The lender sought a review of the Registrar’s decision to grant leave to permit the plaintiff husband and wife real estate developers to file a second further amended statement of claim.
The lender provided construction finance to a development company. As security the lender took first mortgages over the development units and the guarantors’ home.
When the loan went into default the guarantors voluntarily sold their home and used the proceeds to reduce the debt. The lender then sold the development properties pursuant to its power of sale.
After the sale of the development units there was a surplus and the lender paid the surplus to the second mortgagee of the development units. The guarantors then sued the lender alleging that the surplus should have been paid to them on the grounds they were subrogated to the first mortgage over the development units.
The lender won at first instance (click here to read our case note) and then won before the Court of Appeal (click here to read our case note), then lost before the High Court (click here to read our case note). The matter was referred back to the trial judge by the High Court. The guarantors then sought to bolster their chances by seeking leave to amend their statement of claim by alleging fraud and dishonesty. This was permitted by the Registrar. The lender then appealed the Registrar’s decision.
Associate Justice Macready proceeded on the basis that the decision as to whether to grant leave to amend was analogous to a decision as to whether proceedings should struck out or summarily dismissed. Accordingly the Registrar was wrong to simply wash her hands of the matter by declaring “it involved a complex matter which needed to be dealt with by a judge at some later stage”.
Associate Justice Macready then went on to apply the relevant test which was:
If there is a real question to be determined, whether of fact or law, and the parties’ rights depend upon it, then the court should not dismiss the action as frivolous and vexatious and an abuse of process.
The judge then found the fraud and dishonesty alleged was not properly particularised:
The allegation which is said to give rise to dishonest and fraudulent design is that the defendant ignored the plaintiffs’ claims as guarantor. In the absence of any further definition of the circumstances one cannot see from the amended pleading that the conduct was necessarily dishonest and fraudulent.
His Honour made no reference to, but presumably applied, UCPR 15.3 which reads:
A pleading must give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which the party relies.