FEDERAL COURT OF AUSTRALIA

Devon v Ji [2016] FCA 797

ORDERS

THE COURT ORDERS THAT:

1.    Judgment be entered for the twenty-seventh respondent against the applicant pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth).

2.    The applicant pay the twenty-seventh respondent’s costs of the proceeding.

3.    The matter be listed for hearing on a date to be fixed on the question of whether the proceeding should be dismissed against the remaining respondents.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DAVIES J:

1    This proceeding was commenced by the applicant (“Mr Devon”) against 27 respondents (some of whom appear to be named twice). The proceeding as against the first, second, third and twelfth respondents was dismissed summarily pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) (“the Act”) on the application of those respondents on the ground that the claims against them had no reasonable prospect of success: Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 357 (“Devon v Thirteenth Kaysan”). The twenty-seventh respondent has now made application pursuant to s 31A(2) of the Act and/or r 26.01(1) of the Federal Court Rules 2011 (Cth) for an order dismissing the whole of Mr Devon’s claims against him.

2    The subject matter of the proceeding concerns two loan transactions. One of the loan transactions related to an amount of $1.5 million advanced by the first and second respondents to Southco Enterprises Pty Ltd (“Southco”), a company of which Mr Devon was the sole director at the relevant time (“the first loan”). The first loan was secured by a debenture granted by Southco over its assets, a guarantee given by Mr Devon and a first mortgage over his property at 11 Cromwell Road, South Yarra (“the South Yarra property”) in favour of the first and second respondents. The first and second respondents were clients of the third respondent, a legal firm which procured the finance for Southco. The other loan transaction related to an amount of $1.1 million lent by the nineteenth to twenty-sixth respondents to Cambray Place Pty Ltd (“Cambray Place”), another company associated with Mr Devon (“the second loan”). The second loan was secured by a debenture granted by Cambray Place over its assets, a guarantee given by Mr Devon, mortgages over properties in Geelong and also a fifth mortgage over Mr Devon’s South Yarra property. The twenty-seventh respondent is a solicitor who acted on behalf of the nineteenth to twenty-sixth respondents in relation to that loan. A second mortgage granted by Mr Devon over his South Yarra property is held by the fourth to eleventh respondents. The twelfth respondent is a legal firm that acted for the fourth to eleventh respondents.

3    Mr Devon has sought relief against the respondents pursuant to the National Consumer Credit Protection Act 2009 (Cth) (“the Credit Act”) as well as under various other acts. Mr Devon is self-represented and prepared his court documents without legal assistance. The court documents do not clearly articulate recognisable causes of action, but in so far as the allegations can be ascertained, they raise three substantive claims. One claim is that the loan transactions were “credit contracts” to which the provisions of Sch 1 of the Credit Act (“the National Credit Code” or “the Code”) applied and the respondents did not comply with the licensing requirements or the responsible lending requirements imposed by the Credit Act. Another claim is that the loans were knowingly and deliberately structured by the respondents as loans to corporate entities, namely Southco and Cambray Place, not as loans to Mr Devon in his individual capacity, so as to avoid the requirements of the National Credit Code. Mr Devon has also made claims of unconscionable conduct, and misleading and deceptive conduct, against the respondents. In Devon v Thirteenth Kaysan at [33], I held that none of these claims had any reasonable prospect of success as against the first, second, third and twelfth respondents. Mr Devon has applied for leave to appeal that decision.

4    On the application by the twenty-seventh respondent for summary dismissal, Mr Devon informed the Court that he was not claiming that the National Credit Code applied to the second loan transaction. Rather, his claim is that the second loan transaction was linked to the first loan transaction and, he claimed, as the first loan is “voidable” because the National Credit Code applied to that loan and the respondents failed to comply with the Code, the second loan transaction is also “voidable”. To support his claim that the National Credit Code applied to the first loan transaction, Mr Devon relied on s 13(1) of the National Credit Code. Section 13(1) provides that:

In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.

Mr Devon contended that the presumption that the Code applied to the first loan has not been rebutted by the twenty-seventh respondent in this application. Mr Devon also advanced a claim of unconscionable conduct against the twenty-seventh respondent in oral submissions. The unconscionable conduct was said to be that the twenty-seventh respondent required as a condition of the second loan that the loan be secured by a mortgage over the South Yarra property when, Mr Devon stated, the Geelong properties would have provided sufficient security in respect of the loan. Mr Devon claimed that the further mortgage over the South Yarra property was unnecessary and was only made a condition of the second loan in order to enable the twenty-seventh respondent to obtain additional brokerage fees in respect of the lending arrangements entered into at Mr Devon’s expense.

5    In Devon v Thirteen Kaysan at [14]–[15] I set out the relevant principles to apply on an application for summary judgment pursuant to s 31A(2) as follows:

SUMMARY JUDGMENT PRINCIPLES

14.    The power of the Court to grant summary judgment is contained in s 31A of the Act. That section provides as follows:

31A Summary judgment

(1)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is prosecuting the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.

(2)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3)    For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

for it to have no reasonable prospect of success.

(4)    This section does not limit any powers that the Court has apart from this section.

(5)    This section does not apply to criminal proceedings.

15.    The applicable principles to apply in determining the application for summary dismissal were not in dispute and are set out in Spencer v Commonwealth (2010) 241 CLR 118; [2010] HCA 28. Chief Justice French and Gummow J stated at [24]–[25] (footnotes omitted):

24.    The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said:

"The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried."

    More recently, in Batistatos v Roads and Traffic Authority (NSW) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde which included the following:

"Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way."

    There would seem to be little distinction between those approaches and the requirement of a "real" as distinct from "fanciful" prospect of success contemplated by s 31A. That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions.

25.    Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.

In applying s 31A of the Act, the Court does not conduct fact finding but must assess the strength of the allegations made by reference to the pleadings, affidavits and any other evidence adduced, in order to determine whether the claim is sufficiently strong to warrant a trial. Although the test for summary judgment does not require the respondents to show that the Applicant’s claims against them are hopeless or bound to fail, the Court must consider whether there are any real, as opposed to fanciful, issues of fact or law that require proper determination at a trial. The Court should be cautious to dismiss a claim summarily where questions of fact or law arise.

6    As with the first, second, third and twelfth respondents, none of Mr Devon’s claims against the twenty-seventh respondent raise a triable issue in fact or law.

7    In Devon v Thirteen Kaysan, I rejected the argument that there is a triable issue as to whether the first loan transaction was subject to the National Credit Code and Mr Devon is bound by that decision. Section 13 of the National Credit Code accordingly does not assist Mr Devon in the present application.

8    In so far as there is a claim as against the twenty-seventh respondent (or any other of the respondents) that the second loan transaction is “tainted” or impugned by the first loan transaction because the transactions were related, such a claim is bad in law and has no reasonable prospects of success.

9    The unconscionable conduct allegation articulated by Mr Devon in oral submissions is not pleaded nor does it emerge (or at least not clearly emerge) from Mr Devon’s affidavits. Furthermore, such a claim is also wholly unsupported by the material before the Court, save for generalised assertions that the second loan need not have been secured by a mortgage over the South Yarra property and was done that way by the twenty-seventh respondent so as to benefit the twenty-seventh respondent by charging additional fees. There is no factual material from which it may be concluded that there is a basis in fact for that claim and a triable issue.

10    Although not expressly dealt with by Mr Devon in oral submissions, his court documents do make the allegation that the second loan transaction (as with the first loan transaction) was structured as a loan to a company, not to Mr Devon personally, to avoid the requirements of the National Credit Code. If this is intended to be an allegation of sham (which was how that claim was put by counsel for Mr Devon in Devon v Thirteenth Kaysan), it is misconceived for the same reasons as the sham allegation in respect of the first loan transaction: Devon v Thirteen Kaysan at [24]–[27]. As with the first loan transaction, there is nothing in the evidence before the Court to support a claim that it was the common intention of all the parties to the second loan transaction that the transaction should not create the legal relations which the documents on their terms created: Raftland Pty Ltd v Commissioner of Taxation (2008) 238 CLR 516; [2008] HCA 21. In so far as the claim may be said to be an unconscionable conduct claim, this claim is also not based on any factual material but only upon generalised self-serving assertions by Mr Devon. Given the absence of factual material to support such a claim, I am satisfied that Mr Devon does not have a reasonable prospect of success in prosecuting such a claim as against the twenty-seventh respondent.

11    In the circumstances, there is no basis upon which to conclude that there are issues of fact or law on which Mr Devon would have a “real” as distinct from “fanciful” prospect of success as against the twenty-seventh respondent. Accordingly, there should be summary judgment for the twenty-seventh respondent against Mr Devon pursuant to s 31A of the Act.

12    Counsel for the twenty-seventh respondent submitted that the Court should dismiss the proceedings of its own motion against the balance of the respondents on the basis that the claims as against the remaining respondents must also have no reasonable prospect of success because they are the same claims made against those respondents who have successfully applied under s 31A of the Act. Whilst there is considerable force in that submission, Mr Devon should be given an opportunity to address the Court separately on whether the balance of the proceedings should be dismissed in light of the earlier judgment and this judgment.

Associate:

Dated:    11 July 2016

SCHEDULE OF PARTIES