cross-claim Mr Sayed refers to acts of MERC. So that the reader of the cross-claim can have an understanding of who MERC was in relation to NAB and how it was involved, the pleading in paragraph 17 should remain unamended.

23. [24]

    The existing form of paragraph 31 reads this way:

24. [25]

    Mr Sayed wishes to add the following words at the beginning of the paragraph:

25. [26]

    Paragraph 33 asserts that the Bank wilfully and recklessly sacrificed Mr Sayed’s interests as mortgagor. It then listed a number of particulars. Particular (n) in its existing form read:

26. [27]

    Mr Sayed seeks to amend that particular by adding the word “rejected” before the words “tender bid”.

27. [28]

    The Bank objects to these amendments because it says Mr Sayed has served and identified all the evidence he is to rely on and that the evidence does not disclose that NAB rejected tender offers. The Bank objects to the allegation of reassigning the sale of the Corrimal property to an alternative agent on the basis of the relevance of the pleading. The Bank is apprehensive that if the amendment is allowed Mr Sayed will be able to ask for discovery in relation to all of the agents the Bank has appointed. The Bank accepts, however, that there may be evidence of the Bank appointing a new agent at some point in the process.

28. [29]

    In my opinion, the Bank suffers no prejudice if Mr Sayed is allowed to make the amendments to paragraph 31 and the consequential amendment to particular (n) in paragraph 33. If there is no evidence of the Bank having rejected the tender offer as the Bank asserts then Mr Sayed will not be successful in relation to that allegation. I do not share the Bank’s concern about the potential to use the amended paragraph as a basis for getting wide discovery.

29. [30]

    Mr Sayed wishes to insert the following two paragraphs into the cross-claim:

30. [31]

    Mr Sayed says that the time limitation problems in Sayed (No. 6) do not apply if the action is based on fraud and he pleads fraud in relation to the landlocked issue in these two paragraphs. Although he had said in 2016 that he did not rely on fraud in seeking to amend the cross-claim at that time, he said that he took that course to avoid wasting time so that the matter would be heard at the earliest opportunity. He said that, now that the Bank has reopened the matter by complaining about the inclusion of paragraphs 32, 42 and 43 that led to my judgment in Sayed (No. 8), he wishes to plead fraud.

31. [32]

    Mr Sayed should not be allowed to include paragraphs 32A and 32B for a number of reasons. First, the courts take a strict view in relation to allegations of fraud. Criminality is being alleged. Rule 15.3 Uniform Civil Procedure Rules 2005 (NSW) says that the pleading must give particulars of any fraud that is pleaded.

32. [33]

    In Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 Kirby P (with whom Hope and Samuels JJA agreed) said (at 538) that particulars of the fraud claimed must be exactly given and the allegations must be established by the strict proof which such a charge requires. The pleading must specifically allege the acts involved and that they were done in a manner that involves fraud: Redgrave v Hurd (1882) 20 Ch D 1 at 12. Particulars of the knowledge of the falsity of the facts or representation would be necessary. A statement or representation may be wrong without being false.

33. [34]

    What are purportedly particulars under these two paragraphs are simply assertions or conclusions. They are not particulars sufficient to plead fraud.

34. [35]

    Secondly, the paragraphs roll up a number of potential causes of action including conspiracy, deceit and negligence.

35. [36]

    Thirdly, paragraph 32B is misconceived not only because there is no concept of gross negligence in the civil law but because negligence has no place in a claim against a mortgagee for not properly exercising its power of sale: Forsyth v Blundell (1973) 129 CLR 477; Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491. That fact had been recognised by the pleading in paragraph 33 of the cross-claim.

36. [37]

    Fourthly, Mr Sayed is estopped from now attempting to plead the landlocking issue by assertions of fraud in the light of my judgment in Sayed (No. 6). Alternatively, it is an abuse of process for him to endeavour to do so: Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 at [24]-[26]. In Sayed (No. 6) I held that Mr Sayed was not able to make the landlocking claim partly because he had not brought forward the claim in a timely fashion and partly because the Bank would be statute barred from making any claim against its agents as a result of Mr Sayed’s claim against it. Neither of those matters has changed.

37. [38]

    Fifthly, Mr Sayed did not rely on fraud when he applied to amend his cross-claim in 2016. I specifically noted that he did not do so (Sayed (No 6) at [36]) and he has given the explanation I have referred to earlier.

38. [39]

    In Nominal Defendant v Manning (2000) 50 NSWLR 139; [2000] NSWCA 80 the Court of Appeal was considering a situation where an interlocutory application had been made and rejected and a subsequent application was made on evidence not presented in the earlier proceedings. The issue was whether it was an abuse of process for an applicant to do that in interlocutory proceedings.

39. [40]

    The Court by majority rejected the view that an applicant making a second interlocutory application is guilty of an abuse of process unless the other party is guilty of fraud or the application rests on evidence which could not reasonably have been relied on before. However, Heydon JA (one of the judges in the majority) went on to say:

40. [41]

    Acting Justice Foster (the other judge in the majority) said at [123] that such a second application was a matter to be taken into account in the exercise of discretion.

41. [42]

    A matter that weighs heavily in the exercise of that discretion in the present case is the length of time that these proceedings have been on foot and the circumstances that gave rise to them. The loans secured by the mortgages were made on 21 June 2006. Default took place in October 2008 and the proceedings commenced on 28 May 2010. I have otherwise traced the history of the matter in Sayed (No. 5). The significant recent matters are that after Harrison AsJ determined the matter of the In Principle Agreement an amended cross-claim was filed on 18 August 2015. A number of applications were made in 2016 to amend that cross-claim with the result that the present form of that pleading was filed on 23 October 2016.

42. [43]

    Now, at a time eight and a half years after default occurred, more than seven years since the land was sold and almost seven years since the proceedings commenced Mr Sayed for the first time seeks to assert in a pleading that the Bank acted fraudulently in a manner not easy to discern from the pleading so that he can by a second means plead a cause of action that I rejected on one of his applications to amend in 2016. No satisfactory explanation has been given for the failure to bring this matter forward at an earlier time. It would undoubtedly have the effect of delaying further the hearing of the cross-claim which was otherwise at the point where a hearing date can be allocated.

43. [44]

    This is one of the particulars to support the allegation that NAB wilfully and recklessly sacrificed Mr Sayed’s interests as mortgagor. The particular originally read in this way:

44. [45]

    Mr Sayed seeks to amend the particular so that it reads:

45. [46]

    The basis for this amendment is said by Mr Sayed to be that he owned the rights to and the intellectual property in the development approvals and that he would have been in a position to be able to sell them to the ultimate purchaser after the purchase, but by the Bank’s including them in the contract of sale, no increased price was obtained by doing so.

46. [47]

    In my opinion, this proposed amendment is misconceived. The development approval was in the public arena. Mr Sayed may have had a legitimate complaint if the Bank had failed to include with the contract the fact that there was a development approval. No basis is put forward for suggesting that the purchaser did not pay a figure taking into account the development approval. Further, it is not clear how Mr Sayed would have had the right to sell the rights to the development approval nor that a purchaser who had purchased the land would have had any interest in so doing because the purchaser already had the rights that came with the land.

47. [48]

    This amendment should not be allowed.

48. [49]

    This particular relevantly read:

49. [50]

    Mr Sayed seeks to amend this particular to read relevantly:

50. [51]

    It can be seen that this amendment concerns the issue of landlocking. Expressing the matter as “access between the Corrimal Lots” does not mean that it is not concerned with landlocking. Mr Sayed claimed the right to amend this particular on the basis that he wished to allege fraud concerning the landlocking issue. I have dealt with this in considering paragraphs 32A and 32B and have rejected his amendments there. This amendment falls with those.

51. [52]

    These paragraphs in the existing claim read as follows:

52. [53]

    Mr Sayed seeks to substitute for those two paragraphs the following:

53. [54]

    Towards the end of the hearing of this application Mr Sayed handed to me a further form of the further amended first cross-claim which he said was the form of the pleading he wished to file. Mr Sayed said that in lieu of paragraphs 42A and 43A set out above he wished to plead the matter in this way:

54. [55]

    It is necessary to set out the paragraphs referred to from the Defence filed 13 February 2012:

55. [56]

    The Bank submitted that Mr Sayed was precluded from relying on unconscionability in relation to the Corrimal loan because there was a res judicata or an issue estoppel arising out of the judgment of Harrison AsJ in Sayed (No. 4). Alternatively, the Bank submitted that to plead what is contained in paragraphs 42A and 43A is an abuse of process because of what has been decided by Harrison AsJ.

56. [57]

    Mr Sayed submitted that the effect of Harrison AsJ’s judgment was that the Woonona matter was decided but the cross-claim had not been determined. He submitted that the cross-claim about Corrimal had always been about the loan and the sale.

57. [58]

    In my opinion, Mr Sayed should not be given leave to amend in relation to paragraphs 42 and 43. In the first place, it should be noted that in Sayed (No. 8) I struck out paragraphs 42 and 43. It is therefore for Mr Sayed to justify why they should go back into the cross-claim in a different form. What Mr Sayed has attempted to do is to rely on the pleading in the Defence of 13 February 2012 but only for the purpose of the Corrimal loan and the Corrimal mortgage. The issue is, however, whether it can be relied upon to that limited extent or whether the judgment of Harrison AsJ in Sayed (No. 4) results in a res judicata or issue estoppel with regard to that pleading.

58. [59]

    An examination of the Amended Statement of Claim filed 2 February 2011 and the Defence to that Amended Statement of Claim filed 13 February 2012 (the pleadings upon which the In Principle Agreement was based) demonstrates that what was in issue in the proceedings brought by the Bank and defended by Mr and Mrs Sayed was the making of the two loans secured over Woonona and Corrimal. They were made on the same day and in the same circumstances and the pleading in paragraphs 27 – 49 shows the inextricable link between them. The defences raised were raised to the making of both loans. Those defences were (a) a fraudulent misstatement of income; (b) an erroneous representation concerning cross-collateralisation or a failure to explain it; (c) asset lending; and (d) breach of the Banking Code of Conduct. The cross-claim extant at the time filed 13 February 2012 incorporated paragraphs 27-49 of the Defence in the way that the cross-claim now put forward by Mr Sayed endeavours to do.

59. [60]

    In Sayed (No. 4) Harrison AsJ set out the background to the proceedings and the In Principle Agreement. In the course of so doing her Honour said this:

60. [61]

    Her Honour ultimately ordered the performance of the In Principle Agreement and refused a stay pending Mr Sayed’s cross-claim – see at [132].

61. [62]

    What thereafter happened was that solicitors then acting for Mr Sayed amended the cross-claim to remove any pleading except in relation to the claim that the Corrimal property had been sold at an undervalue and that the Bank had not acted appropriately in selling it. Significantly, paragraph 46 of the cross-claim was amended to remove the reference to paragraphs 27-45 of the Defence to the Amended Statement of Claim and to substitute for those paragraphs paragraphs 17-44 of the Amended Cross-Claim. Paragraphs 17-44 were headed “The undervalue sale of Corrimal” and dealt only with that matter. The assertion in paragraph 46 was that in acting in the way set out in paragraphs 17-44 the Plaintiff engaged in unconscionable conduct in breach of s 12CC of the Australian Securities and Investments Commission Act 2001 (Cth). That seems to be the reason that a declaration was sought in that Amended Cross-Claim that the Bank engaged in unconscionable conduct in contravention of that section.

62. [63]

    Putting forward that form of the Amended Cross-Claim was a clear acceptance by Mr Sayed of the determination of Harrison AsJ that all that remained in issue between the Bank and Mr Sayed was the sale of Corrimal at an undervalue. The reason for that was that all other matters concerned with the making of the loans were covered by the In Principle Agreement.

63. [64]

    In Tomlinson the joint judgment of French CJ, Bell, Gageler and Keane JJ said:

64. [65]

    In my opinion, it would be an abuse of process for Mr Sayed to raise in an amended form of the cross-claim matters which had been in issue between the parties but which were finally settled in the In Principle Agreement in respect of which Harrison AsJ granted specific performance. Further, I held in Sayed (No 5) that the cross-collateralisation should not be permitted to be pleaded. That was because it fell within the In Principle Agreement. The loan in relation to Corrimal was inextricably linked to the cross-collateralisation and the other defences relating to the making of the loans.

65. [66]

    It follows from the rejection of those paragraphs that there remains no basis for prayers 2, 4 and 5. Sections 12CB and 12CC of the ASIC Act are concerned with behaviour in the provision of financial services. Sections 12GF and 12GM provide remedies for breaches of sections such as 12CB and 12CC. None of those sections is relevant to any failure on the part of a mortgagee exercising a power of sale. In that regard I accept that I was in error in Sayed (No 8) when I said at [4] that Mr Sayed should be given leave to plead whatever matters he wished in support of prayer 2. There were in fact no such matters to plead because the concept of unconscionability, at least in the ASIC Act, has no relevance to a mortgagee’s sale.

66. [67]

    Mr Sayed sought to refine what he was seeking by a further form of the proposed cross-claim handed up in Court. Mr Lucarelli opposed that document being put forward because he had had no opportunity to consider what changes were contained in it from the proposed form of the amended cross-claim identified in the affidavit in support of the present Motion. It is not necessary to consider that objection further because, in substance, what is contained in that further document suffers the same fate as paragraphs 42A and 43A in the proposed cross-claim.

67. [68]

    I consider that Mr Sayed was largely unsuccessful in his application. The bulk of the time was taken up with consideration of paragraphs 32A, 32B, 42A and 42B in respect of which leave was refused. In those circumstances Mr Sayed should pay the costs of his Notice of Motion.

Conclusion

1. [69]

   Accordingly, I make the following orders:

   1. (1)

      Leave is granted to the Cross-Claimant to amend the Further Amended Cross-Claim filed 25 October 2016 in the manner sought in the form of the cross-claim annexed to the affidavit of Bill Sayed sworn 28 March 2017 (to be entitled Second Further Amended Cross-Claim) in the following respects:

   2. (2)

      The Second Further Amended Cross-Claim is to be filed and served by 28 April 2017.

   3. (3)

      The Cross-Claimant is to pay the costs thrown away by reason of the amendment.

   4. (4)

      The Cross-Claimant is to pay the costs of the Notice of Motion filed 28 March 2017.