SUPREME COURT OF QUEENSLAND CITATION: Perpetual Limited v Registrar of Titles & Ors [2013] QSC 296 PARTIES: PERPETUAL LIMITED (ACN 000 431 827) (FORMERLY KNOWN AS PERPETUAL TRUSTEES AUSTRALIA LIMITED (ACN 000 431 827)) (plaintiff) v REGISTRAR OF TITLES (first defendant) LESTER WILLIAM GEORGE (second defendant) HELENE LISA GEORGE AND ANTHONY MICHAEL CASTLEY IN HIS CAPACITY AS TRUSTEE IN BANKRUPTCY FOR THE BANKRUPT ESTATE OF HELENE LISA GEORGE (third defendant) PROFESSIONAL LENDERS ASSOCIATION NETWORK OF AUSTRALIA (ACN 086 490 833) (fourth defendant) COLIN IAN BINDING (fifth defendant) EAGLE AND BINDING PTY LTD (ACN 107 325 753) AS TRUSTEE FOR B.F.S. TRUST TRADING AS BINDING FINANCIAL SERVICES (sixth defendant) FILE NO/S: BS 12186 of 2012 DIVISION: PROCEEDING: ORIGINATING COURT: Trial Application Supreme Court of Queensland DELIVERED ON: 29 October 2013 DELIVERED AT: Brisbane HEARING DATE: 10 October 2013 JUDGE: ORDER: Boddice J I shall hear the plaintiff and the fourth defendant as to the form of orders and as to costs. CATCHWORDS: PROCEDURE SUPREME COURT PROCEDURE QUEENSLAND PROCEDURE UNDER THE UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS DEFAULT OF PLEADINGS where the plaintiff makes application for leave to file amended claims and statements of claim where the fourth defendant opposes the application
2 COUNSEL: SOLICITORS: on the basis the proposed new causes of action are sought to be joined outside the limitation period whether the new causes of action in the statement of claim arise out of the same or substantially the same facts as causes of action already claimed Uniform Civil Procedure Rules 1999 (Qld), r 376(4) Draney v Barry [2002] 1 Qd R 145; [1999] QCA 491, applied Macquarie Bank Limited v Meinhardt (NSW) Pty Ltd [2010] NSWSC 1228, cited Mokrzecki v Popham & Ors [2013] QSC 123, applied Thomas v State of Queensland [2001] QCA 336, cited Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515, cited P K O Higgins for the plaintiff K Holyoak for the fourth defendant HWL Ebsworth Lawyers for the plaintiff Barry Nilsson Lawyers for the fourth defendant [1] The plaintiff makes application for leave to file amended Claims and Statements of Claim. The fourth defendant opposes the application, insofar as the amendments affect the fourth defendant, as the proposed new causes of action are sought to be joined outside the limitation period. [2] The issue for determination is whether the proposed additional causes of action arise out of the same, or substantially the same, facts as existing pleaded causes of action against the fourth defendant such that r 376 of the Uniform Civil Procedure Rules 1999 (Qld) has application. If they do, it is accepted leave can be given notwithstanding any expiry of the limitation period. If they do not, the fourth defendant contends leave should only be given on terms which preserve its ability to rely on any limitations of actions defence. Background [3] The proceeding arises out of events surrounding a loan transaction and mortgage entered into between the plaintiff and the second defendant and his now bankrupt wife. Initially, the plaintiff only commenced proceedings against the first, second and third defendants. However, as a consequence of allegations by the second defendant that the plaintiff cannot rely on and enforce the loan and associated mortgage because of fraud on the part of the wife, the plaintiff also initiated proceedings against the fourth, fifth and sixth defendants. [4] Relevantly, those proceedings allege the plaintiff appointed a mortgage originator and manager who in turn appointed the fourth defendant as a referrer of loans in return for fees. It is further alleged the fourth defendant engaged or contracted the fifth and sixth defendants as its representatives to source mortgage applications. [5] In the existing claim against the fourth defendant, the plaintiff alleges the fifth and sixth defendants, as representatives of the fourth defendant, organised the loan application by the second defendant and his wife, and represented to the plaintiff s mortgage originator that in organising the loan various steps had been taken by the fifth defendant in accordance with the referrer agreement.
3 [6] The plaintiff alleges that acting on the faith of, and induced by, those representations, it entered into the relevant loan agreement and mortgage and advanced those funds. It is alleged that if the assertions made by the second defendant are accepted, and the plaintiff is thereby denied the ability to rely upon the loan agreement and mortgage, the representations constitute misleading or deceptive conduct contrary to prohibitions in the Fair Trading Act 1989 (Qld), the Trade Practices Act 1974 (Cth), and the Australian Securities and Investment Commission Act 2001 (Cth). Proposed amendments [7] At the hearing, the fourth defendant s opposition was initially on two bases. First, whether the proposed additional causes of action arose out of the same or substantially the same facts as the existing causes of action. Second, as to the sufficiency of the proposed pleading. [8] As a consequence of the latter complaints, the plaintiff delivered an amended proposed new pleading at the hearing. I am not now asked to determine whether that pleading has overcome those deficiencies. The parties agree the application is to be determined by consideration of the issue as to whether the proposed additional causes of action arise out of the same or substantially the same facts as existing causes of action. [9] The proposed two new causes of action in relation to the fourth defendant are a claim for damages (being pure economic loss) due to negligence, and a claim for breach of warranty. [10] Relevantly, the new causes of action are pleaded in the following terms: 36. PLAN Australia, Mr Binding and Eagle and Binding: (a) knew or ought to have known that: (i) the plaintiff would identify the Loan Application as one being referred to it by PLAN Australia, Mr Binding and Eagle and Binding; PARTICULARS the Loan Application refers to PLAN Australia as the Group ; Eagle and Binding as the Referrer, and Mr Binding as the Loan Consultant ; pursuant to the Membership Agreement any housing loan application submitted by the Originator Member (Eagle and Binding) to a PLAN Australia Panel Lender (the plaintiff) will be submitted via PLAN Australia and will note the PLAN Australia identification number (clause 4.5). (ii) that the plaintiff was relying on the information contained in the Loan Application particularly as to the identity of the proposed borrower, when deciding whether to approve the Loan Application and advance finance to the second defendant and Ms George; (iii) whether the information contained in the Loan Application was true and accurate and whether the proposed borrowers were identified; (b) assumed responsibility to the plaintiffs for the accuracy of the information contained in the Loan Application and the
4 (c) identity of the proposed borrower, by the terms of the referrer agreement pleaded in paragraphs 28 and 29 of this statement of claim; knew or ought to have known that, in the circumstances pleaded in paragraphs 8, 28 and 29 of this statement of claim, and for the reasons pleaded in subparagraph (a) above, the plaintiff was vulnerable to being at risk of suffering economic loss if the Loan Contract and/or Mortgage were unenforceable by the plaintiff against the second defendant and Ms George, as the plaintiff could not take any steps to protect itself against that risk other than to itself undertake the steps required by PLAN Australia, Mr Binding and Eagle and Binding under the terms of the referrer agreement. 37. In consequence of the matters pleaded in paragraph 36 of this statement of claim, PLAN Australia, Mr Binding and Eagle and Binding owed the plaintiff a duty to take reasonable care to ensure that the information contained in the Loan Application was true and not make representations which were untrue, false and/or misleading. 38. The second defendant alleges: (a) (b) (c) (d) (e) (f) (g). the said loan was applied for without his knowledge, instructions or consent; he did not sign the Loan Application; he did not sign the Loan Contract; he did not sign the Mortgage; Mr Binding did not conduct a face-to-face interview with him; at no time did Mr Binding or Eagle and Binding speak to him or adequately take steps to identify him or to ensure that he was applying for a loan; Mr Binding did not establish that he spoke English sufficiently to understand the nature of the transaction or for any other purpose. 41. Further and/or in the alternative, in breach of their duty of care as pleaded in paragraph 37 above, PLAN Australia, Mr Binding and Eagle and Binding failed to take reasonable care to ensure that the information contained in the Loan Application was true. PARTICULARS Despite making the Representations: (a) no face to face interview was conducted identifying (b) the second defendant as an applicant for a loan; there was a failure to identify the second defendant by completing 100 point check. 42. By reason of their breach of duty the plaintiff will suffer loss and damage as aforesaid if the Court makes the determination referred to in paragraph 27 above.
5 Submissions 43. Further and/or in the alternative, in breach of the warranty given by PLAN Australia as pleaded in paragraph 29(d) above, not all statements and information contained in the Loan Application were true and correct. PARTICULARS Despite making the Representations: (a) no face-to-face interview was conducted identifying the second defendant as an applicant for a loan; (b) there was a failure to identify the second defendant by completing 100 point check. 44. The warranty pleaded in paragraph 29(d) of this statement of claim: (a) (b) was for the benefit of the plaintiff as the disclosed third party under the terms of the Referrer Agreement as: (i) (ii) (iii) by clause 1.1 Macquarie Mortgages appointed PLAN Australia on the terms set out in the agreement to assist Macquarie in originating mortgage loans on behalf of Third Parties ; by clause 11.1 Third Party was defined as meaning, inter alia, the Trustee ; by clause 11.1 Trustee was defined as the plaintiff; (iv) by clause 2.1(a), the purpose of the submission by PLAN Australia of applications was for the obtaining of an offer by a Third Party, including the plaintiff, to fund a mortgage loan; (v) by clause 7.3, the matters the subject of the warranty are matters on which the plaintiff would rely for the purposes of deciding whether to approve a loan application and fund a mortgage loan. the benefit of the warranty was accepted by the plaintiff in: (i) accepting the loan application; (ii) approving the loan application and making the advance consequent upon the application with notification to PLAN Australia; (c) is, pursuant to s 55(1) of the Property Law Act 1974 (Qld), enforceable by the plaintiff. 45. By reason of the breach of warranty pleaded in paragraph 43 of this statement of claim and the matters pleaded in paragraph 44 of this statement of claim, the plaintiff will suffer loss and damage as aforesaid if the Court makes the determination referred to in paragraph 27 above. [11] The fourth defendant submits a key issue in the proposed new claim for damages for pure economic loss is vulnerability, as explained in the plurality judgment in
6 Woolcock Street Investments Pty Ltd v CDG Pty Ltd. 1 In the context of the present case, vulnerability is said to be understood as a reference to the plaintiff s inability to protect itself from the consequences of a defendant s want of reasonable care. In that context, its importance is similar to that explained by Einstein J in Macquarie Bank Limited v Meinhardt (NSW) Pty Ltd. 2 [12] The fourth defendant submits that once the significance of vulnerability is understood, the plaintiff cannot properly contend the new cause of action in negligence arises out of substantially the same facts. The central allegation necessary to establish that new cause of action, vulnerability, was never part of the story relied upon as the basis for the previously pleaded statutory representational causes of action. The scope and breadth of the enquiry necessary to consider the new cause of action are vastly different. A similar contention is made in respect of the proposed cause of action on the basis of a breach of warranty. [13] The fourth defendant further submits it is not appropriate to grant leave for reasons of prejudice akin to those found in exercising a discretion under s 31 of the Limitation of Actions Act 1974 (Qld) in personal injuries claims. 3 [14] The plaintiff submits the proposed additional causes of action do arise out of substantially the same facts. They arise out of the same story. Whilst additional facts, and a change in focus, is necessary to establish them, those factors do not deprive them from properly falling within r 376(4). Relevant principles [15] A court may direct a party to amend a claim or pleading in a way and on conditions as the court considers appropriate. 4 However, a special rule applies where the application for leave to amend is made after the relevant period of limitation, current at the date the proceeding was started, has ended. [16] Insofar as the present application is concerned, r 376(4) provides: (4) The court may give leave to make an amendment to include a new cause of action only if (a) (b) the court considers it appropriate; and the new cause of action arises out of the same facts or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding by the party applying for leave to make the amendment. [17] In determining what constitutes substantially the same facts for the purposes of r 376(4), a fairly broad brush comparison is to be made between the nature of the original claim and the proposed amendment. 5 The relevant principles were enunciated by Thomas JA (with whose reasons McMurdo P agreed) in Draney v Barry: 6 I do not think that substantially the same facts should be read as tantamount to the same facts, and consider that the need to prove some additional facts is not necessarily fatal to a favourable exercise 1 2 3 4 5 6 (2004) 116 CLR 515. [2010] NSWSC 1228 at [43]-[45]. See Borsato v Campbell [2006] QSC 191. Uniform Civil Procedure Rules 1999 (Qld), r 375. Thomas v State of Queensland [2001] QCA 336. [2002] 1 Qd R 145 at 164; [1999] QCA 491 at [57].
7 of discretion under r 376(4). If the necessary additional facts to support the new cause of action arise out of substantially the same story as that which would have to be told to support the original cause of action, the fact that there is a changed focus with elicitation of additional details should not of itself prevent a finding that the new cause of action arises out of substantially the same facts. In short, this particular requirement should not be seen as a straitjacket. (citations omitted) [18] There is no dispute the proposed amendments introduce new causes of action. It is accepted the appropriate course, therefore, is to first decide whether the plaintiff is able to bring itself within r 376(4). If it does, unconditional leave to amend could be granted. If not, leave should be granted only on a basis which does not prejudice the fourth defendant s ability to rely on a possible defence under the Limitations of Actions Act. Such an approach was adopted as appropriate in Mokrzecki v Popham & Ors. 7 Discussion [19] In the original pleading, the story relied upon by the plaintiff was that the referrer agreement entered into between the plaintiff s mortgage originator and the fourth defendant provided that any application for approval of loans must be properly completed and signed by the borrower, with a precondition to its submission being that the referrer or its representative personally interview and identify each borrower in respect of an application in accordance with the identification method as set out in the mortgage requirements from time to time. Further, the referrer represented and warranted that the application complied with those requirements, and that all statements and information contained in the application were true and correct and may be relied upon by the mortgage originator (paragraph 29). [20] It was further alleged, in respect of the loan to the second defendant and his wife, the fourth defendant had represented to the plaintiff s mortgage originator that a face-to-face interview had been conducted, that it had been established that the second defendant and his wife spoke English sufficiently to understand the nature of the transaction, that they had been identified by completing a 100 point check, and that the second defendant was applying for a loan (paragraph 33). [21] It was further alleged the plaintiff, acting on the faith of the representations and induced thereby, entered into the loan contract and the mortgage and advanced funds to the second and third defendants (paragraph 35). [22] The new proposed cause of action in negligence alleges the fourth defendant and its authorised representatives the fifth and sixth defendants, knew or ought to have know that the plaintiff would identify the loan application as being referred to it pursuant to the agreement, and that the plaintiff was relying on the information contained within the loan application, particularly as to the identity of the proposed borrower, when deciding whether to approve the loan application and advance 7 [2013] QSC 123 at [21]-[22].
8 finance, including as to the truth and accuracy of the information contained therein and the identification of the proposed borrowers (paragraph 36(a)). [23] It is further alleged those defendants assumed responsibility to the plaintiff for the accuracy of the information and the identity of the proposed borrower, and knew or ought to have known in those circumstances the plaintiff was vulnerable to being at risk of suffering economic loss if the loan agreement and/or mortgage were unenforceable as the plaintiff could not take any steps to protect itself against that risk other than to itself undertake the steps required by those defendants under the terms of the referrer agreement (paragraphs 36(b) and (c)). [24] It is further alleged that in breach of their duty of care those defendants failed to take reasonable care to ensure the information in the loan application was true in that, despite making the representations, no face-to-face interview was conducted identifying the second defendant as an applicant for a loan and there was a failure to identify the second defendant by completing a 100 point check (paragraph 43). [25] Similar allegations are relied upon to support the plea for a breach of warranty, although there is significant reliance placed on the terms of the referrer agreement to establish that cause of action. [26] Whilst the plaintiff now re-pleads further specific acts alleged by the second defendant against the fifth and sixth defendants, as representatives of the fourth defendant, namely, that the fifth defendant did not conduct a face-to-face interview with the second defendant, that at no time did the fifth or sixth defendant speak to the second defendant or adequately take steps to identify him or to ensure that he was applying for a loan, and that the fifth defendant did not establish the second defendant spoke English sufficiently to understand the nature of the transaction or for any other purpose (paragraphs 38(e), (f) and (g)), the prior pleading pleaded allegations to similar effect made by the second defendant. [27] Those allegations, that the loan had been applied for without his knowledge, instructions or consent, and that he did not sign the loan application, the loan contract, and the mortgage (paragraphs 36(a), (b), (c) and (d) of the original pleading), were pleaded in the context of specific allegations that on or about 18 April 2005 the fifth and sixth defendants, as representatives of the fourth defendant, had represented that the fifth defendant had conducted a face-to-face interview with each of the second defendant and his wife, and had established the second defendant and his wife spoke English sufficiently to understand the nature of the transaction, and had identified them by completing a 100 point check (paragraph 33). [28] Against that background, the proposed causes of action properly can be said to stem from previously alleged breaches of the referrer agreement, and previously alleged reliance by the plaintiff upon the fourth defendant having satisfied the terms of that referrer agreement. [29] Importantly, that reliance included a plea of the steps represented as being taken by the fourth defendant s representatives in obtaining the application from the second defendant and his wife, the documentation obtained in relation thereto, the accuracy of the steps that were required to be taken by the fourth defendant through its
9 authorised representatives, and the consequence of representations made as to the steps taken in respect of the loan agreement with the second and third defendants. [30] Whilst the plaintiff does plead additional facts in the proposed additional causes of action, those facts do not fall outside the story previously relied upon by the plaintiff. Those additional facts arise out of substantially the same story. To adopt, and adapt, the words of Thomas JA in Draney, the fact that there is a changed focus with elicitation of additional details does not prevent a finding that the new proposed causes of action arise out of substantially the same facts. [31] The plaintiff has established the proposed new causes of action arise out of substantially the same facts as causes of action for which relief has already been claimed in the proceeding. [32] The plaintiff has also established it is appropriate to grant leave pursuant to r 376(4). Whilst the fourth defendant contends prejudice arises from the proposed amendments, the pleaded basis for vulnerability is succinct. As such, the fourth defendant should have little difficulty in responding to the pleaded allegation of vulnerability. In these circumstances, there will be no real prejudice to the fourth defendant. Conclusions [33] The application for leave to amend, insofar as the proposed amendments relate to the fourth defendant, is granted. I shall hear the plaintiff and the fourth defendant as to the form of orders appropriate as a consequence of these Reasons. [34] I shall also hear the plaintiff and the fourth defendant in respect of costs.