Permanent Custodians Ltd v Daneshyar Enterprise Pty Ltd

1. [1]

   By a Notice of Motion filed on 28 June 2024 (“the Motion”), the defendant, Daneshyar Enterprise Pty Ltd, sought, inter alia, an order setting aside the default judgment obtained by the plaintiff, Permanent Custodians Limited, on 5 March 2024 (“the Default Judgment”). The default Judgment was in the form of a “Judgment Order” (produced in exhibit 4 in these proceedings). That order was executed by the Principal Registrar on 6 March 2024, but, it was entered on 5 March 2024.

2. [2]

   By the Default Judgment, there was an order for the payment of debt outstanding under the plaintiff’s registered mortgage, AS479379 (“the Mortgage”) pursuant to a loan agreement (“the Loan”) and possession of the whole of the land in folio Identifier 9/14/111234 situated at and known as 851 Punchbowl Road, Punchbowl in the State of New South Wales (“the Property”).

Background

1. [3]

   The defendant purchased, at the dates specified, the following properties:

   1. (1)

      837 Punchbowl Rd, Punchbowl for $910,000 on 22 November 2019,

   2. (2)

      154 Picnic Point Rd, Picnic Point for $930,000 on 30 March 2020,

   3. (3)

      406 Marion St, Condell Park for $590,000 on 22 October 2020, and

   4. (4)

      The Property, for $1,025,000 on 30 April 2022.

2. [4]

   The first three named properties were mortgaged to the National Australia Bank (“the NAB Mortgages”), whereas the Property was mortgaged to the plaintiff.

3. [5]

   The defendant entered into a loan agreement with the plaintiff which advanced funds to the defendant secured by the Mortgage. The Loan and Mortgage were managed on behalf of the plaintiff by Bluestone Servicing Pty Ltd (“Bluestone”). I will discuss the contents of the loan agreement below.

4. [6]

   On 3 June 2021, Mr Daneshyar, the sole director of the defendant, was charged under s 86(3) of the Crimes Act 1900 (NSW), namely, specially aggravated take/detain with intent to ransom in company and occasioning actual bodily harm. The plaintiff pleaded not guilty to this offence.

5. [7]

   On 13 September 2023, all of the defendant’s property was restrained by the New South Wales Crime Commission (“NSWCC”) by an order of this Court, which included, inter alia, the properties secured by the NAB Mortgages and the Property (collectively the restraining orders for all the properties shall be referred to as the “restraining orders”. The restraining order operating with respect to the Property shall be referred to as the “restraining order”.)

6. [8]

   On 12 October 2023, the defendant’s former solicitors negotiated a variation to the NSWCC restraining orders which provided for monthly repayments of the NAB Mortgages to be made from the defendant’s Suncorp bank account (the “Suncorp account”). The variation did not provide for repayment of the Loan by the plaintiff, and the defendant fell into default. In Mr Daneshyar’s affidavit of 27 June 2024, he stated that he did not realise that only the properties subject to the NAB Mortgages were caught by the variation to the restraining orders. Mr Daneshyar stated that the balance of the defendant’s Suncorp bank account, at that time, was $500,000.

7. [9]

   Mr Daneshyar did not understand and failed to communicate to the plaintiff that a further variation of the NSWCC restraining orders was required. Consequently, the defendant remained in default.

8. [10]

   On 23 November 2023, the plaintiff issued a default notice to the defendant. I note that Mr Daneshyar is listed as the Guarantor.

9. [11]

   In November and December 2023, Mr Daneshyar sought to arrange payment of the arrears and future monthly repayments from the Suncorp account pursuant to a “third party authority”. It appears Mr Daneshyar requested from Bluestone (over the phone) and received a third party authority form via email on 15 November 2023, which he signed on 16 November 2023 authorising Ms Melanie Horswill to deal with Bluestone on Mr Daneshyar’s behalf. However, on 20 November 2023, a representative of Bluestone sent Mr Daneshyar an email highlighting that Melanie Horswill had not signed the document and must do so “in order to [be] add[ed] on the account”.

10. [12]

    On 18 December 2023, a representative from Bluestone sent an additional email to Mr Daneshyar attaching the third party authority form to be completed.

11. [13]

    On 22 December 2023, a representative from Bluestone emailed Mr Daneshyar to follow up his account arrears of $17,262.42. Four minutes later Mr Daneshyar replied with the following:

12. [14]

    On 18 January 2024, the plaintiff filed a claim in these proceedings (“the Claim”) seeking, inter alia, judgment for possession of the Property and debt for money owing under the Mortgage.

13. [15]

    On 19 January 2024, the defendant was served with the Claim. Mr Daneshyar was informed by the defendant’s accountants on the day that the defendant had been served with the Claim.

14. [16]

    No defence was or has been filed or served on the plaintiff by the defendant to date.

15. [17]

    On 5 February 2024, Mr Daneshyar made a further attempt to arrange for the plaintiff to be paid from the Suncorp account via an email to accounts@r-r.com.au advising that the NSWCC had ceased all of his bank accounts. The communication was as follows:

16. [18]

    On 23 February 2024, a representative from Bluestone emailed Mr Daneshyar to follow up his account arrears of $34,386.57. The text of that email included the following:

17. [19]

    As mentioned earlier, on 5 March 2024, the Default Judgment was entered. The defendant’s director, Mr Daneshyar was not then aware of the Default Judgment, however, a file note of a phone call between Bluestone and Mr Daneshyar on that day at approximately 1.19pm indicated that he may have been made aware of the Default Judgment.The note recorded that Mr Daneshyar stated that he would call back in an hour with his lawyer. The file note read as follows:

18. [20]

    On 18 March 2024, the Court issued a writ of possession for the Property (“the Writ”).

19. [21]

    On 3 April 2024, pursuant to the Writ, the NSW Sheriff issued a notice to vacate and scheduled an eviction to take place at the Property on 16 May 2024 (“the First Eviction”).

20. [22]

    On 16 April 2024, the defendant’s solicitors emailed the plaintiff’s solicitor and asserted that the plaintiff was “aware of the circumstances as to why the loan has not been paid” and requested particulars of the Default Judgment, which had recently come to the defendant’s attention.

21. [23]

    On 13 May 2024, the First Eviction was stayed at the plaintiff’s request.

22. [24]

    On 15 May 2024, at the plaintiff’s request, the NSW Sheriff issued a further notice to vacate and scheduled an eviction to take place at the Property on 24 June 2024 (“the Second Eviction”).

23. [25]

    The affidavit of Mr Daneshyar of 27 June 2024 asserted that it was not until 4 June 2024, that Mr Daneshyar became aware that the NSWCC restraining orders had not included an exception for the Mortgage. This appears inherently improbable considering the email that the defendant’s lawyers had sent, on presumably the instructions of the director of the defendant , on 16 April 2024 to the plaintiff’s solicitors, acknowledged the default judgment and asserted that the plaintiff “was aware of the circumstances as to why the loan has not been paid”.

24. [26]

    On 5 June 2024, the defendant’s solicitors sent an email to the NSWCC with a view of obtaining a further variation to the restraining orders to allow repayments of the Loan in relation to the Property. A copy of the Claim and Default Judgment Order was also sent to the NSWCC. I also note at this juncture the subject of this email chain was “RE: NSWCC v Abbas Daneshyar – proceeding number 2023/00291877” (which was not the file number for this proceeding).

25. [27]

    On 24 June 2024, the Second Eviction took place and the plaintiff was placed into possession of the Property by the NSW Sheriff, by way of execution of the Default Judgment and the Writ.

26. [28]

    Additionally, on 24 June 2024, a number of emails were exchanged between the defendant’s solicitor and the NSWCC. In an email sent at 12.12 pm, the NSWCC enquired about whether the mortgagee had consented to the variation orders proposed by the defendant’s solicitors. At 12:25 pm, the defendant’s solicitors replied that “we have not sought the Mortgagee’s consent as the Mortgage[e] is not a party to these proceedings”. At 1:39 pm the NSWCC sent a further reply which stated, “To expedite our approach to the Court in seeking these orders, it would be prudent to confirm the Mortgagee is not opposed to the proposed course of action, being the payment of arrears and then resumption of the mortgage repayments”. Having regard to the evidence before the Court, this email was not replied to.

27. [29]

    On 2 July 2024, at 11:46am the NSWCC sent revised consent orders to the defendant’s solicitor for consideration and asked, “Can you please advise if you have made contact with the Mortgagee in respect of the proposed course of action?”.

28. [30]

    The defendant’s solicitor returned those signed orders via email at 6.03pm (“the Consent Orders”), however, did not provide a response regarding contacting the Mortgagee.

29. [31]

    The NSWCC sent a further email on 2 July 2024, at 6:18pm asking the following questions:

30. [32]

    That email also received no reply from the defendant’s solicitor.

31. [33]

    On 22 July 2024, the NSWCC emailed the defendant’s solicitor to reiterate those questions and advised they had not approached the Court seeking the orders as a result of the defendant’s failure to answer the questions.

32. [34]

    On 31 July 2024, the NSWCC emailed the defendant’s solicitors informing them that they had received communication from the Mortgagee’s solicitors who advised they are preparing contracts for the sale of the Property.

33. [35]

    On 31 July 2024, the NSWCC informed the defendant, via an email to the defendant’s solicitors, that the plaintiff had informed the NSWCC that it was preparing contracts for the sale of the Property and as a result the NSWCC had updated the orders to accommodate for that sale and requested the defendant’s consent (“the alternative consent orders”).

34. [36]

    On 2 August 2024, the defendant’s solicitors sent a reply to the NSWCC opposing the alternative consent orders and any such sale of the Property and requested the NSWCC “immediately approach the Court to make” the consent orders.

35. [37]

    As at 5 August 2024, the NSWCC had confirmed that it consented to varying the restraining orders for payment of arrears of up to $60,000 as itemised in the defendant’s solicitors’ email dated 24 June 2024 and for further ongoing payments, however, was of the view that “the parties should not approach to (sic) Court seeking any orders regarding the property which are inconsistent with the previous orders made by the Court in favour of the Mortgagee”. As such the Court was not approached to make the consent orders.

The Loan and Mortgage agreements

1. [38]

   Counsel for the plaintiff, Mr M Collins, drew the Courts attention to the general terms and conditions of the Loan. Some important terms are extracted below:

2. [39]

   Clause 22.1(a) and (b) are relevant to the plaintiff’s alternative case as to whether the defendant has an arguable defence, and in particular whether the acceleration clause has any bearing on a claim for possession. That is, the provision, shows the claim for possession was not contingent on there being any acceleration. The defendant is in default on the Loan as payments under the Loan are in arrears. It follows that an entitlement to possession arises in the present case (see cl 22.3).

3. [40]

   Some important terms of the Mortgage are as follows:

The applicable law

1. [41]

   There was no dispute between the parties as to the applicable law and principles applying to the disposition of the Motion. Counsel for the plaintiff provided an adequate summary, in that respect, and that forms the basis for what follows.

2. [42]

   The court's power to set aside a default judgment is contained in r 36.16(2)(a). of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”).

3. [43]

   The court retains that power even where the judgment has been executed.

4. [44]

   The general position in relation to the Motion is that the Court requires the defendant to:

   1. (1)

      provide an explanation for why it did not file a defence;

   2. (2)

      provide an explanation for any delay in applying to set aside the judgment; and

   3. (3)

      show that it has a bona fide ground of defence, being a reasonable defence on the merits.

5. [45]

   In J & M McNamee Holdings Pty Ltd v Mungerie Vale Pty Ltd [2019] NSWCA 283 (at [48]- [51]) Gleeson JA (with whom Brereton JA and Simpson AJA agreed) stated:

6. [46]

   As to the issue of whether the defendant has a defence on the merits, it is relevant for the court to consider the defendant’s apparent prospects of success in the proceedings.

7. [47]

   The plaintiff accepted that the court is not required to make any determinative adjudication on the ultimate substantive strength of any proposed defence, but the defendant must demonstrate facts showing good grounds of defence and that the grounds are arguable or triable. It is not sufficient for the defendant to depose that it believes it has a good defence without providing evidence of the material facts supporting such an assertion.

Consideration

1. [48]

   The defendant accepted that it’s reason for failing to defend the proceedings was unsatisfactory. It accepted that the defendant’s director was informed of the proceedings by his accountants, however, he did not realise that the defendant was required to file a defence.

2. [49]

   Reliance was placed upon the defendant’s status as a small business with a single director facing multiple complex criminal and civil proceedings for the first time. It was contended that in those circumstances the explanation for the failure to defend is not fatal to the Motion.

3. [50]

   The defendant’s explanation for the failure to file a defence is neither adequate nor satisfactory.

4. [51]

   A representative of Bluestone had communicated with Mr Daneshyar regarding the completion of a third-party authority for the purposes of payment from the Suncorp account in November to December 2023 and January to February 2024 without Mr Daneshyar having completed the necessary steps.

5. [52]

   What then followed must raise real doubt about the defendant’s reliance on its director not realising he was required to file a defence. Those circumstances were as follows:

   1. (1)

      on 23 February 2024, Bluestone wrote to Mr Daneshyar confirming that the arrears on the account were $34,388.57 and that Bluestone could only hold off ongoing legal action once the account was brought up to date;

   2. (2)

      on 5 March 2024, Bluestone informed Mr Daneshyar that they were proceeding to judgment. Mr Daneshyar responded that he would call back in an hour with his lawyer, however, he did not do so.

6. [53]

   That consideration is made more acute by the following circumstances:

   1. (1)

      The fact that Mr Daneshyar had legal representation; and

   2. (2)

      Mr Daneshyar acknowledged that the restraining order prevented payments being made from the defendant’s Suncorp account towards the loan account and that the NSWCC had not given consent to vary the restraining order to allow such payments to be made.

7. [54]

   Mr Daneshyar deposed to having not been aware that the Default Judgment was granted.

8. [55]

   However, as earlier outlined in this judgment, the defendant’s solicitors confirmed on 16 April 2024 that it had come to their client’s attention that the plaintiff had obtained the Default Judgment and a copy of the Default Judgment was provided to the defendant’s solicitors on 22 April 2024.

9. [56]

   On 20 May 2024, the plaintiff’s solicitors emailed the defendant’s solicitors informing them that the Second Eviction was scheduled for 24 June 2024 and the plaintiff intended to proceed with that eviction.

10. [57]

    It is in that context that consideration needs to be provided as to any explanation by the defendant for its delay in filing the Motion until 28 June 2024.

11. [58]

    Counsel for the defendant, Mr S J Young submitted that the critical period of delay was “relatively modest”, being, in his submission, 6 weeks. The defendant submitted that delay should be counted from 6 March 2024, when Mr Daneshyar spoke to a Bluestone representative and said he would call back with his lawyer as he “should have taken steps which would have resulted in him ascertaining that default judgment”.

12. [59]

    The defendant contended that delay should only be counted until 16 April 2024 because the period between 16 April 2024 and 28 June 2024, when the Motion was filed, should be taken as explained “by the fact that the parties were making good faith efforts to negotiate a potential resolution to this matter which would not require the court’s intervention”. The defendant stated that conclusion can be inferred as those negotiations could not be provided to the Court in evidence as privileged correspondence.

13. [60]

    Counsel for the plaintiff made brief oral submissions on delay stating,

14. [61]

    In my view, the defendant’s submission that delay should not be counted between 16 April 2024 and 28 June 2024 because good faith efforts to negotiate a resolution were taking place should be rejected. The evidence suggests that the plaintiff’s solicitors never accepted there was a proper basis for a resolution. An email from the plaintiff’s solicitor on 22 April 2024 that stated “our client is not aware of any basis upon which the judgment could be set aside”.

15. [62]

    In relation to the communications with the NSWCC, although the NSWCC were clearly open to a variation order concerning the Property, they made persistent enquiries requiring the Mortgagee’s consent that were consistently ignored by the defendant. These circumstances are as follows:

    1. (1)

       On 24 June 2024, the NSWCC enquired as to the Mortgagee consent to the consent orders, however, the defendant’s solicitors replied that consent was not sought as the mortgagee was not a party to the proceeding. As earlier mentioned in this judgment, this email chain was titled, inter alia “NSWCC v Abbas Daneshyar”. The NSWCC replied that it would be prudent to confirm the mortgagee’s consent but no reply by the defendant was received. At this time, the second eviction took place by way of execution of the Default Judgment and Writ.

    2. (2)

       Revised consent orders, proposed by the NSWCC, were signed by the defendant on 2 July 2024, however, the question regarding the Mortgagee’s consent was reiterated by the NSWCC twice on 2 July and once more on 22 July 2024 without response. As a result, the NSWCC did not approach the Court.

16. [63]

    Although the mortgagee may not have been a party in the proceeding that related to the original restraining order (presumably NSWCC v Abbas Daneshyar), the mortgagee was clearly a party that would be materially affected by the consent orders. In my view, “good faith negotiations” cannot be used to describe communications where recurring questions regarding materially affected parties were consistently ignored.

17. [64]

    In the result, I find that the defendant has not provided an explanation for the delay in applying to set aside the Default Judgment and as such, is a factor I will consider when determining whether to grant or dismiss the Motion.

18. [65]

    No defence or draft defence to the Claim has been provided by the defendant on the hearing of the Motion. The failure to do so is a relevant consideration on an application to set aside default judgment: National Australia Bank v Priestley (No 3) [2012] NSWSC 1171 (Schmidt J) at [32].

19. [66]

    Rather the defendant sought to convey a purposeful defence in written submissions which were supplemented by oral submissions on that topic. In written submissions the defendant contended:

20. [67]

    Counsel for the defendant relied on a defence of unconscionable conduct by the plaintiff which they submitted is “equally arguable in respect of all action that the mortgagee has taken in response to the arrears arising; both the judgment in possession and the judgment in debt flowed from”.

21. [68]

    The defendant made the following oral submissions concerning Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [58] and [59] (“Tanwar”):

22. [69]

    Additionally, in oral submissions, the defendant highlighted various forms of contact between Bluestone and Mr Daneshyar (those communications were discussed in detail in the factual background) to evidence that Bluestone and the plaintiff “had notice that there was an issue with the New South Wales Crime Commission”. These included the following:

    1. (1)

       A phone call and email between Mr Daneshyar and Bluestone on 15 November 2023

    2. (2)

       An email chain between Mr Daneshyar and Bluestone on 22 December 2023

    3. (3)

       An email to accounts@r.r.com.au from Mr Daneshyar on 5 February 2024

23. [70]

    In light of those communications, the defendant submitted:

24. [71]

    The defendant also drew attention to an email from Bluestone of 23 February 2024 which made reference to “legal fees continu[ing] to incur” but there being “no reference to the claims that Mr Daneshyar had made about attempting to negotiate payment with the New South Wales Crime Commission and there is no evidence that the plaintiff made any independent attempt at this time to seek clarification from the Crime Commission as to what was going on.”

25. [72]

    The defendant submitted this matter can be distinguished from Kostopoulos v GE Commercial Finance Australia Pty Ltd [2005] QCA 311 (“Kostopoulos”) because the NSWCC made representations showing an intention to vary the restraining orders by consent and that the delay in seeking the variation on the basis of obtaining the mortgagee’s consent was not reasonable because the mortgagee’s consent was not required. Having regard to those circumstances, counsel the defendant made the following further submissions in that regard:

26. [73]

    The primary submission for the plaintiff was that the foreshadowed defence was not arguable and, on that basis, the Motion should be dismissed. In the alternative, counsel for the plaintiff submitted that, even if the Court was satisfied the defence was arguable, the foreshadowed defence could not be a defence to the claim for possession and would only affect the Debt Judgment. In that alternative case, the plaintiff contended that the Court would only set aside the Default Judgment so far as it applied to the debt.

27. [74]

    In support of those primary submissions, counsel for the plaintiff contended as follows:

    1. (1)

       Mr Daneshyar was informed by his accountants on 19 January that the company had been served with the proceedings, and despite him stating that he had not realised that the defendant was required to file a defence he did not give any further explanation than that. It appears he had been legally represented for years and certainly the Claim document itself makes very clear that a defence needed to be filed within 28 days. There had not been any explanation for how he did not come to realise that or whether his failure to realise that constitutes any sufficient explanation. The explanation given by Mr Daneshyar was inadequate.

    2. (2)

       The plaintiff denied they had “accepted that the arrears could always have been covered from the Suncorp account” and highlighted that the defendant had referenced par 6 of their own letter of 5 June 2024, addressed to the plaintiff’s solicitor, which stated, inter alia, “We consider that it would be unconscionable for your client to rely on the acceleration clause to demand repayment of the entire loan when your client accepts that the arrears could always have been covered from the Suncorp account, from which Mr Daneshyar has attempted to arrange payments”. Counsel for the plaintiff contended that that submission is “not a position my client has ever expressed; indeed, it is simply wrong. Since before this loan went into default, it has not been possible, due to the restraining orders made by this Court, for any arrears on this account to be made from Suncorp”.

    3. (3)

       Despite the defendant’s submission that Mr Daneshyar was not aware that the variation to the NSWCC restraining orders only affected the NAB Mortgages, counsel for the plaintiff submitted that Mr Daneshyar must have understood the Property was not subject to that variation when Bluestone was contacting him in November 2023 in relation to default.

28. [75]

    In relation to the alternative regarding possession, the plaintiff submitted the following:

29. [76]

    Before considering those arguments, I propose to consider the judgments in Kostopoulos and Tanwar in some detail.

30. [77]

    Kostopoulos concerned an individual, Mr Kostopoulos, who purchased a property which was subject to a mortgage from AMP. Two relevant clauses of that mortgage extracted from the decision at [5] – [6] are as follows:

31. [78]

    The acceleration provisions of the mortgage instrument also lay at the centre of the issues in this matter.

32. [79]

    Mr Kostopoulos was charged with criminal offences in 2002 and a caveat over the property was lodged by the Queensland Director of Public Prosecutions (“DPP”) as a result. This resulted in a breach of clause 1.1(b) of the Mortgage.

33. [80]

    In June 2003, the rights against Mr Kostopoulos under the mortgage were acquired by GE Commercial Finance Australia Pty Ltd (“GE”). AMP warranted that Mr Kostopoulos was not in default under the mortgage. After that date, Mr Kostopoulos continued to meet his interest payment obligations and sought to submit that the warranty AMP gave to GE had waived Mr Kostopoulos’ breach of the mortgage.

34. [81]

    On 18 November 2004, the DPP’s restraining order was extended with Mr Kostopoulos’ consent until 31 May 2005.

35. [82]

    On 13 January 2005, GE served Mr Kostopoulos a notice asserting the following four events of default had occurred:

36. [83]

    The notice further claimed that $508,611.62 was due and payable. This represented the total amount remaining to be paid on the mortgage under the acceleration clause. Mr Kostopoulos could not pay that amount.

37. [84]

    On 1 April 2005, GE gave Mr Kostopoulos notice to leave the property and on 7 April gave a notice of exercise of power of sale.

38. [85]

    On 27 April, Mr Kostopoulos filed an application seeking a final injunction to restrain the respondent from “proceeding on a demand dated 13 January 2005, for acceleration of payment of $508,611.62”.

39. [86]

    The application, at first instance, was dismissed and the Court did not allow an application for adjournment on the basis of receipt of late material. The decision was appealed on the following basis:

40. [87]

    In discussing an issue regarding s 95 of the Property Land Act 1974 (Qld), Keane JA (with whom McMurdo P agreed) observed (at [33]):

41. [88]

    Keane JA then gave consideration to the equitable jurisdiction of the Court, under a heading dealing with the same subject matter, (at [48] – [62] of the judgment). Paragraphs [48] to [55] are relevant in this matter. Below is an extract of those passages:

42. [89]

    The appeal was dismissed, and the Court held equitable principles did not apply.

43. [90]

    Kostopoulous has been cited with approval by McDougall J in RHG Mortgage Securities Pty Ltd v BNY Trust Company of Australia Ltd [2009] NSWSC 1432 (“RHG Mortgage”) as follows (at [173]):

44. [91]

    This authority has also been cited with approval by Adamson J (as his Honour then was) in Westpac Banking Corporation v Parker [2012] NSWSC 514 (“Parker”) as follows (at [34]):

45. [92]

    The headnote to the judgment in Tanwar explains the background circumstances of that matter as follows:

46. [93]

    The majority of the High Court (Gleeson CJ, McHugh, Gummow, Kirby, Hayne and Heydon JJ) made the following observations bearing upon the question of unconscionability as follows (at [58] – [60]):

47. [94]

    Whilst no draft defence has been provided to the Court (under instructions given by the defendant), the written submissions of the defendant are, in a general sense, productive of an assessment, as earlier mentioned, that the defendant intended to rely upon a defence based upon unconscionable conduct. In substance, it would appear that the defence would amount to a claim for relief against forfeiture although the particulars of any defence, in that respect, are scant.

48. [95]

    I turn then to my considerations of that foreshadowed defence in the light of the submissions made by the parties and the evidence.

49. [96]

    There was no dispute in these proceedings that the defendant was in a state of indebtedness under the Mortgage. The defendant was in default on the Loan and Mortgage in accordance with the default notice.

50. [97]

    The Claim (which sought to claim the full amount remaining under the Loan relying on the acceleration clause, namely cl 22.2(b) under the Loan and cl4.4(b)(i) of the Mortgage) was filed on 18 January 2024. It is clear that more than 30 days’ notice of default was provided to the defendant such that reliance on the acceleration clause was available under the Loan and Mortgage.

51. [98]

    In those circumstances, the accelerator provisions of the Loan and Mortgage were triggered. The default judgment placed the plaintiff in possession of the property. There is no stay or injunction preventing sale of the property.

52. [99]

    The restraining order continues to operate with respect to the Property. Hence, since the Loan went into default, it has not been possible for any arrears on the Suncorp account to be made.

53. [100]

    It is not the case, therefore, that the setting aside of the Default Judgment will, on the evidence, vary those circumstances.

54. [101]

    The NSWCC did confirm that it would consent to the variation of the restraining order for the payment of arrears but that position was dependent upon the mortgagee not being opposed to that course of action resulting in reversion to the defendant making a payment of arrears and resuming mortgage payments. The position of the plaintiff was and is that it would not consent to such a course because the debt had been accelerated and a variation to the restraining order to pay arrears and then continue repayments was not an available response to the Claim.

55. [102]

    It follows that the submission made by the defendant that the arrears “could have always been covered from the Suncorp account” may not be accepted when expressed at that level of generality.

56. [103]

    When the entirety of the defendant’s contentions, such as they were, are considered in the light of the evidence in these proceedings, there must be real doubt about the prospect of the defendant making out a defence based upon the equitable doctrine of forfeiture.

57. [104]

    Counsel for the plaintiff relied upon the judgment of the Queensland Court of Appeal, Kostopoulos. The defendant also seemed to, at least implicitly, rely on that authority. I propose, with respect, to follow that judgment, as a judgment of an intermediate appellate court and one that has been applied in this Court in RHG Mortgage and Parker.

58. [105]

    I agree with the submission of the plaintiff that the factual circumstances in Kostopoulos are consistent with those operating in the present matter because:

    1. (1)

       The mortgagor was charged with a criminal offence, which restrained dealings with his property and there was a lodgement of a caveat over the property.

    2. (2)

       The proceedings concerned a debt acceleration clause under the mortgage (although it was noted that in these proceedings 30 days’ notice of default was required before acceleration could occur whereas in Mr Kostopoulos no notice was required).

    3. (3)

       The acceleration clause was activated by default (although in Kostopoulos the default was non-monetary, namely, that a caveat was placed on the property).

59. [106]

    Whilst the defendant directed attention to [50] of Kostopoulos and in particular, the reference by Keane JA to the appellant in that matter being “entitled to redeem the mortgage notwithstanding the acceleration [,but] he [was] not able to do so”, the Court was there alluding to restraints operating upon the appellant of the kind discussed in [33] of the judgment in Kostopoulos. The Court found there was no right in forfeiture.

60. [107]

    In Kostopoulos, the fact that the debt had become “repayable on the occurrence of default by the appellant” did not constitute forfeiture (at [50]) and the benefit under the Mortgage was dependent upon the terms “on which it depended for its existence” (at [53]). There was no reliance, in that matter, or in the current proceedings, that the plaintiff (the appellant in Kostopoulos) acted in reliance on an assumption induced by the defendant (the respondent in Kostopoulos) such that it would be a detriment to the plaintiff (appellant) if the defendant (the respondent) were to be allowed to enforce its claim to repayment of the principle sum (at [56]).

61. [108]

    Further, it was not suggested by the defendant, in any foreshadowed defence, that success upon the defence would result in the vitiation the Mortgage.

62. [109]

    These considerations also underline why a failure by the defendant to provide a draft defence is particularly relevant in this matter to the exercise of the Court’s discretion against the granting of the Motion.

63. [110]

    There is a further factor pointing to the weakness of the proposed defence.

64. [111]

    In order to make good the suggested defence, it is necessary for the defendant to show that it is “against conscience” (Tanwar at [60]) for the plaintiff to act under the acceleration clause of the Mortgage.

65. [112]

    Thus, I agree with the submission of the counsel for the plaintiff that it would be necessary to show that the plaintiff had acted unconscionably or unconscientiously in order for relief against forfeiture to be available.

66. [113]

    The Court does not have a pleaded defence as to what actions or inactions by the plaintiff constituted unconscionable conduct. If a defence were allowed, it may be accepted that additional evidence may be called on the question, but for present purposes the Court has the bare submissions of the defendant suggestive of circumstances that may give rise to a case in unconscionably. But even within those broad parameters, there must be real doubts as to whether the defendant has an arguable defence. My reasons for this conclusion appear below.

67. [114]

    First, the plaintiff took the following active steps to alert the defendant as to its default:

    1. (1)

       On 23 November 2023, the plaintiff issued a default notice to the defendant. I note that Mr Daneshyar was listed as the Guarantor.

    2. (2)

       On 15 November 2023, Bluestone sent a third party authority form to Mr Daneshyar per his request.

    3. (3)

       On 20 November 2023, a representative of Bluestone sent Mr Daneshyar an email highlighting that the proposed third party, Melanie Horswill, had not signed the document.

    4. (4)

       On 18 December 2023, a representative from Bluestone sent an additional email to Mr Daneshyar attaching a third party authority form.

    5. (5)

       On 22 December 2023, a representative from Bluestone emailed Mr Daneshyar to follow up his account arrears of $17,262.42.

68. [115]

    Secondly, the following additional factors are relevant:

    1. (1)

       As earlier mentioned, Mr Daneshyar relied to the email of 22 December on the same day stating “I have discussed with your team many times the right person to contact regarding the loan. The NSW crimes commission has sceased (sic) my accounts and I have put them onto the right person to contact to get the accounts upto (sic) date".

    2. (2)

       I agree with the submissions on the plaintiff that there is no obligation under the Mortgage or Loan on a lender to interrogate reasons for default and to then take steps to try to deal with those reasons for default to bring the account back into order.

    3. (3)

       The NSWCC was seeking the mortgagee’s consent to vary the orders, but as I have earlier noted, the observations of a senior solicitor for the NSWCC made on 24 June 2024 were that the defendant needed to confirm with the mortgagee was not opposed to the proposed course of action (see at [28] above). The communication from the NSWCC was not responded to by the defendant or his lawyers.

69. [116]

    Having regard to the entirety of the aforementioned considerations, and the intimation by the defendant as to a potential defence, on the evidence before the Court as to the Motion, I consider that the defendant has a weak case on the merits of the foreshadowed defence outlined in the defendant’s submissions.

70. [117]

    I turn to the further and alternative issue raised by the plaintiff as to the orders for possession.

71. [118]

    In Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 (“Inglis”), Walsh J stated (at [166] – [167]):

72. [119]

    Walsh J’s judgment was sustained on appeal where Barwick CJ (with whom Menzies and Gibbs JJ agreed stated (at [169]):

73. [120]

    In National Australia Bank Ltd v C & O Voukidis Pty Ltd [2014] NSWSC 384 (“Voukidis”) Campbell J observed (at [25] – [28]):

74. [121]

    Counsel for the plaintiff advanced a submission, in the alternative, predicated on Inglis and Voukidis such that, if the defendant had met the burden of making out an arguable defence, the Court should only set aside the judgment for debt and not possession (which would remain on foot).

75. [122]

    The defendant accepted that the mortgagee was entitled to possession under the terms of the mortgage and “that is a distinct matter from the debt judgment”. However, it was contended that the unconscionable defence was equally applicable in respect to all actions the mortgagee might take in response to arrears on a Loan and Mortgage. The judgment in possession and debt flowed from the same default for the same causes (that is, the plaintiff’s level of knowledge).

76. [123]

    The defendant sought to deal with Inglis and Voukidis by submitting that, on those cases, the mortgagor had alleged set-off and sought interlocutory relief against the mortgagee exercising a power of sale in circumstances where the mortgage wanted to advance a set-off. Here it was submitted, the unconscionable conduct defence should result in a different outcome because the plaintiff should not be permitted to rely, in the circumstances of unconscionable conduct, with the acceleration clause or possession under the loan. The general principles applied to unconscionable conduct are equally applicable to any claim the mortgagee may take under the mortgage, even though surrounding circumstances may vary in a way that effects whether unconscionable conduct may be established.

77. [124]

    It is strictly unnecessary to deal with this issue. However, I will make some brief observations.

78. [125]

    The problems besetting the Motion by the failure to produce a draft defence reach a high point in respect of the alternative submissions of the plaintiff because of an absence of definition (and authority) as to how the defence, in this respect, may be formulated.

79. [126]

    In any event, the way that the defendant has constructed its argument as to the alternative contentions necessarily invokes the same considerations that I have entertained in finding that there was an insufficiency of a trailable defence arising from that primary argument. Furthermore, I do not consider that Inglis and Voukidis may be distinguished from the present case in the manner suggested by the defendant.

80. [127]

    The plaintiff will be prejudiced by the setting aside of Default Judgment because it will be unable to proceed to sell the property and wind up its secured loan to the defendant. The plaintiff was concerned about its exposure to the defendant in circumstances where the defendant’s director has been charged with serious offences and as such significant restraints on his income and assets.

81. [128]

    Nonetheless, the defendant submitted that the plaintiff’s interests are adequately protected by its ongoing security and the NSWCC restraining orders, which the NSWCC had, at one point in time, indicated that it was willing to vary to ensure that the arrears owing to the plaintiff can be paid.

82. [129]

    In oral submissions counsel for the defendant stated, “we say that the prejudice to the defendant, in allowing the mortgagee sale to proceed, in circumstances where the mortgagee was never at real risk of being deprived of the monthly repayments, that the prejudice to the plaintiff is outweighed by the potential prejudice to the defendant”.

83. [130]

    Counsel for the defendant submitted that the defendant’s equity in the properties will be diminished by the sale expenses and the defendant will be unable to invest the cash in the Suncorp account in an alternative real estate investment because of the NSWCC restraining orders.

84. [131]

    The defendant also submitted that the ultimate extent of the prejudice cannot be determined until the outcome of the defendant’s director’s criminal proceedings, and consequently of the NSWCC proceedings, which ultimately seeks forfeiture of the defendant’s assets, have been determined.

85. [132]

    Having considered those submissions, I am of the view that the plaintiff’s oral submissions on prejudice, as appear below, represent a proper balancing of considerations as to prejudice:

86. [133]

    In my view, in consideration of my findings in relation to the existence of a bona fide defence, the prejudice to the plaintiff is greater than any possible prejudice to the defendant in granting the Motion to set aside the Default Judgment.

CONCLUSION

1. [134]

   In reaching a final conclusion on the Motion, it is necessary to take into account not only the Court’s earlier assessments as to delay, the merits of any defence and prejudice but additionally the broader consideration of what determination will best serve the interests of justice.

2. [135]

   In coming to that conclusion I have taken into account the additional considerations raised by the defendant that there is some complexity in the proceedings because of the interaction of the parties’ commercial relationship, the restraining orders and the defendant’s director’s ongoing criminal proceeding..

3. [136]

   Nonetheless, I do not consider, in the balancing of all of those considerations, that it is in the interests of justice to grant the Motion.

4. [137]

   Orders should be made dismissing the Motion with costs (I do not consider costs in the cause to be an appropriate outcome).

ORDERS

1. [138]

   The Court makes the following orders:

   1. (1)

      The Notice of Motion filed by the defendant on 28 June 2024 is dismissed.

   2. (2)

      The defendant shall pay the plaintiff’s costs of the Notice of Motion.