Supreme Court New South Wales

• Medium Neutral Citation: St George Bank - A Division of Westpac Banking Corporation v Diakakis [2014] NSWSC 928
• Hearing dates: 11 July 2014
• Decision date: 11 July 2014
• Jurisdiction: Common Law
• Before: Adamson J

Decision

1. An order for possession of the land comprised in Certificate of Title Folio Identifier 2/SP70623 being the land situated at and known as Unit 2, 259-261 Maroubra Road, Maroubra.

2. Order the second defendant to pay the plaintiff's costs of the proceedings.

• Catchwords: CONTRACTS - defendant was legally represented at the time he entered into the loan agreement and mortgage - loan was not shown to be improvident or neither was the defendant demonstrated to be under the influence of his son or subject to any relevant disability or disadvantage - no unfairness was demonstrated by the defendant - the defendant complied with the loan agreement for the first seven years of its operation
• Legislation Cited: Contracts Review Act 1980 (NSW); Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth); Uniform Civil Procedure Rules 2005 (NSW), r 29.7
• Cases Cited: Baltic Shipping Co v Dillon (1991) 22 NSWLR 1; Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482; Ginelle Finance Pty Ltd v Diakakis [2002] NSWSC 1032; Ginelle Finance Pty Ltd v Diakakis & Ors [2007] NSWSC 60; West v AGC (Advances) Ltd (1986) 5 NSWLR 610
• Category: Principal judgment
• Parties: St George Bank - A Division of Westpac Banking Corporation (Plaintiff); Phillip Diakakis (1st Defendant); Michael Diakakis (2nd Defendant)
• Representation: Counsel: P Newton (Plaintiff); No appearance for defendant.; Solicitors: Kemp Strang (Plaintiff)
• File Number(s): 2011/153420
• Publication restriction: Nil

Judgment

Introduction

1 The plaintiff (St George) seeks to enforce a mortgage granted to it by Michael Diakakis (Mr Diakakis) and his son, Phillip, the first defendant against whom default judgment was entered on 21 November 2013.

2 Mr Diakakis previously appeared in these proceedings by a solicitor, who ceased to act in 2013. Mr Diakakis did not appear at the hearing before me on 11 July 2014. I am satisfied that Mr Diakakis has been made aware of the procedural steps taken in the litigation since his solicitor ceased to act, the fact of the hearing date and the court book on which the bank relies. Mr Diakakis has not filed any evidence in the proceedings. He did, however, file a defence and cross-claim on 29 June 2011.

3 On 18 February 2010 the plaintiff's business was sold to Westpac. Pursuant to the provisions of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) on 1 March, 2010 Westpac became the successor in law of St George Bank and Westpac on and after 1 March 2010, was substituted for St George Bank. However because the documents in evidence do so, I propose to refer to the plaintiff as St George.

The Facts

4 In 2003 Mr Diakakis and Phillip agreed to purchase a property at Unit 2, 259-261 Maroubra Road, Maroubra from Millman Australia Pty Limited (Millman) for $513,000. The property was then subject to a mortgage to the Australian and New Zealand Banking Group Limited (ANZ Bank). They applied for a loan from St George and entered into a Residential Loan Agreement with the bank on 17 September 2003 pursuant to which $330,000 was to be advanced to them to purchase the property. It was a term of the loan that they would grant a mortgage to St George over the property to secure the loan. The term of the loan was 30 years. Its expressed purpose was to purchase a home unit. The loan application recorded Mr Diakakis' occupation as "Pensioner/ investor".

5 Mr Diakakis and Phillip were represented by a firm of solicitors, John S. Zouroudis & Co, who acted for them on this and other transactions. The firm was also acting for Mr Diakakis in the proceedings in the District Court and this Court which related to mortgages he had granted over property known as 259 Botany Road, Kingsford. This property had been the residence of Mr Diakakis and his son for 33 years before they moved to the Maroubra unit. The proceedings were:

(1) Proceedings commenced in 2002 by Permanent Custodians Limited (as first registered mortgagee) against him in the District Court;

(2) Proceedings commenced by Ginelle Finance Pty Limited (as second mortgagee) in this Court.

6 On 5 November 2002 Studdert J entered summary judgment in favour of Ginelle Finance against Mr Diakakis and gave leave to issue a writ of possession in respect of the Kingsford Property: Ginelle Finance Pty Ltd v Diakakis [2002] NSWSC 1032. In these proceedings, Mr Diakakis cross-claimed against two solicitors, Denis P Grogan and Peter J Cassimatis. He alleged that Mr Grogan failed to exercise due care and skill in acting on his behalf as mortgagor of the Kingsford Property in respect of the mortgages to Permanent Custodians and Ginelle Finance both of which appeared to have been signed by Mr Diakakis on 19 October 2001. He alleged against Mr Cassimatis that, although he had purported to witness Mr Diakakis signing mortgages and other documents and had purported to explain those documents to him, he had not done so. Mr Diakakis succeeded on his cross claims: Ginelle Finance Pty Ltd v Diakakis & Ors [2007] NSWSC 60.

7 The background set out above has been included to explain the relationship between Mr Diakakis and John S Zouroudis & Co, who acted for him on the purchase of the Maroubra property, and the reason for the substantial payment to the firm from the loan monies as appears from the table below. That Mr Diakakis continued, over a lengthy period, to instruct the firm to act on his behalf is some indication that he retained confidence in the firm.

8 In September and October 2003 Mr Diakakis and his son signed directions to St George to pay the loan amount ($330,000) as follows:

Amount	Payee	Purpose of payment
$1,004	St George	Loan fees
$9,853.55	Westpac	Repayment of personal loan
$256,935.83	Millman	Vendors towards purchase price
$1,230	Lewis Yee	Fee charged by vendor's solicitor for attending settlement of the sale
$60,976.62	John S Zouroudis & Co	Fees for District Court and Supreme Court proceedings referred to above.

9 Upon completion of the sale of the property, the mortgage to ANZ was discharged and the mortgage to St George was registered. At or about the same time, Mr Diakakis sold the Kingsford Property for $808,000. John S Zouroudis & Co's trust account ledger indicated that the firm acted for Mr Diakakis on the sale of the Kingsford Property.

10 The source of the balance of the purchase monies is not revealed by the evidence but it can reasonably be inferred that Mr Diakakis and Phillip had access to other funds, possibly from the sale of the Kingsford property, to make up the purchase price of $513,000, of which $486,474.74 was paid on settlement day.

11 From the time of the advance in October 2003 until about June 2010, repayments under the loan agreement and mortgage were met. As at 12 November 2010, defaults in the payment of interest amounted to $14,134.00. On 15 November 2010, Kemp Strang sent a default notice to each defendant specifying the defaults and requiring the arrears be paid within the grace period of 31 days. No payment of the arrears claimed in the notices was made within the grace period specified.

12 The loan agreement and the mortgage provided that, in the event of default that was not rectified, St George would be entitled to possession of the property.

13 Mr Diakakis filed a defence on 29 June 2011 in which he admitted signing the loan agreement and mortgage and admitted the defaults. He alleged that he was induced into signing the loan agreement and the mortgage under the influence of his son and alleged that those agreements were accordingly void and of no effect. In a cross-claim filed on the same day Mr Diakakis sought declarations that the loan agreement and mortgage were unjust within the meaning of s 4 of the Contracts Review Act 1980 (NSW) and orders that they be set aside and discharged pursuant to s 7 of the Contracts Review Act so far as they relate to him. The allegations made in the cross-claim are addressed further below.

St George's entitlement to relief

14 Mr Diakakis did not appear when the matter was called on for hearing on 11 July 2014. St George sought to proceed in his absence in accordance with r 29.7 of the Uniform Civil Procedure Rules 2005 (NSW).

15 Mr Diakakis has neither filed nor adduced any evidence of his defence or his cross-claim. St George has adduced evidence that establishes that he was legally represented at the time he entered into the loan agreement and mortgage and received benefits from the loan: the acquisition of the property in which he proposed to live (and did in fact live) and the discharge of his liability for legal costs in other proceedings. The evidence does not reveal any basis for the suggestion that the loan was improvident or that Mr Diakakis was under the influence of his son, or indeed subject to any relevant disability or disadvantage.

16 If there was any unfairness (and none is revealed by the evidence) there is nothing to show that St George was aware of it, much less responsible for it. It had no direct contact with either of the borrowers. The loan agreement appears to be a standard home loan at a market interest rate. There is no evidence to suggest that it was beyond the means of the defendants to repay it. Indeed that they were able to comply with the loan agreement for the first seven years of its operation is powerful evidence that it was within their means and that they had freely and voluntarily signed the loan documents presented to them and received an incontrovertible benefit from the loan. In Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 Gleeson CJ said at 9:

"[t]he general policy of the law is that people should honour their contracts. That policy forms part of our idea of what is just."

17 In the cross-claim Mr Diakakis relied on his age (he was born on 14 September 1940), the fact he was born in Greece (it is alleged he moved to Australia in 1964) and his alleged status as a recipient of a Disability Support Pension. There is also an allegation that he relied on Phillip to meet the mortgage repayments. In my view, these matters (even if that had been proved) have not been shown to have created any unjustness, having regard to the benefit obtained by Mr Diakakis by reason of the loan. A contract is not unjust merely because a person is unable to pay the debt when called upon do to so, or because its enforcement will lead to the loss of a home: West v AGC (Advances) Ltd (1986) 5 NSWLR 610; Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482 at 491E per Handley JA.

18 On the basis of the facts that I have found that are set out above, St George is entitled to possession of the property and to its costs of the proceedings.

Orders

19 I make the following orders:

(1) An order for possession of the land comprised in Certificate of Title Folio Identifier 2/SP70623 being the land situated at and known as Unit 2, 259-261 Maroubra Road, Maroubra.

(2) Order the second defendant to pay the plaintiff's costs of the proceedings.

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Decision last updated: 14 July 2014