Ersh v The Greek Orthodox Parish and Community of Burwood and District Saint Nectarios Limited

By an amended summons filed pursuant to Part 50 of the Uniform Civil Procedure Rules (“the Rules”) the plaintiff initially sought relief which was pleaded in the following terms:

The summons was supported by two affidavits of Andrea Lee, solicitor, sworn 14 August 2014 and 27 February 2015, both of which were read without objection. No evidence was adduced by the defendant.

At the commencement of the hearing, the attention of the plaintiff’s solicitor was drawn to the fact that the orders sought included an order granting leave to appeal. It was pointed out that the grounds as pleaded appeared to assert errors of law, in which case the plaintiff would have an appeal as of right, rather than by leave: Local Court Act 2007 s. 39. The matter having been raised, the plaintiff’s solicitor indicated that order (i) in the summons was no longer sought.

As originally pleaded, the grounds of appeal were in the following terms:

At the commencement of the hearing before me, the plaintiff’s solicitor expressly conceded (T2 L19-20) that the terms in which Grounds 2 and 3 were pleaded were “certainly … deficient”. He then made application to amend those grounds. That application was opposed but counsel for the defendant candidly conceded that his client would be unlikely to suffer any prejudice if it were granted. The plaintiff’s solicitor proceeded to articulate the amendments that he sought and I made an order requiring him to file a further amended summons reflecting them. Such amendments were restricted to grounds 2 and 3. At that stage, Ground 1 was to proceed as originally pleaded.

At the conclusion of the hearing, after some time had been spent hearing submissions in relation to it, the plaintiff’s solicitor indicated that Ground 1 was no longer pressed. Bearing in mind the amendments referred to previously this left two grounds pleaded in the following terms:

Because of the amendments, and notwithstanding the indication given by counsel for the defendant that he was not prejudiced, I set a timetable at the conclusion of the hearing to allow for the provision of further written submissions. Having received the further submissions of the defendant, the plaintiff’s solicitor then advised that the ground in [6](1) was abandoned and that he only pressed the ground in [6](2) above. I have proceeded on the basis that although not specifically pleaded, the plaintiff asserts that the Magistrate’s determination which is referred to in that ground was an error.

The plaintiff brought proceedings in the Local Court for the recovery of a sum of $56,000.00 which was said to have been loaned by her to the defendant. It was the plaintiff’s case (pleaded at para 3 of the Statement of Claim) that she made a series of advances to the defendant totalling $56,000.00 by way of a loan, on terms that the loan would be repayable on giving notice of 1 month.

The plaintiff relied upon a document dated 15 December 1993 as evidence of the loan. That document, on the letterhead of the Greek Orthodox Parish and Community of Burwood and District, was in the following terms:

The document was signed by Father Ezekiel and Miss Pendaki.

The plaintiff pleaded (at para 5 of the Statement of Claim) that by letter dated 20 October 2012 she gave written notice seeking the return of the money. On that day, the plaintiff wrote to Grace Bishop Seraphime in (inter alia) the following terms:

On 15 November 2012 Bishop Seraphime replied in (inter alia) the following terms:

There is no issue that the plaintiff was declared bankrupt on 18 October 2005 and was discharged on 18 October 2008. The present proceedings were commenced on 1 August 2013 although the statement of claim itself was dated 11 July 2013. The plaintiff did not disclose the existence of the debt to her trustee, Mr Jones.

On 14 February 2014 Mr Jones wrote to the plaintiff’s solicitor in the following terms (Ex 2):

That letter was accompanied by an undated document signed, on behalf of Mr Jones, which was in the following terms:

A further letter from Mr Jones to the plaintiff’s solicitor, also dated 14 February 2014, was in the following terms:

At the commencement of the hearing before the Magistrate there were preliminary discussions about the issues, in the course of which the following exchange took place between the Magistrate, Mr Levet of Counsel (who appeared for the defendant) and Mr Hall solicitor (who appeared for the plaintiff):

Accordingly, it was made clear at the outset of the hearing that the defendant would argue that the notice seeking repayment of the loan was not valid. On the plaintiff’s case it was the defendant’s failure to repay the loan upon that notice being given which triggered the right to bring the proceedings.

An affidavit of the plaintiff of 6 November 2013 was read, and the plaintiff was cross-examined. She confirmed (T25 L13-25) the details of her bankruptcy as I have set them out above. She was then asked (commencing at T25 L27):

The plaintiff was then cross-examined about Ex 2 (commencing at T26 L30):

At that point, counsel appearing for the defendant made an application that the proceedings be dismissed on the basis that at the time that the proceedings were commenced, the plaintiff’s cause of action was in fact vested in the plaintiff’s Trustee. That application was refused, and the cross-examination of the plaintiff continued.

The plaintiff confirmed (commencing at T50 L5) that she relied upon the document of 15 December 1993 (at [9] above) as the loan document. She further confirmed that she relied upon her letter of 20 October 2012 (at [11] above) as the document which determined the loan (T52 L29-33; T54 L15 and following).

The plaintiff then gave the following further evidence regarding her bankruptcy (commencing at T54 L30):

The plaintiff confirmed (at T55 L38-40) that the Trustee had not made the demand for repayment because he did not know about the debt. She was then asked (commencing at T56 L13):

At the conclusion of the evidence the Magistrate heard submissions from both parties. Counsel for the defendant encapsulated his position as follows (commencing at T65 L14):

…

The condition of the agreement that is alleged to be breached, is that my client has not made payment after notice. If the notice is defective, no cause of action has yet arisen, the plaintiff’s claim should be dismissed”.

The Magistrate reserved her judgment which was delivered orally on 24 June 2014. Having set out the nature of the claim and the evidence in support of it, and having referred specifically to Ex 2, the Magistrate said (T2 L45-48):

Having recounted the submissions of the parties, her Honour said (commencing at T3 L24):

The plaintiff’s solicitor expressly conceded in the course of the hearing that (to use his words) “at the date the demand was made (the plaintiff) did not have title”. However he submitted that this did not have the effect of rendering the notice invalid. He submitted that by the time that the matter had progressed to hearing, the plaintiff had “procured the entitlement to bring proceedings in respect of the debt”. In making these submissions, he sought to draw an analogy between the plaintiff’s position and the provisions of s. 64 of the Civil Procedure Act 2005 (NSW) (“the CPA”).

In subsequent written submissions, the plaintiff’s solicitor cited various definitions of the word “notice” and submitted that the Magistrate had erred because:

It was submitted that in these circumstances the Magistrate erred in determining that because of the plaintiff’s prior bankruptcy no valid notice had been given.

Finally, it was submitted that the notice was valid because a person may establish a claim of right whenever that person asserts a claim that they honestly believe to be lawful, even though it may be unfounded in law or fact. The plaintiff’s solicitor cited the decision in R v Bernhard [1938] 2 KB 264 in support of that proposition.

Counsel for the defendant submitted that the appeal was fundamentally misconceived. Put simply, the defendant’s position was that the notice on which the plaintiff relied was not one that she was entitled to give. In these circumstances, it was submitted that the notice was not effective in giving rise to a requirement on the part of the defendant to repay the loan.

Counsel for the defendant submitted that the pleading in para 5 of the statement of claim implicitly represented that the plaintiff was a person who was entitled to give the requisite notice. Counsel submitted that this had been squarely put in issue by the defendant and that in these circumstances it was incumbent upon the plaintiff to establish, on the balance of probabilities, that she had given a valid notice. It was submitted that she had failed to do so and that the Magistrate had not erred. It was submitted that the evidence clearly established that the plaintiff’s cause of action relied upon a notice of demand that she had no standing to give.

In written submissions, counsel for the defendant also relied on the fact that at the conclusion of the hearing before me, the solicitor for the plaintiff expressly conceded (at T19 L28-32) that it was incumbent upon the plaintiff to give a valid notice. It was submitted that in light of this concession the plaintiff’s case must necessarily fail.

As noted in [34] above the plaintiff’s solicitor expressly accepted that it was fundamental to the plaintiff’s case that she establish that the notice she gave seeking recovery of the loan money was valid. It follows that if the plaintiff cannot do so her appeal must fail.

I turn firstly to the relevant statutory provisions. Section 58 of the Bankruptcy Act 1966 (Cth) (“the BA”) is in the following terms:

Section 5 of the BA defines “property” as:

The debt said to be owing by the defendant to the plaintiff vested in the plaintiff’s trustee upon her bankruptcy. The plaintiff’s discharge from bankruptcy under s. 158 of the BA did not have the effect of re-vesting, in her, any property which had previously vested in her trustee: Pegler v Dale [1975] 1 NSWLR 265; Daemar v Industrial Commission of NSW and anor. [No. 2] (1990) 22 NSWLR 178.

I am unable to accept the submission made by the plaintiff’s solicitor that the relevant requirement was “simply one that notice be given”. It was necessarily implicit that such notice would be valid. To suggest otherwise would be contrary to common sense. The plaintiff was not in a position to give a valid notice to the defendant seeking repayment of the loan because the debt was not hers to recover. No error has been demonstrated in the Magistrate’s findings in this regard.

I am also unable to accept the submission made by the plaintiff’s solicitor that some relevant analogy is to be drawn between the present circumstances and the provisions of s. 64 of the CPA. That section deals with amendment of documents in proceedings. It says nothing at all about the validity of a notice of the kind presently under consideration.

Further, the decision in Bernhard (supra) does not assist the plaintiff. That case involved criminal proceedings brought under s. 30 of the Larceny Act 1916 (6 & 7 Geo. 5, c. 50) which created a charge of demanding money with menaces with intent to steal. The decision is authority for the proposition that an honest belief in a right to such money constitutes a good defence to a charge under that section. The plaintiff’s solicitor relied, in particular, upon that part of the Court’s judgment at 270 which was in the following terms:

“… a person has a claim of right, within the meaning of the section, if he is honestly asserting what he believes to be a lawful claim, even though it may be unfounded in law or in fact”.

As I understood it, the plaintiff’s solicitor relied upon this passage in support of the proposition that the plaintiff had a claim of right to the debt owing by the defendant and that as a consequence, the notice was valid. Such reliance is, in my view, misplaced. The decision in Bernhard involved a consideration of what might constitute a defence to a criminal charge under s. 30. It says nothing whatsoever about the validity of a notice such as the one issued by the plaintiff in the present case. I am prepared to accept that the plaintiff, at all times, honestly believed that her claim to the money was lawful. That does not affect the fact that at the time of the issue of the notice, the debt was not hers to recover and that, as a consequence, the notice she issued was not valid.

Finally, as I have previously noted, the plaintiff’s solicitor submitted that by the date of the hearing before the Magistrate the plaintiff had “perfected her cause of action”. That submission suggests that prior to the commencement of the proceedings the plaintiff’s cause of action was in some way imperfect. In any event, to the extent that such submission amounted to the proposition that the correspondence from the trustee in Ex 2 cured what was an otherwise invalid notice, I am not able to accept it. The plaintiff may have been able to bring the proceedings with the consent of the trustee. However that consent did not cure the invalidity of the notice.

I make the following orders:

The proceedings are dismissed.

The plaintiff is to pay the defendant’s costs as agreed or assessed.