- Unreported Judgment
SUPREME COURT OF QUEENSLAND
No 2850 of 2002
NATIONAL AUSTRALIA BANK LIMITED (ACN 004 844 937)
MICHAEL BRENDON FEENEY
CHRISTOPHER PETER FEENEY
HER HONOUR: The applicant plaintiff applies under Rule 292 of the Uniform Civil Procedure Rules for summary judgment in an amount of $271,593.37. The claim is for monies owing in respect of a home loan; monies owing under a guarantee of the business loan of Barron River Foods Pty Ltd, of which Mr Feeney, the first defendant, is a director; and monies owing under a guarantee of amounts owing under a bill facility to BRF Investments Pty Ltd (of which, again, Mr Feeney is a director) and other persons named Connolly.
I should say that the application is proceeding only against Mr Michael Brendon Feeney, the first defendant.
It is said on affidavit by the plaintiff and not challenged that there was default and demand in respect of all three sets of money owing and the guarantees. Mr Feeney, who appeared on his own behalf, resisted summary judgment on the basis that the securities for the loans and monies expended were sold at an under value.
Barron River Foods Pty Ltd had business assets. Mr Feeney says that its plant and equipment, stock and trade debts and goodwill had a value of some 1.4 million dollars. BRF Investments Pty Ltd had land and buildings as to which Mr Feeney attributes a value of 1.3 million. Receivers were appointed by the applicant in respect of all of those assets on 15 November 2001.
Contracts had been executed on 13 November 2001 for sale of the property to a person named Birkbeck for 1.1 million and for sale of shares in Barron River Foods Pty Ltd for $400, but he was also to assume the assets and liabilities of that entity. But the contract did not proceed.
Another company, Overscan Marketing, submitted an offer which Mr Feeney says totals $561,480 for the business assets of Barron River Foods Pty Ltd. The letter of offer raised a couple of conditions and did not constitute an offer in the prescribed form for the purposes of the receivers. At any rate they did not pursue the Overscan offer, but instead sold the property for one million dollars and the business for $100,000 to Birkbeck.
Mr Feeney seeks a stay of the application because there are proceedings by way of a claim and statement of claim against the applicant and the receivers in the Cairns Supreme Court claiming losses for the sale of the business and the property at an undervalue.
In addition to seeking a stay on that ground, he opposes this application on the basis that there is a need for a trial and the fact that he has a set-off or counterclaim.
The claim and statement of claim in the Cairns matter are exhibits. The allegations in the statement of claim are that the National Australia Bank, the applicant, ignored the existing contract of sale and appointed receivers. I do not see that there is any basis in that claim against them merely by reason of the appointment of receivers while the contracts of sale were on foot. They were entitled under the terms of the securities to appoint receivers and the appointment of receivers per se did not necessarily determine whether the contracts of sale would proceed.
Thereafter the allegations of negligence and breach of duty made in the statement of claim turn on the conduct of the receivers. Assuming for present purposes that a mortgagee selling owes a like duty to a guarantor as it does to a mortgagor, what seems to me an insuperable obstacle to this claim being made good against the applicant is that it was not selling as mortgagee. It was the receivers which were appointed by it who undertook the sale.
In each case the security instrument advancing the monies allowed for the appointment of receivers and in each case contained a provision deeming such receivers to be the agents of the mortgagor, not the applicant.
In Commonwealth Bank of Australia v. Muirhead  1 QdR 567, the Court of Appeal held that Section 85 of the Property Law Acts 1974 which creates the statutory duty of the mortgagee to take reasonable steps in relation to the sale of the security had no application to the exercise of a power of sale by a receiver appointed by a mortgagee who is acting solely as agent of the mortgagor.
The crucial point for present purposes is that the receiver is not the applicant's agent. What that means is that although there may be an action to be brought by the first defendant against the receivers, or perhaps even against the borrowers as principals of the receivers, there is no basis for a claim against the applicant.
I note that the Muirhead case has been followed recently by Justice Spender in the Federal Court in National Australia Bank Ltd v. Freeman 2002 FCA 244. He had this to say, having discussed a situation like to this where the receiver is the agent of the mortgagor. He went on to say:
“The unreality of that situation in fact is a matter which has troubled me on a number of occasions but the authorities to which I will refer make it plain that I ought to accept that the contractual term is effective so that the receiver appointed by the mortgagee exercising the power expressed in the bill of mortgage is acting as agent for the mortgagor. Notwithstanding what might be thought the unreality of the situation the legal position is that if there was negligence in the conduct of the sale Mr Freeman would have an action against the receiver. Almost certainly the receiver would have received an indemnity from the bank, but the legal characterisation of his rights in respect of any claimed sale at an undervalue is legally a claim against the receiver and not against the bank.”
That last sentence has some resonance here where Mr Feeney pointed out the undoubted existence of an indemnity by the bank of the receiver.
I note also that Muirhead was followed in National Australia Bank v. Troiani 2001 QSC 77 by the Chief Justice in respect of the position of guarantors. He pointed out the existence of the clause and concluded as a result that the applicant for summary judgment in that case bore no liability.
Since there can be, then, no basis for a claim against the applicant in respect of the alleged sale at an undervalue, there is no prospect of success in this respect. The existence of the claim and statement of claim form no ground for a stay and there is no maintainable defence, set-off or counterclaim.
The applicants are entitled to judgment.
HER HONOUR: Mr Feeney, I am going to order that you pay the costs of and incidental to the application to be assessed on a standard basis, unless you have anything in particular that you want to say about it. It is just the usual thing that costs follow the success of the applicant.
With those amendments, then - I have taken out the words “including interest in the sum of $90,168.03 and changed “indemnity basis” to a standard basis.
I will make the order as per the draft.
- Published Case Name:
National Australia Bank Limited v Michael Brendon Feeney
- Shortened Case Name:
National Australia Bank Limited v Feeney
 QSC 411
15 Nov 2002
No Litigation History