Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: First Mortgage Managed Investments Pty Limited v Pittman (No 2) [2014] NSWCA 272
• Hearing dates: On the papers (last submissions received 20 June 2014)
• Decision date: 19 August 2014
• Before: Beazley P; Gleeson JA; Sackville AJA

Decision

1. Dismiss the respondents' motion filed on 17 April 2014 (Motion) insofar as it seeks the orders referred to in paragraphs 1 and 2.

 

2. The respondents pay the appellant's costs of the Motion.

 

3. The respondents have leave to file a cross-appeal naming the second cross-defendant (Ms Locke) as a cross-respondent and seeking an order setting aside Order 5 made by the primary Judge on 18 December 2012.

 

4. Direct the respondents to file the notice of cross-appeal within seven days and serve the notice of cross-appeal on Ms Locke within the same period by registered mail at her last known address, together with a copy of this judgment.

 

5. Subject to the respondents' compliance with Order 4, set aside Order 5 made by the primary Judge on 18 December 2012 and remit the respondents' cross-claim against Ms Locke to the primary Judge for hearing and determination.

 

6. Amend Orders 2 and 3 made by the Court on 7 April 2014 to add the words "of delivery of judgment in First Mortgage Investments Pty Ltd v Pittman (No 2)" after "14 days" whenever appearing.

 

7. Note that the stay ordered by the Court on 12 May 2014 has expired.

 

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: PROCEDURE - Judgments and orders - Amending, varying and setting aside, re-opening to reconsider a point under Uniform Civil Procedure Rules r36.16 - Whether the Court proceeded on a misapprehension as to the facts or the evidence - Whether the Court overlooked or failed to consider submissions made by the respondents on appeal
• Legislation Cited: Contracts Review Act 1980 (NSW) s7; Civil Procedure Act 2005 (NSW) s 91; Uniform Civil Procedure Rules 2005 (NSW) r6.24, 36.16, 51.4
• Cases Cited: Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (No 2) (2013) 87 ALJR 1159; De L v Director-General, NSW Department of Community Services (No 2) (1997) 190 CLR 207; First Mortgage Managed Investments Pty Limited v Pittman [2014] NSWCA 110; Power v Deputy Commissioner of Taxation (No 2) [2014] NSWCA 77; Smith v New South Wales Bar Association (1992) 176 CLR 256
• Category: Procedural and other rulings
• Parties: First Mortgage Managed Investments Ltd (Appellant); Basil James Pittman (First Respondent); Rex Neil Webster (Second Respondent)
• Representation: Counsel: AG Bell SC / KS Howe (Appellant); TF Robertson SC / JE Lazarus (Respondents); Solicitors: Bransgroves Lawyers (Appellant); Brock Partners Lawyers (Respondents)
• File Number(s): 2012/396832

Decision under appeal

• Jurisdiction: 9111
• Citation: First Mortgage Managed Investments Ltd v Pittman [2012] NSWSC 1332
• Date of Decision: 01 November 2012
• Before: Garling J
• File Number(s): 2008/288217

Judgment

 

1 THE COURT: The Court delivered judgment in this appeal on 7 April 2014: First Mortgage Managed Investments Pty Limited v Pittman [2014] NSWCA 110 (Principal Judgment). This judgment should be read in conjunction with the Principal Judgment.

 

Background

 

2 In the Principal Judgment, the Court allowed, in part, an appeal by the appellant (FMI) from orders made by the primary Judge which declared loan and mortgage documentation between FMI, as mortgagee, and the respondents, as borrowers (the FMI Mortgage) to be unenforceable. Orders 2 and 3 provided for the parties to file agreed short minutes of order giving effect to the reasons for judgment or to file written submissions in default of agreement. Order 4 provided that there would be no order as to the costs of the appeal.

 

3 Under the FMI Mortgage, FMI lent the respondents a total of $2.025 million. Part of the moneys advanced by FMI was used by the respondents to discharge two existing mortgages over their properties (the Land). Those mortgages were referred to in the Principal Judgment, respectively, as the Flamanda Mortgage and the Moranon Mortgage.

 

4 The Court upheld the primary Judge's finding that the FMI Mortgage was unjust within the meaning of s 7(1) of the Contracts Review Act 1980 (NSW) (the Act). However, the Court concluded (at [182]-[195]) that the primary Judge had erred in finding that the respondents should be relieved entirely of their obligation to repay the moneys advanced under the FMI Mortgage.

 

5 In the Principal Judgment the Court re-exercised the discretion conferred by the Act in relation to the grant of relief to the respondents. The Court held (at [198]-[216]) that any relief granted to the respondents had to take account of the benefits they had derived from the FMI Mortgage. Those benefits included the moneys advanced by FMI that were used to discharge the Flamanda and Moranon Mortgages. The funds so applied amounted to $1,172,713.04.

 

6 In the proceedings in the Common Law Division, the respondents' filed a cross-claim against Ms Locke, alleging that she had induced them by false representations and other wrongful acts to enter into the FMI Mortgage. The primary Judge dismissed the cross-claim notwithstanding that Ms Locke did not appear at the trial and that his Honour had made adverse findings against her. It appears that the respondents agreed that, since they had wholly succeeded against FMI, it was appropriate that an order should be made dismissing the cross-claim. Neither FMI nor the respondents joined Ms Locke as a party to the appeal. Nor did the respondents cross-appeal against the dismissal of their cross-claim.

 

The motion

 

7 On 17 April 2014 the respondents filed a motion seeking the following relief:

 

"1. Pursuant to r 36.16(3)(A) of the Uniform Civil Procedure Rules 2005, orders 1 and 4 made on 7 April 2014 be set aside, and in lieu thereof, order that:

 

(a) The appeal be allowed in part.

 

(b) The respondents' notice of contention dated 8 November 2013 be upheld.

 

(c) [FMI] pay the respondents' costs of the appeal.

 

2. Orders 2 and 3 made on 7 April 2014 [directing the parties to file short minutes of order giving effect to the reasons for judgment] be stayed, pending the outcome of order 1 above.

 

3. Alternatively to order 1 above:

 

(a) Pursuant to r 6.24 of the UCPR, [Ms] Locke, the second cross-defendant in the proceedings below, be joined as a party to this appeal as the third respondent.

 

(b) Order 5 made by Garling J [the primary Judge] on 18 December 2012 [dismissing the respondents' cross-claim] be set aside.

 

(c) The proceedings be remitted to Garling J to determine the respondents' cross-claim against [Ms Locke] in the proceedings below.

 

(d) Any final orders made by the Court be stayed pending the final determination of the cross-claim.

 

4. Costs ..."

 

The notice of motion was supported by an affidavit of Mr Rodgers, a solicitor for the respondents.

 

8 The notice of contention referred to in proposed Order 1(b) sought to uphold the Principal Judgment on the alternative ground that a finding should have been made that the respondents did not obtain any unwarranted benefits from the discharge of the Flamanda and Moranon Mortgages.

 

9 On 12 May 2014 the Court made directions including the following:

 

1 The respondents to serve a copy of the notice of motion filed 17 April 2014 and affidavit of [Mr] Rodgers sworn 17 April 2014 on [Ms] Locke by registered mail at Ms Locke's last known address within 7 days of the date of these orders.

 

2 The respondents to file and serve upon the appellant and upon Ms Locke their submissions in support of their notice of motion filed 17 April 2014 within 14 days of the date of this order.

 

...

 

5 Ms Locke to file any written submissions upon which she wishes to rely in respect of the alternative order 3 sought in the notice of motion within 21 days of the date of these orders.

 

...

 

7 Orders 2, 3 and 4 made by the Court on 7 April 2014 stayed pending the outcome of the respondents' notice of motion filed 17 April 2014.

 

8 The matter to be dealt with on the papers on receipt of the written submissions in the matter as directed.

 

It appears that Ms Locke had not filed written submissions.

 

The rules

 

10 Rule 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) relevantly provides as follows:

 

"(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order

 

...

 

(3A) If notice of motion for the setting aside or variation of judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1) as if the judgment or order had not been entered."

 

11 UCPR r 6.24(1) provides that:

 

"If the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party."

 

Principles

 

12 The respondents' written submissions on the motion stated the principles governing an application to set aside a judgment or order under UCPR r 36.16. Subject to one matter, FMI does not challenge the respondents' statement of principles, which is as follows:

 

"The principles relevant to that question were discussed in Smith v New South Wales Bar Association (1992) 176 CLR 256 at [265]-[267], and may be summarised as follows:

 

'(a) the power is discretionary, and is exercised having regard to the public interest in maintaining the finality of litigation;

 

(b) whether there is a relevant avenue of appeal;

 

(c) the importance of the matter calling for review;

 

(d) if ... ; and

 

(e) embarrassment or prejudice to the other party'.

 

The Court may re-open its judgment if it has proceeded on a misapprehension as to the facts or the law, where there is some matter calling for review or where the interests of justice so require: De L v Director-General, NSW Department of Community Services (No 2) (1997) 190 CLR 207 at [215] (and the cases there cited). The jurisdiction to recall a judgment or orders extends beyond cases where a party is not given an opportunity to be heard on an issue held to be determinative: Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (No 2) (2013) 87 ALJR 1159 at [15].

 

A paradigm example of whether the power should be exercised is where the Court does not determine a centrally relevant issue, or fails to consider submissions which, if accepted, could materially affect the outcome of a case ..."

 

13 The qualification to these principles added by FMI is that a heavy burden is imposed on a party who seeks to re-open a judgment or order. In Power v Deputy Commissioner of Taxation (No 2) [2014] NSWCA 77, the Court explained (at [3]) the reasons why that is so:

 

"There is no doubt that the court has power to re-open a judgment or order to reconsider a point. It may do so if it is convinced that, in the earlier consideration of the point, it has proceeded on a misapprehension as to the facts or the law, or there is some matter calling for review, or the interests of justice so require. However, a heavy burden rests upon the applicant for re-opening to show that such an exceptional course is required, on the assumption that there has been no fault on the part of the applicant ... There are two competing objectives of the law that must be considered when dealing with an application for the court to reconsider a point that has already been decided. The first is that justice ought to be done and ought to be seen to be done. Accidents and oversights can sometimes occur that will occasion injustice if they are not repaired. In so far as the High Court of Australia may grant leave to appeal from an intermediate appellate court, an intermediate appellate court such as this court is not the final court of appeal. Nevertheless, any injustice resulting from an oversight by an intermediate appellate court may be difficult to remedy. Competing against that objective is the objective of finality of litigation ... The object of finality reinforces the respect that should be shown to orders that are final on their face, addressed to the world at large, and upon which conduct may be ordered in reliance upon their binding authority ...[emphasis added]"

 

Submissions

 

Respondents' Submissions

 

14 The respondents contend that the Principal Judgment failed to consider submissions made on their behalf. Specifically, they argue that the Court overlooked submissions supporting the contention that the discharge of the Flamanda and Moranon Mortgages did not confer unwarranted benefits on the respondents, since both of the earlier Mortgages were unjust and were liable to be set aside by the respondents.

 

15 The respondents also submit that leave should be granted to join Ms Locke as a party to the appeal so that an order can be made remitting the cross-claim against her to the primary Judge for determination. The respondents say that they are entitled to commence fresh proceedings against Ms Locke since the claim against her was not determined on the merits: Civil Procedure Act 2005 (NSW) s 91. They submit that it would be more convenient for the claim against her to simply be remitted, thus avoiding the necessity for separate proceedings.

 

FMI's Submissions

 

16 FMI submits that the Court in the Principal Judgment did not misapprehend the relevant facts or the law and that there are no circumstances requiring the Court to take the exceptional course of re-opening its judgment. FMI says that the Court gave adequate reasons for disposing of the respondents' notice of contention and in fact took into account matters that the respondents claim were overlooked in the Principal Judgment.

 

17 So far as the respondents' cross-claim against Ms Locke is concerned, FMI points out that the respondents themselves agreed to the dismissal of the cross-claim. FMI submits that, as it had no claim against Ms Locke and it was not seeking to disturb the order dismissing the cross-claim, there was no occasion for it to join Ms Locke as a party to the appeal. Apart from these matters, FMI expresses no view as to whether the cross-claim should be remitted to the primary Judge for determination.

 

18 FMI, however, contends that no basis has been shown for granting a stay of the judgment against the respondents pending determination of the cross-claim. They rely on the respondents' failure to cross-appeal against Ms Locke and the fact that the cross-claim is a matter between the respondents and Ms Locke.

 

Reasoning

 

Should the Judgment be Re-opened?

 

19 The Principal Judgment records (at [209]) the finding of the primary Judge that the Flamanda Mortgage was unjust when entered into by the respondents. The respondents' complaint on the current motion is that the Principal Judgment does not address arguments advanced by them to demonstrate that there were grounds on which they could have succeeded in persuading a court to grant relief in respect of the unjust Flamanda Mortgage.

 

20 The difficulty with the respondents' submission is that it does not address at all the "fundamental difficulty" identified in the Principal Judgment (at [212]). The difficulty is that there was no evidence as to whether entering into the Flamanda Mortgage made the respondents better or worse off than they were prior to that transaction (at [213]-[214]). The Principal Judgment also points out (at [214]) that there was no evidentiary basis for determining what would have happened had the respondents refused, or been advised to refuse, to enter into the Flamanda Mortgage. These were the main obstacles to the respondents demonstrating that the discharge of the Flamanda Mortgage out of the moneys advanced by FMI did not constitute an unwarranted benefit to them.

 

21 The respondents' reply submissions on the motion merely argue that the absence of evidence on these matters should not have been determinative. That was not a proposition developed by them on appeal. In any event the submission does not attract the power to re-open the Principal Judgment.

 

22 The respondents' complaints about the Court's analysis of the Moranon Mortgage centre on particular arguments that are said to have been overlooked. The respondents' submissions themselves, however, do not pay sufficient regard to the reasoning of the Court in the Principal Judgment.

 

23 For example, the respondents contend that the Court failed to turn its attention to the fact that the borrower under the Moranon Mortgage was Ms Locke and that the respondents were merely third party mortgagors. The Principal Judgment (at [56], [206]) makes it clear that the Court well appreciated the respondents' role in the Moranon Mortgage. The Judgment notes at ([206]) that Moranon must have appreciated that the respondents were indeed third party mortgagors, but that this did not demonstrate that the Moranon Mortgage was unjust.

 

24 Similarly, the Principal Judgment analyses in some detail (at [200]-[203]) the role of Mr Mitchell, who was the solicitor required to give independent advice to the respondents prior to them entering into the Moranon Mortgage. The Principal Judgment concludes that no finding could be made that Mr Mitchell, contrary to his certification, failed to give the advice reasonably to be expected of an independent solicitor. The respondents complain that the Principal Judgment does not mention that the Acknowledgement of Legal Advice signed by each respondent related only to one of the Lots owned by them that was subject to the Moranon Mortgage. But the respondents also signed declarations that they had received independent advice from Mr Mitchell concerning the loan and security documentation (Supplementary Blue, 250-251). These declarations are not limited to a single Lot. They constitute (in part) the certification to which the Principal Judgment refers.

 

25 The remaining submissions, in essence, seek to revisit the arguments advanced on the appeal. The respondents assume that Moranon knew that they could not have received any benefit from the transaction. Moranon certainly knew that the respondents were third party mortgagors and that the additional funds were being advanced to Ms Locke. But Moranon also knew that the respondents had already mortgaged the Land to support Ms Locke's endeavours and that the new loan was intended to allow her Razorback development to proceed. These matters were taken into account when the Court found (at [206]) that the evidence did not establish that Moranon was aware, or should have been aware, that the respondents failed to appreciate the risks they were assuming when entering the Mortgage.

 

26 The respondents' submissions on the motion do not address the point made in the Principal Judgment (at [207]) that FMI had no reason, at the time it advanced funds to the respondents, to believe that the Moranon Mortgage could be impugned. As the Judgment recognises, this fact is not necessarily determinative, but it was an important matter that the Court took into account in reaching its conclusion.

 

27 In summary, the respondents have not shown that the Court overlooked arguments that were put or misapprehended the evidence in material respects. Nor have they identified submissions which the Court failed to consider and which could have affected the outcome of the appeal. The motion to re-open the Principal Judgment should be dismissed.

 

Joinder of Ms Locke

 

28 The respondents must bear responsibility for their failure to file a cross-appeal challenging the decision of their cross-claim against Ms Locke. It should have been clear that if FMI's appeal succeeded, whether in whole or in part, the respondents' only recourse for further relief would be to pursue their cross-claim.

 

29 Contrary to the respondents' submissions, FMI was not obliged to join Ms Locke as a respondent to the appeal. It had sought no relief against her and had no interest in challenging the dismissal of the respondents' cross-claim: see UCPR r 51.4.

 

30 However, as the respondents point out, Ms Locke admitted in her pleadings many of the key allegations made against her in the cross-claim and, as has been noted, she chose not to appear at the trial. It is therefore difficult to see how Ms Locke could resist the claims made against her by the respondents. She has been given an opportunity to make submissions in opposition to the relief now sought by the respondents, but has not taken advantage of that opportunity.

 

31 It is appropriate that the respondents be given leave to join Ms Locke as a party to the appeal. Subject to the respondents filing a notice of cross-appeal joining Ms Locke as a cross-respondent and seeking an order setting aside the primary Judge's dismissal by the cross-claim against her, the order made by the primary Judge dismissing the cross-claim should be set aside. An order should also be made remitting the cross-claim against Ms Locke to the primary Judge for hearing and determination.

 

32 The respondents have not established any basis for delaying the entry of orders giving effect to the Court's reasons for judgment on the appeal. Nor have they shown any ground for staying enforcement of the orders pending determination of the cross-claim by the primary Judge. Had the respondents filed a timely cross-appeal against Ms Locke, the issues arising on the cross-claim could have been resolved at the same time as the appeal. It would not be just to impose a stay on FMI to correct a problem of the respondents' own making.

 

33 Orders 2 and 3 made by the Court in the Principal Judgment required the parties to file agreed short minutes of order and, in default of agreement, to file proposed short minutes together with brief written submissions. These directions remain in force. Having regard to the passage of time, the dates of compliance should now be calculated by reference to the date of this judgment.

 

Orders

 

34 The following orders should be made:

 

1 Dismiss the respondents' motion filed on 17 April 2014 (Motion) insofar as it seeks the orders referred to in paragraphs 1 and 2.

 

2 The respondents pay the appellant's costs of the Motion.

 

3 The respondents have leave to file a cross-appeal naming the second cross-defendant (Ms Locke) as a cross-respondent and seeking an order setting aside Order 5 made by the primary Judge on 18 December 2012.

 

4 Direct the respondents to file the notice of cross-appeal within seven days and serve the notice of cross-appeal on Ms Locke within the same period by registered mail at her last known address, together with a copy of this judgment.

 

5 Subject to the respondents' compliance with Order 4, set aside Order 5 made by the primary Judge on 18 December 2012 and remit the respondents' cross-claim against Ms Locke to the primary Judge for hearing and determination.

 

6 Amend Orders 2 and 3 made by the Court on 7 April 2014 to add the words "of delivery of judgment in First Mortgage Investments Pty Ltd v Pittman (No 2)" after "14 days" whenever appearing.

 

7 Note that the stay ordered by the Court on 12 May 2014 has expired.

 

**********

Amendments

12 August 2015 - Coversheet: Counsel should read TF Robertson SC
File No. for proceedings below should read 2008/288217

Decision last updated: 12 August 2015