Ziegler v Anz Banking Group Limited [2001] ACTSC 31 (12 April 2001)

Last Updated: 11 June 2002

Walter Ziegler v Australia and New Zealand Banking Group Limited [2001] ACTSC 31 (12 April 2001)

CATCHWORDS

PRACTICE AND PROCEDURE - Application for extension of time for lodging appeal - Inconsistency of issues raised in pleadings and appeal - Inadequate explanation of delay in filing appeal - Likelihood of success of appeal on the grounds of unconscionability.

Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447

Ebsworth v The Commonwealth (1986) 85 FLR 98 at 101

Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458 at 459,

Janesland Holdings Pty Ltd v Francisc Simon and Maria Simon and Others [1999] ACTSC 35

Kabushi Kaisha Universal v Aristocrat Leisure Industries Pty Ltd (Federal Court of Australia, Unreported, 4 March 1998)

National Australia Bank Ltd v Garcia [1998] HCA 48; (1998) 194 CLR 395.

Nelson Tobacco Co v Commissioner of ACT Revenue (1992) 109 FLR 323at 325

Port Jackson Stevedoring Pty Ltd v Almond and Spraggon (Aust) Pty Ltd [1978] HCA 8; (1978) 139 CLR 231 at 241

Protonotarios v Zapasnik, unreported, 5 March 1992, see discussion Civil Procedure ACT para [20,503.40]

Radin v Commonwealth Bank [1998] FCA 1361

Tyson v Brisbane Market Freight Brokers Pty Ltd [1993] HCA 33; (1994) 120 ALR 1

No. SCA 23 of 2001

Coram: Master T Connolly

Supreme Court of the ACT

Date: 12 April 2001

IN THE SUPREME COURT OF THE )

) No. SCA 23 of 2001

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: WALTER ZIEGLER

Appellant

AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Respondent

ORDER

Coram: Master T. Connolly

Date: 12 April 2001

Place: Canberra

THE COURT ORDERS THAT:

1. The application for an extension of time to appeal against my decision of 27 October 2000 be dismissed.

2. The appellant pay the respondent's costs.

1. This is an application pursuant to Order 81 rule 8 of the Supreme Court Rules for an extension of time within which an appeal may be brought from a decision of the Master on 27 October 2000. At an earlier hearing of this matter I indicated to the parties that it might be more appropriate if the matter was heard by a judge, but it was the view of both parties that, as I had been involved in many applications arising from this litigation, it would be preferable for me to hear and determine the application for an extension of time to appeal, even thought the proposed appeal is from my own decision.

2. Leave is sought to appeal from my decision of 27 October 2000 which entered summary judgment in favour of the plaintiff bank against EBMA Investments Pty Ltd, Ernest Allesch and Walter Ziegler, the present applicant. The summary judgment order related to a claim by the bank for repayment of a loan, and interest. This claim was initiated by originating application of 11 November 1999, which pleaded a debt in the sum of $41,975.65 and interest. This pleaded that the plaintiff bank agreed in November 1996 to advance to the first defendant, EMBA Investments Pty Ltd, a loan originally in the sum of $25,000 by way of an overdraft. It further pleaded that Mr Allesch and Mr Ziegler, the second and third defendants, were directors of the company, and had agreed in the loan documentation to guarantee the repayment of the loan. It was further alleged that the third defendant, the present applicant Mr Ziegler, provided mortgage security for the loan by way of a mortgage over his home in the Canberra suburb of Pearce. The originating application sought judgment against the three defendants for the sums due, and possession against the mortgage property.

3. The matter first came before me on 3 March 2000 by way of a notice of motion filed on behalf of the three defendants. On this occasion Mr Allesch sought and was granted leave to appear on behalf of the first defendant, the company, and he also indicated that he was speaking for Mr Ziegler. The notice of motion sought to transfer the matter to the Magistrate's Court on the basis that the debt claim was for a sum within the jurisdictional limit of that court. The application was opposed on the basis that that court did not have jurisdiction to hear and determine the application for relief by way of possession. I dismissed the notice of motion, with costs. This decision was then taken on appeal, including an attempt to appeal directly to the Federal Court. The appeal was not successful, and was dismissed with costs.

4. The matter came back before me on 4 August 2000 by way of an application for summary judgment. There had been no defence filed, and it would have been open to the bank to obtain a default judgment. The bank, however, chose to apply for summary judgment, thus giving the defendants an opportunity to be heard. On this occasion Mr Allesch again appeared for the corporate defendant, and spoke for Mr Ziegler, who he said was not well. Mr Allesch opposed the grant of summary judgment, and asserted that there was an agreement with the bank that the loan was advanced in order to allow Mr Allesch to take part in litigation in the Family Court of Australia, and that the bank would not seek repayment of the loan until such time as those proceedings in the Family Court of Australia were concluded. It seemed to me from what Mr Allesch said in those proceedings, a transcript of which is on file, that there could be, if what he said in relation to this agreement was true, be a defence to the bank's claim that the loan was repayable and the debt was due. Mr Allesch acknowledged, at page 8 paras 15-35 of the transcript, that there was an agreement to borrow money from the bank, that the money was borrowed, and that the money would be repayable. He asserted that the contract further provided that the debt and interest would be repayable when his Family Court proceedings were completed. I permitted the defendants to file and serve a defence on or before 1 September 2000.

5. A defence was filed on 31 August 2000, but it did not clarify the nature of the alleged agreement not to enforce repayment. At a hearing on 8 September 2000 I granted the defendants leave to amend their defence by 21 September 2000. An amended defence was filed on 21 September, and the plaintiffs sought certain particulars in relation to the allegations of a separate agreement in relation to the repayment of the loan. The matter was adjourned on 29 September 2000 to 6 October 2000.

6. On that occasion the defendants sought leave to issue further subpoenas against the plaintiff. The plaintiff's solicitors had filed extensive affidavits containing the loan files, and the files themselves were present in the plaintiff's solicitors' office. He gave an undertaking in open court that the original file would be made available for inspection by the defendants. I dismissed the application for leave to issue further subpoenas. I should add that Mr Nicol stated in this application that the offer to inspect the original files has never been taken up by the defendants. I also ordered the defendants to file and serve answers to the plaintiff's request for further and better particulars by 27 October 2000.

7. As the pleadings then stood the defendants all admitted that the loan to the company was entered into, that Mr Allesch and Mr Ziegler as directors of the company had guaranteed the loan, and that the Pearce property of Mr Ziegler had been provided as security. The terms of the loan document as pleaded by the bank were admitted, as was the fact that no repayment had been made. The only issue between the parties was the assertion by the defendants that the bank had agreed that the loan would not fall due until the conclusion of the Family Court proceedings. The further and better particulars sought by the bank related to this assertion.

8. On 27 October 2000 the plaintiff renewed its application for summary judgment. The defendants sought a stay of proceedings. No further and better particulars had been provided, and in the course of that hearing Mr Allesch abandoned his assertion that there had been a separate agreement in the terms asserted. I formed the view that the defence as pleaded was not sustainable, and granted summary judgment for the plaintiff against the first, second and third defendants. I delivered my reasons orally. I adjourned the application for possession against Mr Ziegler until 10 November 2000. I indicated in open court, in Mr Ziegler's presence, that it was important that he obtain independent legal advice in relation to his position, because he now had a judgment against him, and he was the person who had provided the security for the loan. I withdrew Mr Allesch's leave to act on behalf of the company and Mr Ziegler, on the basis that Mr Ziegler's interests and Mr Allesch's interests were now potentially in conflict.

9. Mr Allesch, notwithstanding this order, has purported to appeal on behalf of all three defendants from this decision. This appeal is still progressing.

10. On 10 November 2000 the application for possession came before me. On that occasion Mr Ziegler was represented by a solicitor, Mr Bundock, who sought and was granted an adjournment of two weeks to 24 November 2000. On 24 November Mr Bundock appeared to seek leave to withdraw as Mr Ziegler's solicitor. I granted this, and adjourned the application for possession for one week. On that occasion Mr Nicol for the bank indicated that the bank would not proceed to seek possession until after Christmas. This was a concession that the plaintiff did not have to make, but it did give further time for Mr Ziegler to consider his position, having by this time had the opportunity to have been represented by a solicitor. It also gave Mr Allesch and Mr Ziegler the opportunity to repay the loan.

11. A notice of motion was filed by Mr Allesch on 31 January, purporting to act on behalf of Mr Ziegler, in which he sought orders that possession be stayed, and that the matter be remitted to the ACT Credit Tribunal. On 2 February 2001 I dismissed this notice of motion, and granted possession to the bank. Mr Ziegler was not separately represented on this occasion, but was present in court with Mr Allesch, who continued to purport to represent him. I stayed the order for possession for four weeks, and again urged Mr Ziegler to seek legal advice.

12. On 16 February 2001 Mr Allesch appeared before Justice Gray seeking orders on a notice of appeal purportedly filed on behalf of Mr Ziegler seeking to appeal against my decision of 2 February 2001 granting possession. The notice of appeal referred to the grounds specified in a supporting affidavit of Mr Allesch and Mr Ziegler. This referred to difficulty obtaining transcript in order to file the appeal documents for the earlier appeal.

13. Justice Gray stood this matter over for one week, and the bench sheet records, "Mr Allesch on notice that Judge will dismiss the notice of motion if a legal practitioner is not present to represent Mr Ziegler."

14. On 23 February 2001 Mr Herald appeared before Justice Gray to represent Mr Ziegler. Justice Gray dismissed the purported notice of appeal as fundamentally defective, and the bench note records, "Mr Herrald given leave to make a properly formulated application before next Friday (2.03.01) so that the order for repossession might be stayed."

15. There was no appearance on 2 March 2001. At this point the stay I granted on 2 February 2001 had expired. The matter came before me again on 9 March on the basis of a notice of motion of 7 March 2001 filed on behalf of Mr Ziegler by his solicitor. This sought orders that the judgment against the third defendant be set aside, or that leave to file an appeal against my decision of 27 October 2000 be granted. Mr Nicol, on behalf of the bank, submitted that this notice of motion did not comply with the requirements of the rules in relation to an application to extend time for an appeal, and this was not seriously contested. I dismissed the notice of motion with costs, but granted leave to file and serve a proper application for leave to extend time to appeal by 23 March 2001. I further stayed the order for possession.

16. An application for extension of time to appeal in substantially proper form was filed on 22 March 2001, supported by an affidavit of Mr Ziegler and Mr Herrald. Order 81 rule 8 provides that an application for extension of time shall be accompanied by an affidavit showing:

a) the nature of the case in summary form;

b) each question involved; and

c) the reason why the extension of time should be given.

17. On 23 March I granted an adjournment for one week with liberty for the plaintiff to put on an affidavit in reply, and extended the stay. The matter came on for argument on 30 March 2001.

18. It was submitted that the application for extension of time was not in proper form because it did not set out the nature of the case in summary form and each question involved. I am satisfied, however, from Mr Herrald's affidavit, that the nature of the case which would be relied on in an appeal has been set out in summary form. Mr Herrald states in paragraph 7:

"In short form, the basis of the appellant/third defendant's case are that in determining the issues the Court would consider:

a. Was there any consideration passing between the plaintiff and the third defendant to support the guarantee and mortgage that the plaintiff relies upon. The appellant third defendant says there was not.

b. The appellant/third defendant was not given the opportunity nor advised by the plaintiff to seek Independent Advice when it was apparent to the plaintiff that the third defendant was being asked to provide security and sign documents to his detriment and to the advantage of the plaintiff.

c. At the time when those documents were signed the first defendant had already, with the knowledge and consent of the plaintiff, drawn upon funds on overdraft so the signing of the documentation on 29 February 1996 had the effect of providing the plaintiff with security for advances for which it was otherwise unsecured to the obvious advantage of the plaintiff and to the disadvantage and detriment of the third defendant. The plaintiff failed to advise the appellant/third defendant of this situation.

d. The plaintiff failed to avail itself of the invitation and offer to take other security from the first defendant who as the Bank well knew, under the documentation prepared by the plaintiff, was the principal debtor.

e. The transaction, by its very nature involving an unlimited guarantee by a third party, the third defendant, and notwithstanding the personal peculiarities of the third defendant, which were well known to the plaintiff, the plaintiff took advantage of the appellant/third defendant's commercial inexperience. The transaction is potentially vitiated as being harsh and unconscionable."

19. It seems to me that grounds (b) and (e) set out the basis of an argument that the contract be set aside on the ground of unconscionability pursuant to the principles set down by the High Court in Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 and National Australia Bank Ltd v Garcia [1998] HCA 48; (1998) 194 CLR 395. The argument before me proceeded on the basis that this was the substantial point sought to be raised on this appeal.

20. The starting point in any consideration of an application for an extension of time in which to lodge an appeal is the proposition that the purpose of time limits within which an appeal may be lodged is to achieve finality in litigation:

"When the time for appealing has expired, the litigation is at an end; the successful party is entitled to the benefit of the judgment in his or her favour. At that stage, the successful party has a vested right to retain the judgment. It would make a mockery of (the relevant rule) if, months after the time for appealing has expired, the unsuccessful party could obtain an extension of time on the ground that he or she had delayed appealing because that person wanted to research the issues involved. Lack of legal knowledge is a misfortune, not a privilege." (per McHugh J Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458 at 459, cited with approval by Miles CJ in Nelson Tobacco Co v Commissioner of ACT Revenue (1992) 109 FLR 323at 325).

21. It follows that, "where the time for filing and serving has expired, leave should only be granted under very special circumstances and upon very special grounds."(per Gallop J, Ebsworth v The Commonwealth (1986) 85 FLR 98 at 101). The onus is on the party seeking the extension of time to establish such circumstances and grounds. While all of these matters must be considered, Miles CJ made the point in Nelson Tobacco Co v Commissioner of ACT Revenue that, "Overall, however, there is the need to do justice to the parties"(at 325).

22. The extent of the delay is a factor to take into account. In this case there has been a considerable delay, as judgment was pronounced and reasons delivered orally on 27 October 2000. The applicant third defendant was present that day in court. The plaintiff took out the orders on 9 November 2000. The present application was filed and served on 22 March 2001, being 147 days, or nearly 5 months, after judgment. Such a delay is extensive, noting that in Nelson Tobacco Company Pty Ltd v Commissioner for ACT Revenue Miles CJ observed that a delay of 167 days in that case was "very considerable", and in Kabushi Kaisha Universal v Aristocrat Leisure Industries Pty Ltd (Federal Court of Australia, Unreported, 4 March 1998) Branson.J said that a delay of five months was, "so gross as to justify a refusal of the application" even though reasons for the delay were advanced.

23. The principle reason for the delay here is that the applicant has only recently taken advice from Mr Herrald, but as Mr Nicol observed in argument in this case, the third defendant was represented by a solicitor, Mr Bundock, on the first time this matter came before me after judgment. Mr Ziegler subsequently elected to no longer be represented.

24. A further factor which must be taken into account in determining an application for an extension of time is the nature of the appellate process. The present application seeks time to file an appeal from a decision of the Master. The Full Court of this Court has held that an appeal from the master is an appeal stricto sensu. (Protonotarios v Zapasnik, unreported, 5 March 1992, see discussion Civil Procedure ACT para [20,503.40]). It is common ground that the issues sought to be raised on the appeal were never raised in the pleadings or argument when summary judgment was entered in favour of the plaintiff. Indeed, the third defendant filed a defence in which he acknowledged the loan agreement and did not dispute its validity, and this is inconsistent with the issues sought to be raised on appeal. In Tyson v Brisbane Market Freight Brokers Pty Ltd [1993] HCA 33; (1994) 120 ALR 1,McHugh J said at 11:

"..the public interest in the finality of litigation requires that, unless some exceptional circumstances exists, a party must be refused leave to make a case on appeal which is inconsistent with his or her pleadings."

25. An appellate court is even more reluctant to allow a point on an appeal if that point was expressly or in effect conceded in the court below. As Barwick CJ observed in Port Jackson Stevedoring Pty Ltd v Almond and Spraggon (Aust) Pty Ltd [1978] HCA 8; (1978) 139 CLR 231 at 241:

"..it should only be in the clearest case and for the most cogent reasons that a party who has conceded matter at trial should be allowed to make the validity of what has been conceded the basis for overturning the result of the trial."

26. In an affidavit of the third defendant of 1 August 2000 he referred to being a witness to the original agreement, and in an annexure to that affidavit he enclosed a letter of 13 May 1999 in which he asserted,

"At all times the purpose of this overdraft facility was disclosed to the Bank as funds required to defend an unjust Family Court decision obtained during hospitalisation of Mr Allesch...ANZ Bank has been fully aware that advances made by the Bank have been more than adequately covered by assets/funds then and now....Contractual conditions are not breached because there are adequate fund to repay the debt. Access is stayed only until completion of proceedings before the High Court of Australia....After all the intention to repay has always been clear to the Bank. The temporary inability at this point in time is equally clear."

27. Mr Nicol, for the bank, submitted that this amounted to a concession that the loan agreement was properly in place, and indeed an acknowledgment that the debt would be repaid. There is much to this submission.

28. A further and important factor to be taken into account in an application for an extension of time is the likelihood of the success of the appeal. The substantive issue sought to be raised in the appeal is the proposition that the contract should be set aside as unfair or unconscionable. A transaction will be set aside as unfair or unconscionable where a party is under a special disability at the time of executing the transaction documents and the disability was sufficiently evident to the other party to the transaction to make it prima facie unfair or unconscionable for it to be allowed to rely on those documents. (Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447).

29. While it is asserted in Mr Herrald's affidavit that the third defendant was not given the opportunity nor advised by the plaintiff to obtain independent legal advice, this is not asserted by Mr Ziegler himself. He asserts merely that he did not obtain legal advice. In an affidavit filed by Mr Lance, the then manager of the Fyshwick Branch of the ANZ Bank, Mr Lance states that he explained to Mr Ziegler the consequences of putting his home forward as security for the loan. He states that, before the documents were signed, they had been taken away from the bank and examined by the third defendant. He points to the "Acknowledgment" in the loan contract above the signature of the third defendant where it states, "I have had an opportunity to get legal advice from an independent lawyer before agreeing to sign this guarantee."

30. Mr Lance's affidavit was filed on 28 March 2001, and Mr Lance was not required for cross examination. There is thus the uncontradicted evidence that the third defendant was advised of the consequences of his decision to advance his property as security, and was given the opportunity to obtain independent legal advice. On my reading of the authorities there is only a requirement to ensure independent legal advice in a situation where the credit provider knows or ought to know that the person offering the security is in a relationship involving emotional dependence on the part of the surety towards the debtor. In Radin v Commonwealth Bank [1998] FCA 1361 Lindgren J said,

"A contract is not unjust for the reasons only that it is not in the commercial interests of the mortgagor to enter into it or because the mortgagor had not independent advice. Perhaps the giving of a `purely' third party mortgage is never in the commercial interest of the mortgagor."(para 67).

31. In Janesland Holdings Pty Ltd v Francisc Simon and Maria Simon and Others [1999] ACTSC 35 Crispin J found that parents who guaranteed a business loan for their son did understand the nature of the transaction. Although there had been no insistence by the lender on independent advice, His Honour said,

"There is no general principle requiring potential lenders to query the wisdom of such decisions or provide advice about the need for independent financial advice. The contract of guarantee will be unenforceable only if the lenders conduct has been unconscionable." (para 79).

32. While it is asserted that the third defendant was under a disadvantage due to "commercial inexperience" it is acknowledged on the pleadings that he was a director of the company to whom the loan was advanced. True it is that it was common ground that the benefit of the loan advanced to the company would go to Mr Allesch, the other director, but the third defendant, as a director of the company, cannot be said to be unaware of commercial reality, or indeed to be a "third party" to the loan advanced to the company of which he was director.

33. I am not satisfied that it is in the interest of justice to grant leave to extend time for this appeal to be lodged. The appeal is very late, and there has been no adequate explanation for this delay, particularly when the third defendant did have the benefit of legal advice and representation in the weeks immediately after the decision was handed down and within the time laid down in the rules for an appeal to be filed. For me to grant an extension of time to argue points that were not only not raised at the original hearing, but are indeed inconsistent with the pleadings, would on the authorities require compelling reasons, which I am not satisfied exist. Moreover, the appeal, if it could be dealt with in the face of all these procedural difficulties, runs up against the fundamental difficulty that there is evidence that the plaintiff bank did advise the third defendant, the director of the company to whom the loan was advanced, of the consequences of his decision, and he signed an acknowledgment of the opportunity to take legal advice. He does not assert to the contrary in his affidavit. In these circumstances, the prospects of success of the appeal on the unconscionability point appear slim.

34. I should note that this does not leave Mr Ziegler with no remedy, as a party who has been induced to stand surety for another person's debts by that persons influence has an action in equity against that person (National Australia Bank Ltd v Garcia (1996) 39 NSWLR 577), and Mr Ziegler may well have such an action against Mr Allesch. I should also note that Mr Allesch has always maintained that he would repay this debt. He has been given every opportunity, but has made no approach to the bank. Mr Nicol noted that considerable sums were expended in filing fees for EBMA Investments Pty Ltd's unsuccessful, and in his submission, unsustainable, appeal to the Federal Court, and had even this sum been offered to the bank it may have made a difference by showing a genuine intent to repay the loan.

35. This litigation has taken a long time. When it began, the outstanding amount was only some $41,000. There have been many interlocutory steps taken by the defendants, without success and which have generated costs orders. There has been an appeal to the Federal Court. The costs incurred to date by way of adverse costs orders mean that the debt is now at least twice what it was. A further round of appeals, with the poor prospects of success that I have referred to, would incur further substantial costs. The bank has, it seems to me, given the defendant's ample opportunity to repay the loan, and even at the hearing before me on this application Mr Nicol indicated that the bank would be interested in any proposals for repayment. I dismiss the application for an extension of time to appeal against my decision of 27 October 2000, with costs.

I certify that the preceding thirty six (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of Master T. Connolly.

Associate:

Date: 12 April 2001

Counsel for the Appellant: Mr Herrald

Solicitor for the Appellant: Jack C Herrald Solicitors

Counsel for the Respondent: Mr Nicol

Solicitor for the Respondent: Blake Dawson Waldron

Date of hearing: 30 March 2001

Date of judgment: 12 April 2001