Westpac Banking Corporation v Upton
[2015] QDC 278
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- Unreported Judgment
- Appeal Determined (QCA)
- Westpac Banking Corporation v Upton[2015] QDC 278
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Westpac Banking Corporation v Upton[2015] QDC 278
Westpac Banking Corporation v Upton[2015] QDC 278
DISTRICT COURT OF QUEENSLAND
CITATION: | Westpac Banking Corporation v Upton [2015] QDC 278 |
PARTIES: | WESTPAC BANKING CORPORATION v JAMES SYDNEY UPTON & SHAUN CHRISTOPHER MCKINNON & GRAHAM ROBERT KILLER |
FILE NO/S: | D 1244/2015 |
DIVISION: |
|
PROCEEDING: | Application for summary judgment |
ORIGINATING COURT: | District Court of Brisbane |
DELIVERED ON: | 10 November 2015 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 1 September 2015 |
JUDGE: | McGill SC DCJ |
ORDER: | Judgment under rule 292 that the first defendant pay the plaintiff $617,440.17, in respect of the plaintiff’s claim other than the claim for enforcement costs and expenses. Judgment under r 293 that the first defendant’s counterclaim against the second and third defendants added by counterclaim be dismissed. Order that the first defendant’s amended counterclaim filed 5 June 2015 be struck out, but with liberty to re-plead in accordance with these reasons. The first defendant’s application is dismissed. Order the first defendant pay the costs of the plaintiff and second and third defendants added by counterclaim of both applications, to be assessed on the indemnity basis. |
CATCHWORDS: | GUARANTEE AND INDEMNITY – Liability of guarantors – effect of winding up and dissolution of principal debtor – effect of variation of guaranteed obligation – construction of guarantee – whether enforcement unconscionable. MORTGAGES – Remedies of mortgagee – appointment of receivers and managers – whether appointment valid – status of receivers and managers – liability for their actions in attempting to sell mortgaged land – whether guarantor can sue. PRACTICE – Summary judgment for the plaintiff – whether need for trial of the action – whether the defendant has had a proper opportunity to contest a claim to recover various changes of lawyers and receivers, claimed as enforcement costs. Land Title Act 1994 s 63. Property Law Act 1974 s 85. UCPR r 292. Boz One Pty Ltd v McLellan [2015] VSCA 68 – cited. Capital Finance Australia Ltd v Airstar Aviation Pty Ltd [2004] 1 Qd R 122 – cited. Commonwealth Bank of Australia v Muirhead [1997] 1 Qd R 567 – considered. Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 – not followed. Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 – cited. Re Excel Finance Corporation (1993) 41 FCR 346 – cited. Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 – applied. GE Capital Australia v Davis & Ors [2002] NSWSC 1146 – applied. Higton Enterprises Pty Ltd v BFC Finance Ltd [1997] 1 Qd R 168 – considered. Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70 - cited. Leach v Commonwealth Bank of Australia [2014] QSC 295 – cited. National Australia Bank Ltd v C & O Voukidis Pty Ltd [2015] NSWSC 185 – applied. Sandtara Pty Ltd v Abigroup (1996) 42 NSWLR 491 – cited. Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410 – not followed. Star v Silvia (No. 1) [1994] 12 ACLC 600 – cited. Upton v Tasmanian Perpetual Trustees Ltd (2007) 158 FCR 118 – cited. Westpac Banking Corporation Ltd v Kingsland (1991) 26 NSWLR 700 – cited. |
COUNSEL: | M J Luchich for the plaintiff and second and third defendants by counterclaim. The first defendant appeared in person. |
SOLICITORS: | Henry Davis York Solicitors for the plaintiff and second and third defendants by counterclaim. The first defendant was not represented. |
- [1]This is an application for summary judgment. The plaintiff on 27 March 2015 filed a claim by which it sought from the defendant $665,742.13 as money owing under a guarantee, and costs in accordance with a mortgage and guarantee. On 5 May 2015 the defendant filed a notice of intention to defend and defence and counterclaim. The counterclaim sought relief against the plaintiff and also three other defendants by counterclaim, two individuals who remain defendants by counterclaim and a company. It is not for the moment necessary to deal with the claims made by the counterclaim in that document. On 19 May 2015 the plaintiff filed a reply and an answer to the counterclaim by the plaintiff and the three defendants added by counterclaim. An amended defence and counterclaim was filed by the defendant on 5 June 2015, which made various changes to the earlier version of those pleadings, and significantly abandoned the claim against the fourth defendant by counterclaim.
- [2]On 14 July 2015 the plaintiff and the second and third defendants added by counterclaim filed an application by which the plaintiff sought judgment on its claim against the first defendant under r 292. The plaintiff and second and third defendants by counterclaim also sought judgment against the first defendant on the counterclaim under r 293, or in the alternative striking out the amended defence and the amended counterclaim were sought, either the whole of the document or a list of paragraphs in it. Pursuant to directions given by another judge, written outlines of submissions were filed by the plaintiff and by the first defendant, both on 28 August 2015.
Facts
- [3]A large volume of affidavit material has been filed in relation to the application. From this material it appears that Cambridge Pacific Investments Pty Ltd (“CPI”) was registered as a company on 14 January 2005. The defendant[1]became a director of that company on 6 August 2007, and remained the sole director from the following day until 10 August 2014 when the company was deregistered.[2]By a deed dated 8 August 2007 CPI became the trustee of the Cambridge Pacific Investments Trust (“the trust”).[3]The list of beneficiaries or potential beneficiaries was wide, but the defendant was included as one of the Class A beneficiaries under that deed.
- [4]On 10 September 2007 a representative of the plaintiff wrote to CPI offering finance in accordance with an attached business finance agreement forwarded with the letter, and inviting the company to execute and return the duplicate of that agreement to accept the offer.[4]On 14 September 2007 the defendant signed an acceptance on behalf of CPI of that offer of business finance, which acceptance was evidently returned to the plaintiff. That agreement was with CPI as trustee of the trust, and the finance details indicated that the business loan was to assist with the purchase of commercial property at 26 Depot Road, Dugandan; there was a limit of $539,000 on the loan. That document referred to various terms and conditions and, in addition, incorporated the terms and conditions set out in the general conditions booklet version three dated March 2003.[5]On 14 September, the defendant also signed a document headed “guarantee and indemnity” identifying him as the guarantor and CPI as the customer in respect of the business finance agreement dated 10 September 2007.[6]Apart from his guarantee, the loan was secured by a registered mortgage in favour of the plaintiff over the land at Dugandan owned by CPI.[7]
- [5]It was submitted by the defendant that the copy of the general conditions booklet which is Exhibit SAM5 was not the correct booklet. Reference was made to notations at the top of the document where page 1 is form 14 version 2 and page 2 to 17 are form 20 version 1. These I suspect are Titles Office form numbers. It appears to have been executed by a solicitor on 31 March 2003 and lodged for registration on 1 April 2003. The exhibit appears to be a copy of a registered document, and as such if that is the document registered, that contains the relevant terms, regardless of the date. There is nothing in the appearance of the document to suggest to me that it is in any way irregular or that it should be disregarded.
- [6]By a letter dated 27 November 2008 the plaintiff made a further offer of a loan to CPI on certain terms set out in that letter.[8]On 3 December 2008 the defendant, on behalf of CPI, signed an acceptance of this offer which presumably was subsequently returned to the plaintiff. The letter stated that the purpose of this loan was the purchase of 10 Morton Street, Norman Park, Queensland. One of the requirements before the loan could be drawn on was that CPI arrange for the director to sign the guarantee and mortgage required by the bank. The document indicated that the security for the loan would be a mortgage by CPI as trustee over the property at Norman Park, and a new $390,000 limited guarantee by the defendant. On 3 December 2008 the defendant signed a document headed “guarantee and indemnity” in favour of the plaintiff in respect of money owed by CPI in relation to the loan offer dated 27 November 2008.[9]
- [7]On 20 August 2010 there was a further offer made by the plaintiff to CPI, of a temporary increase in the limit of the existing business loan of $539,000 by $30,000, to be reduced back to the lower limit by 31 December 2010.[10]The securities sought were a limited guarantee and indemnity from the defendant, involving an increase in the limit of the existing guarantee from $396,000 by $569,000, in return for which the limited guarantee and indemnity for $539,000 was to be released. The facility was also to be secured by the existing mortgage over the property at 26 Depot Road, Dugandan. On 30 August 2010 the defendant on behalf of CPI accepted this offer.
- [8]On 20 August 2010 the plaintiff wrote to the defendant seeking his agreement as guarantor under the guarantee and indemnity dated 3 December 2008 to the replacement of the existing guaranteed obligation with the new guaranteed obligation in accordance with the details contained in the business finance agreement dated 20 August 2010, a copy of which was attached to the letter.[11]The defendant signed an express agreement dated 30 August 2010 to this replacement of the existing guaranteed obligations with new guaranteed obligations.
- [9]It was submitted by the defendant that he was only liable as a guarantor under the guarantee, and that the document did not extend to providing an indemnity. The definition in Clause A1 of Exhibit SAM5uses the word “guarantee” to refer to a guarantee and indemnity. The letter in 2010, Exhibit SAM11, referred to substituting new guaranteed obligations for the existing guaranteed obligations. The term “guaranteed obligations” is defined in clause A2 as the obligations the subject of the Guarantee, that is, the guarantee and indemnity. That is shown by the fact that there is a capital G in “Guarantee” making it a reference to the guarantee and indemnity: Clause A1. In my view it is quite clear that it was not the case that the obligations of the defendant under this agreement were limited to the obligations of a guarantor in the strict sense.
- [10]Between December 2010 and September 2012 there were a series of further variations to the terms of the business loan, which followed the same pattern.[12]Each time there was a letter to CPI setting out the new arrangements, a copy of which was signed by the defendant as director and returned, and a letter to the defendant seeking his agreement to the variation of the guaranteed obligation which would be subject to his guarantee and indemnity, which he signed and returned.
- [11]By a deed dated 21 May 2013 the defendant removed CPI as trustee of the Trust, and appoint CPAC Residential Pty Ltd as trustee.[13]Two days later, on 23 May 2013, the defendant put CPI into liquidation.[14]It was deregistered on 10 August 2014. Under the terms of the loan agreement, a default event occurred if the borrower was a corporation or trustee of a trust and if it was wound up or dissolved or steps were taken towards this.[15]The default events in the loan agreement were also default events for the purposes of the guarantee and indemnity. There were these default events, notwithstanding that there had not been any failure to make any payment due under the loan. The fact that the loan account was not in default in money terms was relied on by the defendant, but plainly there were default events for the purposes of the contract. The defendant also submitted that the plaintiff’s security was the same as before and it ought to have allowed the loan to run in the same way, with a new trustee company, but it was not under any obligation to do so and no basis upon which any obligation to do so could arguably have been imposed upon the plaintiff was raised in the defendant’s material.
- [12]The plaintiff also at one time alleged that there was a default event in that CPI had been removed as trustee of the trust without the plaintiff’s consent. This was disputed by the defendant, on the basis that he claimed he obtained consent in a telephone call to an officer of the bank on 24 May 2013.[16]In this application the plaintiff relied on the other default events of winding up and dissolution, and in those circumstances it is not necessary to consider the availability of this event further.
- [13]On 27 May 2013 the defendant sent an email to an officer of the plaintiff referring to a conversation that morning and confirming that they had placed CPI into voluntary liquidation “on the advice of our accountant and solicitor”.[17] He went on to acknowledge that “we are now technically in default and Westpac reserves its rights to act accordingly.” He proposed that the interest only period be extended for a further six months to “allow us to sell the property in a more orderly fashion.”
- [14]Evidently the attempts by the defendant to sell the property proved to be unsuccessful. There was an email from the defendant to an officer of the bank on 10 January 2014 attaching a proposal for the extension of the forbearance period, and advising that he had an offer of $480,000 on the property; he sought access to the bank’s valuation to assist in negotiations, and asked if the bank would accept a lower price (sic,? amount) than the mortgage to clear the loan.[18]Enclosed with the email was a report advising that the defendant had completed two formal marketing campaigns for the property at Dugandan with no firm results, attempts to sell were continuing but there was no timeframe attached to the sale. The attached report did not refer to any offer other than one of $480,000, though there was a reference to a couple of other potential purchasers who had shown some interest. Reference was also made to pursuing refinancing. Evidently the defendant’s efforts to obtain a purchaser for the property had not been at all successful up to then. It appears that following this email the second and third defendants by counterclaim were appointed under the mortgage as receivers and managers of the mortgaged premises, on 21 January 2014.[19]
Terms of loan and guarantee
- [15]Under the terms of the loan in the event of a default event the plaintiff was entitled to require the borrower to pay all principal and other monies then owing immediately, even if they were otherwise not yet payable.[20] A demand was made by the plaintiff on the defendant, but the money was not paid by him, or for that matter by CPI or the new trustee of the trust.[21]There was no dispute that the demand had been made,[22]but in the amended defence para 22, the defendant alleged that the plaintiff had no legal right to make that demand, or abused that legal right, by failing to follow due process, misrepresented itself and acted unconscionably to the guarantors. There is no dispute that no part of the amount claimed has been paid by CPI as a result of its liquidation, by the new trustee, or by the defendant.
- [16]One matter that concerned me was that there was no evidence that the plaintiff ever made demand on CPI for the payment of the full amount of the loan and interest. The standard conditions do not provide for anything to follow automatically from the happening of a default event; rather under clause D3 “the lender can do any one of the following, to the extent permitted by law”. One of the steps which was open was:
“require you to pay to the lender all principle and all other amounts which you promised to pay under part B above. You must immediately pay them even if they are not yet otherwise payable.”
- [17]Clause B5 of the standard conditions headed “when you must pay” provided that all amounts were payable “on demand or when the lender debited your account for them”, except where a lender arrangement says otherwise. The term “lender arrangement” was defined broadly in clause A2, and would cover the various business finance agreements made by the acceptance of the various offers referred to earlier. The finance details of the final variation provided for repayment over 15 years to expire 20 September 2022, to be interest and fees only for six months, then revert to principal interest and fees with repayments of $7,452 per month. In those circumstances DPI’s obligations in relation to payment were to pay interest and fees only per month for six months, and thereafter to make the specified monthly payments of principal interest and fees. It was submitted for the plaintiff that there was no lender arrangement which provided that money was payable other than on demand for the purposes of clause B5, but plainly the business loan agreements, and subsequently variation agreements, said otherwise. The effect a default event was that the plaintiff was entitled to call on DPI to pay all amounts outstanding, but that did not occur.
- [18]Clause B1 contained a promise to pay, in the case of someone who has given a guarantee, all monies which the customer owes to the lender for any reason under and in relation to the guaranteed obligations. Clause B1 of the standard terms also contained a provision:
“However, under a guarantee you are only required to pay amounts payable by the customer if the customer fails to pay them when due or when they would have been due.”
The term “guarantee” is defined in clause A1 as “a guarantee and indemnity” which was the document signed by the defendant, so on the face of it under that document the obligation of the defendant, whether as guarantor or principal debtor under the indemnity, was only to pay monies the customer failed to pay when due.
- [19]Apart from this there are various conditions in clause E1-E13 which apply specifically in relation to any guarantee, as defined. Clause E2 provided:
“If the customer does not pay an amount of the guaranteed money when it is due, the lender may demand that you pay that amount. You must then immediately pay that amount to the lender. The lender can make any number of demands and demands can be made for all or part of the guaranteed money and even if the lender does not take action to recover the guaranteed money from anyone.”
- [20]This provision is consistent in my view with the wording of the proviso in clause B1, in that it creates an obligation on the guarantor to pay on demand any amount not paid by the customer when it is due. In the context of the present case, that means that if CPI failed to make a monthly payment the plaintiff was entitled to demand that that payment be made by the defendant who was thereupon obliged to pay it. If there was a default event, the plaintiff was entitled to make demand on CPI for the full amount owing, and in those circumstances that amount became immediately payable under clause D3. If however that was not done, it seems to me that the amounts payable by CPI only became due when they became due, that is, month by month. That is consistent with the proviso in clause B1, where the obligation under the guarantee is expressed to be by reference to a failure on the part of the customer to pay amounts payable when due or when they would have been due.
- [21]The plaintiff referred to the wording of clause D3, that after a default event “the lender may require you to pay to the lender all principle and all other amounts which you promised to pay under part B, even if they are not yet otherwise payable.” It was submitted that, if the agreement is interpreted so that a requirement to the customer to pay is necessary there is an entitlement to payment from a guarantor, it would deprive those words of any effect. It seems to me that the answer to that proposition is that, if one looks at the provisions of this document which are specifically referable to the obligation under a guarantee, that obligation is defined differently. This document is not in terms confined to guarantees, but particular parts refer specifically to guarantees. Where there is a provision which refers specifically to a guarantee, if there is any inconsistency between that provision and a provision applying more generally, the provision which is specific to a guarantee will operate in the case of a guarantee: generalia specialibus non derogant.
- [22]It is true Clauses E8 and E10 provide that in a variety of circumstances the liability of the guarantor will not be adversely affected, including that the lender has not exercised any rights against anyone else. It follows from this, for example, that it is irrelevant to the liability of the defendant that the plaintiff failed to prove for its debt in the winding up of CPI. But the point here is that the issue is not whether the rights against the defendant are in some way lost, but how the rights against the defendant under this document are defined, that is, what rights are given in the first place.
- [23]The plaintiff lent money to CPI which was repayable by monthly payments, initially of only interest and fees, and subsequently of interest principal and fees, over a period of years. The contract with CPI provided that in certain circumstances (default events) the plaintiff could require the full amount to be immediately payable, but apparently it never did. In these circumstances, there has been no failure on the part of CPI to pay the full amount when due, because it was never made due. It follows, on the face of the document, that the obligation on the defendant cannot be independently accelerated by making demand on the defendant for the full amount of the money payable.
- [24]Subsequent events, however, have overcome that difficulty for the plaintiff. Clause E10 provided that if the lender has no legal right to recover an amount of guaranteed money from the customer or to enforce the guaranteed obligations the amount will be taken to be part of the guaranteed money and the guarantor will pay it to the lender whenever the lender demands. The effect of the winding of up of CPI was that the plaintiff no longer had a legal right to enforce the debt once the company was dissolved, and indeed once the winding up had progressed to the point where the plaintiff no longer had a legal right to recover money from CPI or to enforce its obligation. So an entitlement to make demand on the defendant arose under clause E10 which existed at the time when the demand was made on 6 February 2015. Thus it seems to me that the plaintiff was entitled to make demand at that time for the full amount which thereupon became payable by the defendant, and is now recoverable.
- [25]Even if I were wrong about that, the defendant executed the deed of forbearance dated 10 September 2013[23]which expressly provided that the outstanding debt, defined to include all monies owing by CPI, would be paid by the last day of the forbearance period, or if not paid would become immediately due and payable by the guarantors without the need for any demand or notice to be given to any of them upon the termination or expiry of the forbearance period. That period expired prior to the making of the demand, and the effect of that provision was to make all monies owing by CPI immediately due and payable by the defendant upon the expiry of the forbearance period. Accordingly, even if that money did not become payable under clause E10, it became payable upon the expiry of that period pursuant to the deed.
- [26]It was submitted for the defendant that the deed of forbearance did not have the effect of making money, otherwise not payable, payable to the plaintiff, but merely prevented the plaintiff from taking action while it remained in force, and preserved the status quo thereafter. That, however, is not what the deed provided. The deed was executed on the basis that the guarantors, including the defendant, were liable to the plaintiff for the outstanding debt: see paragraph E of the recitals. Clause 4 provided for obligations of the guarantors during the forbearance period, including in clause 4.2 the provision that:
“By no later than 5pm on the termination date the guarantors must pay the outstanding debt to the lender in full in cleared funds.”
Hence under the deed there was an independent or new obligation to pay the full amount of the monies outstanding under the facility to the plaintiff by not later than 5pm on 31 December 2013.
- [27]The defendant did not comply with that obligation, and accordingly under clause 5.1 of the deed it was expressly provided that in those circumstances the outstanding debt was immediately due and payable by each obligor, which included the defendant, without the need for any demand or notice to be given to the obligor or any other person, other than a notice expressly required by a finance document, and the plaintiff could immediately commence enforcement action for the recovery of the outstanding debt without further notice. In these circumstances the deed goes much further than the interpretation sought to be put on it by the defendant, and contains an independent obligation to pay, during the forbearance period, the full amount of the outstanding debt, which obligation can, immediately after the expiry of the forbearance period (which has occurred), be enforced against the defendant.
Defendant’s submissions
- [28]The position therefore is that the money was lent to CPI, it has not been repaid, and prima facie the defendant is liable under his guarantee and indemnity in respect of the loan. The defendant filed an outline of submissions on 28 August 2015, in which he submitted that the case was the result of unconscionable behaviour by the plaintiff resulting from a desire by the plaintiff to clean up their loan book and to get rid of a loan they no longer saw as a commercial priority. The plaintiff reneged on its contract with the borrower and is punishing the defendant for objecting to its actions. His argument appears to be that it was unconscionable for the plaintiff to act on the default events which had occurred rather than to allow the loan to continue on the agreed terms and conditions. It was suggested that this was because the plaintiff had a more commercially profitable use of the same resources available to it, but there was no evidence of that, and it was just speculation.
- [29]I doubt very much whether such behaviour, that is mere taking advantage of a contractually defined default event so as to hold the borrower and the guarantor to the contractual terms, can amount to unconscionable conduct anyway, but this was not a case where everything had been going smoothly, and where the borrower’s attempts to substitute a new trustee provoked a sudden burst of uncooperativeness on the part of the bank. On the contrary, most of the variations that I have referred to occurred because the borrower was not operating within the original parameters of this loan.
- [30]The variation in August 2010 involved a temporary increase to clear arrears on existing debts, and provided for payment of interest and fees only until the end of the year, after which repayments of principal were to commence. The variation on 30 December 2010 was to extend the temporary increase and interest only payments for a further three months, to 31 March 2011 and the change in September 2011, described as a restructure of the existing facility, again made it interest and fees only until 31 March 2012. The variation in May 2012 was to extend the interest and fees only term until 31 October 2012, and the variation in September 2012 was to extend it for a further six months. In May 2013 the defendant was seeking a further interest only period. Rather than being an account where everything was going smoothly, this a picture of an account which was persistently not performing as promised.
- [31]The fact that the plaintiff was, for a time, not strictly enforcing its rights under the loan agreement but was allowing an extension of the interest only period does not mean that there was any continuing obligation to be generous to the borrower, or to behave in the future in a way in which involved anything other than holding the borrower, and the defendant, to the terms of their agreements. The defendant alleged that there were various things the plaintiff should have done but did not do, but did not show how there was any legal obligation on the part of the plaintiff to do any of those things, nor am I aware of any such obligation.
- [32]The defendant referred to the fact that the plaintiff did not prove for its debt in the liquidation of CPI,[24]as if that somehow means that there is thereafter no debt in existence which could be the subject of the guarantee. But there is no such principle of law. Given that CPI was worthless, it would have been a waste of time proving for the debt, but that does not mean that somehow the debt and any obligation dependent upon it was discharged. Even apart from that, the defendant’s obligation as the guarantee and indemnity is one of indemnity, as a principal obligor, which necessarily would not be discharged by the discharge of the obligation of the principal debtor. The notion that the creditor’s demand on the guarantor is somehow on behalf of the principal debtor and will be invalid if the principal debtor has ceased to exist is not correct, in the absence of something in the guarantee to produce that result, to which my attention has not been drawn.[25]
- [33]The defendant also argued that the fact that CPI was not a party to the forbearance deed entered into on 20 September 2013 meant that it was ineffective as a contract. But that document was simply an agreement between the plaintiff and the defendant and another guarantor for the plaintiff temporarily to forbear to enforce its rights against them, which agreement was honoured by it. It certainly did not have the effect of discharging those rights, whether or not CPI was still in existence at that time.
- [34]At one point the defendant was submitting that the position had been that there were three separate loans which were each the subject of a separate guarantee, that two of the loans had been repaid, and that although the third loan had not been repaid the guarantee in respect of that loan, the business loan, had been released.[26]It is true that the guarantee executed in September 2007 was released in 2010, but this occurred in the context of the arrangement in August 2010 by which the guarantee signed in November 2008 was varied so as to increase the limit to include the amount owing on the business loan as increased as part of the same arrangement. The effect of this is that the 2008 guarantee then covered two transactions, the loan for the purchase of 10 Morton Street, Norman Park, and the loan for the purchase of 26 Depot Road, Dugandan. The fact that the former loan has been repaid does not mean that liability does not continue under that guarantee as varied in 2010 in respect of the transaction involving the Dugandan property.
- [35]There was some argument from the defendant at the hearing that the 2010 arrangement was vague, and that the documentation did not identify the loan transaction in relation to the Dugandan property. That argument in my opinion was without substance. The letter of offer included finance details which referred to the existing limit of $539,000 in respect of a business loan, which was the limit for the loan in relation to the Dugandan property, to be increased temporarily by $30,000, and the third page of the letter referred expressly to the fact that the loan was subject by way of security to a mortgage over the Dugandan property. A copy of this was enclosed with the letter of 20 August 2010 sent to the defendant, and on 30 August 2010 he agreed to the new guarantee obligations, as set out in that letter. It follows that thereafter the 2008 guarantee as varied did secure the liability in respect of the Dugandan property.[27]It is also clear that the effect of the 2010 variation was not just to increase the limit in relation to the loan covered by the guarantee previously, but to substitute a new obligation, in relation to both loans.[28]
- [36]The defendant complained that the plaintiff’s behaviour had been unconscionable because the plaintiff had refused to accept the new trustee company as the new borrower, and had refused to accept the pre-payment of 12 months’ interest on the loan.[29]It was not however suggested that there was anything unconscionable about the original transaction, and in circumstances where the original transaction was not unconscionable, it is difficult to see how a refusal of a lender to agree to a restructuring of the transaction in the way sought by the borrower is going to be unconscionable. There is no obligation on a lender to agree to any change in the arrangements proposed by the borrower, or the guarantor. The change in the arrangements was brought about evidently because the original borrower, CPI, became insolvent,[30]and it is unsurprising that the plaintiff would then seek to enforce securities in relation to the loan. A lender cannot be under any obligation in those circumstances to accept alternative securities and to allow the loan to continue on a different basis. In my opinion there was no unconscionable conduct on the part of the plaintiff in failing to agree to the defendant’s proposed variation of the loan arrangements in relation to the business loan secured on the Dugandan property.
- [37]The defendant also in his first affidavit advanced an argument that a guarantee by another person which was required as part of the 2010 variation was invalid because it was not undertaken in accordance with the requirements of the consumer credit legislation, and, as his liability as guarantor was as a joint guarantor with this other person, it followed that his liability under the guarantee was also invalid.[31]This was not a matter raised specifically in oral submissions, and in any event there is no substance to the argument. The guarantee was given in respect of a business loan, borrowing money for the purpose of purchasing an industrial property, and was therefore not a consumer credit transaction, even if the other person gave a mortgage over that person’s principal place of residence to secure any liability under the guarantee. In any case, the guarantee given by the defendant was not a joint guarantee with that given by the third person. These were separate and independent securities, so any problem of validity of the security involving that person would not affect the liability of the defendant under his guarantee.[32]Furthermore, even if as a result of some defect in the guarantee of the other person the defendant were not liable under the guarantee provisions of the guarantee and indemnity, he would still be liable under the indemnity provisions, which would not be discharged in such circumstances. For these reasons there is no substance to this argument.
- [38]The defendant also in his affidavit advanced an argument that the effect of the transfer of the land to the new trustee was that the mortgage was no longer enforceable against the land, either initially or once the previous trustee was dissolved, at which point there was no longer any continuing obligation on the part of the original trustee which could be secured by the mortgage.[33]That argument is also not correct. The effect of the registration of a mortgage is that it operates as a charge on the land for the debt secured by the mortgage: Land Title Act 1994, s 74. The mortgagee has the power under the Act, apart from any other power given by the terms of the mortgage, to take possession of the land or to obtain an order for sale of the land: s 78. The effect of a transfer of land subject to a registered mortgage is set out specifically in s 63 of the Act: the transferee is liable to comply with the terms of the mortgage and the terms implied by an Act. It follows that the transfer of the land to the new trustee did not in any way impair the ability of the plaintiff to enforce against the land its rights as mortgagee of the land.
- [39]The defendant also advanced the argument that the liquidation and dissolution of CPI meant that the debt secured by the mortgage disappeared, so that there was no longer anything secured by the mortgage. That is also not correct, essentially for the same reason as it is incorrect to say that the effect of those events was to destroy the liability of the defendant on the guarantee, but in any case the mortgage is a separate security and any inability to enforce the mortgage would not impact on the enforceability of the guarantee. Apart from anything else, clause E8 of the standard terms and conditions provided expressly that the defendant’s liability under the guarantee was not affected by any other security being temporarily or permanently invalid or unenforceable. Accordingly the defendant’s obligation would not be affected even if the mortgage were invalid for some reason.
- [40]It also follows that it is irrelevant to the claim on the guarantee and indemnity whether there has been any invalidity in the appointment by the plaintiff of the receivers and managers of the mortgaged land. The defendant complained about both the appointment of the receivers and managers, and the actions of the receivers and managers in failing to sell the land, but it does not seem to me that these matters would impact on the liability of the defendant unless in some way the plaintiff were claiming the costs associated with doing that from the defendant.
- [41]The defendant also deposed, and submitted at the hearing, that there was no useful purpose in pursuing the claim against him because he had no assets, and that the plaintiff was therefore simply pursuing the claim for a collateral purpose, namely to bankrupt him and in that way prevent him from complaining about the actions of the second and third defendant by counterclaim.[34]The plaintiff is not obliged to accept the defendant’s mere assertion, even under oath, that he has no assets. This provides no defence in law to its claim. Bankruptcy is a procedure available to a creditor in circumstances where a judgment debtor fails to pay a debt, but the fact of the availability of bankruptcy in such circumstances, and that a creditor may prior to the judgment contemplate that such a step may be necessary, does not render the proceeding unconscionable or an abuse of the court’s process. On the face of it the plaintiff is simply seeking to enforce payment of the money owed to it, and the defendant has not shown by any credible evidence that there is any purpose collateral to that basic objective which might render the proceeding an abuse of the court’s process. It is not an abuse of the court’s process to pursue a cause of action which the plaintiff does have with a view to seeking to have any judgment on that cause of action satisfied.
- [42]The defendant also disputed the quantum of the plaintiff’s claim, though the argument was confined to an argument in relation to the claim about enforcement expenses. The statement of claim alleged that as at 5 February this year the amount owing was $665,742.13. This consisted of principal in the sum of $560,723.53, interest in the sum of $56,716.64, and enforcement costs and expenses and other costs and liabilities in the sum of $48,301.96: para 31. In response to this allegation the defendant, apart from denying liability, complained about the failure of the plaintiff or the second and third defendants by counter claim to have effected the sale of the property, and complained about their conduct in the management of the property, but otherwise alleged simply that the amounts claimed exceeded the amount owing plus reasonable costs, or alternatively the amount claimed included costs not permitted by the documents pleaded: para 24, esp. (b) and (c). There was no challenge specifically to the allegations that the principal remains unpaid, or to the allegation that interest accrued as at 15 January 2015 came to the amount alleged.
- [43]For the purposes of the summary judgment application, the plaintiff has relied on clause H5 of the booklet, which provides:
“A written statement by a representative of the lender as to amounts owing under the document is sufficient evidence against you unless you prove it is wrong.”
A representative of the plaintiff has deposed to the proposition that for the purposes of that clause “the sum of $665,742.13 calculated as at 5 February 2015 is owing by the first defendant under the 2008 guarantee”. The effect of the contract between the parties may well be that that is prima facie evidence that that is the amount properly owing under the guarantee,[35] but it does not necessarily mean that summary judgment for that amount will be given in the absence of the defendant being able to produce evidence at this stage that that amount is not owing.
- [44]Summary judgment is not given under r 292 unless the court is satisfied that there is no need for a trial of the claim or the part of the claim in question. One of the reasons that may give rise to the need for a trial is that it is not obvious to the court, on the material currently available, that the whole of the amount claimed by the plaintiff is really owing, or the circumstances may be such that the defendant has not in practice had a proper opportunity to assess whether the amount claimed is actually owing under the terms of the contract between the parties. The defendant says in substance that that is the situation here, because such information as has been provided in relation to the amount claimed by way of costs and expenses is incomplete and does not correspond with the amount claimed in the statement of claim.[36]
- [45]The fact that, under the terms of a contract such as the present guarantee, the onus is on the defendant to disprove the figure claimed by the plaintiff[37]does not mean that there is no need for a trial in circumstances where a plaintiff merely asserts a liability for a particular amount, and the defendant has not at that stage filed affidavit evidence which, if accepted, would demonstrate that the figure is wrong. In my opinion, if a situation is such that the defendant has not had a proper opportunity to assess whether the amount claimed by the plaintiff is properly payable under the terms of the agreement between the parties, that is a reason why summary judgment should be refused, on the basis that the court is not satisfied that there is no need for a trial of the proceeding, at least in respect of any part of the plaintiff’s claim which at that stage remains opaque. Whatever may be the effect on the onus at the end of a trial of a clause like H5, in my opinion it is not a useful basis for success on an application under r 292 where the claim is not properly particularised.
- [46]The plaintiff relied also on affidavit evidence that, according to its computerised records, as at 5 February 2015, the outstanding principal was $560,723.53 and interest of $56,716.64 had accrued and was unpaid.[38]The amount claimed as enforcement costs was particularised as legal costs totalling $48,301.96, the amount charged in 14 invoices, six from the solicitor for the plaintiff and eight from the firm of the second and third defendants by counterclaim. In those circumstances, the claim does raise the issue of the validity of the appointment of the receivers and managers. Copies of the first four of the solicitor’s invoices are in evidence,[39]but the amounts paid in the plaintiff’s records[40]are less than the amounts charged by those invoices.[41]These four seem to relate to legal work in May and June 2013, and in relation to the deed of forbearance and the appointment of the receivers and managers.
- [47]There was no setoff pleaded in relation to the plaintiff’s claim against the defendant, nor could any money claim by the defendant operate effectively as a setoff, in circumstances where it was a term of the guarantee that money payable under the guarantee be paid without deducting amounts claimed to be owed by the lender.[42]Such a provision is effective to prevent a setoff being raised against the plaintiff.[43]
- [48]For the reasons I have given below, the various matters raised by the defendant as to the validity of the appointment of the second and third defendants as receivers and managers are without substance, so all reasonable amounts which the plaintiff reasonably paid or incurred in relation to the receivership would be recoverable from the defendant under the provision in clause B1 making the defendant liable for enforcement costs and expenses, either directly or as a guarantor of the liability of CPI. It does not however follow that the plaintiff is entitled to recover by way of summary judgment whatever amount is claimed, even in the absence of any evidence that such amounts are not properly payable under this provision. In principle the defendant is entitled to litigate the question of whether the amounts claimed were reasonably incurred and are reasonable in amount, and for that purpose to take advantage of the ordinary provisions under the rules for discovery of documents and, perhaps, interrogatories (subject to a grant of leave).
- [49]The total amount claimed in respect of costs of the receivers and managers seems to come to $32,286.54[44]which strikes me as rather a lot in circumstances where they do not ever seem to have achieved very much. There is material from the defendant criticising their actions in various respects; it is not necessary to go into this in detail, because, appropriately, it is uncontradicted at the moment,[45]though no doubt like most stories there are two sides to this one. In my opinion the position in relation to the claim for payment of the expenses of the receivers and managers is a claim in respect of which I am not satisfied that there is no need for a trial. The position is essentially the same as the claim in relation to the legal costs.
- [50]It follows therefore that it is appropriate to give judgment under r 292 against the defendant in respect of the claim for the principal and interest, but to order that the plaintiff’s claim in relation to enforcement costs and expenses go to trial.
Counterclaim
- [51]With regard to the counterclaim, this is concerned with the appointment of the second and third defendants as receivers and managers of the mortgaged premises and their conduct pursuant to that appointment. By a deed executed on 23 January 2014 the plaintiff, pursuant to powers conferred on it by the mortgage over the land at Dugandan, appointed those defendants to be receiver and manager of that land with all the powers conferred upon a receiver and manager by virtue of the mortgage or by any other means: clause 2(a).[46]The deed went on to provide expressly that the receiver was the agent of the new trustee, that is to say CPAC Residential Pty Ltd. The mortgage over the land was in terms of the standard terms document no. 706487974, that is Exhibit SAM5,[47]and clause D3 of those standard conditions provided that at any time after a default event the lender could appoint one or more receivers or receivers and managers who could do anything the lender could do as set out, including take possession of the property, sell the property and do a wide range of other things involving the property including collecting rent and other amounts.
- [52]The clause went on to provide: “To the extent the law permits, a receiver or receiver and manager will be your agent, and need not comply with requirements imposed on mortgagees.” That is a common provision, and it is well-recognised that it is effective to make the receiver the agent of the mortgagor rather than the mortgagee: Commonwealth Bank of Australia v Muirhead [1997] 1 Qd R 567 at 579-580, 583. In that case it was held that, for that reason, s 85 of the Property Law Act 1974 did not apply to a sale by a receiver appointed by a mortgagee under such a clause. In 2008 s 85 was amended to overcome this decision so that it applied to the exercise of a power of sale conferred on a receiver by the instrument of mortgage.
- [53]The mortgage was of course entered into by CPI, but the effect of the Land Title Act 1994 s 63 is that the new owner of the land is liable to comply with the terms of the mortgage, so the mortgage is enforceable in the same way against the new trustee. It follows that the allegation in paragraph 13 of the counterclaim is wrong in law. The receivers are agents for the company, not agents for the plaintiff.[48]One consequence of this is that the receivers owed no duty of care to the mortgagor: Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 at 834.[49]The counterclaim alleged in paragraph 5(a) that the receivers owed a duty of care to the beneficial owners of the property. In circumstances where, on the authorities, the receivers did not even owe a duty of care to the legal owner of the property, they could not have owed any duty of care to a beneficial owner of the property. The counterclaim also repeated the propositions, which are not correct, that once CPI was dissolved the debt it owed somehow disappeared for the purpose of the guarantee and indemnity, or that thereafter there was no debt secured by the mortgage.
- [54]The defendant relied on ss 84, 92 and 96 of the Property Law Act. Section 84 acts as a restriction on a mortgagee exercising a power of sale, but plainly does not operate as a restriction on the exercise of the power of sale by the mortgagor, and hence by an agent of the mortgagor, which is what the receivers are. It follows from the approach adopted by the Court of Appeal in Muirhead that s 84 does not apply to a sale by receivers and managers appointed under a mortgage, nor does s 84 apply to the appointment by the mortgagee of receivers and managers. I think it is of some significance that s 84 was not amended when s 85 was amended in 2008.
- [55]Section 92 is concerned with a mortgagee appointing a receiver under a power conferred by the Property Law Act, and provides that that power may not be exercised until the mortgagee has become entitled to exercise the power of sale, presumably by complying with s 84. A power to appoint a receiver is conferred by s 83(1)(c) of the Act, but it is not a power to appoint a receiver of the property; it is a power to appoint “a receiver of the income of the mortgaged property or any part of the mortgaged property …”. It is accordingly only relevant where mortgaged property is producing rent. The short answer to the complaint that there was a failure to comply with s 92 is that s 92 did not apply to the power in the mortgage, not under the Act, to appoint a receiver and manager, which power was the one exercised by the plaintiff. The proposition that s 96 applies is also wrong: it is concerned with a situation where a mortgage provides for repayment of the principal at a particular date, and after that date passes interest on the principal is accepted for a period of not less than three months without any arrangement to extend or renew the mortgage. Nothing like that happened in the present case, so s 96 is irrelevant.
- [56]Paragraph 16 of the counterclaim contains the allegation that the solicitors acting for the plaintiff and the receivers had a duty of care to ensure that its legal advice was not unlawful and did not represent a conflict of interest. No doubt as solicitors they did owe a duty of care, but not to the first defendant. This allegation is irrelevant. Paragraph 17 alleged that the plaintiff and the receivers had a duty to manage the property and to sell it for its market value or as close to that value as possible. The relevant duty is that imposed by s 85(1), to take reasonable care to ensure that the property is sold at the market value. The first defendant would have a remedy in damages against the plaintiff for any breach of this duty, pursuant to s 85(3), because of his status as a guarantor, but only if the duty has been breached: Higton Enterprises Pty Ltd v BFC Finance Ltd [1997] 1 Qd R 168. In that case it was held that the duty was breached when a contract of sale was entered into, even though that contract ultimately was not completed.
- [57]Plainly the property has not in fact been sold since the appointment of the receivers. The defendant alleged blandly that the receivers failed to sell the property within a reasonable time or failed to sell the property for market value or failed to recover the funds owed to the plaintiff, and failed to limit the amounts allegedly owed by the first defendant to the plaintiff. This does not provide any proper allegation of the breach of the relevant duty laid down in the statute. There was some criticism of the conduct of the real estate agents in advertising the property for sale, but it is difficult to see how this could be related to any loss suffered, because it is clear enough that the defendant has been himself seeking purchasers for this property throughout this period, and he has not been able to obtain a purchaser willing to pay anything like the figure at which the property was allegedly at some stage valued. Strictly speaking, as it stands this pleading does not allege what the market value of this property was at any particular time, but it is difficult to see how any deficiency in the approach to selling of the real estate agents in fact led to a breach of the statutory duty.
- [58]The mere fact that the property has not been sold does not demonstrate that the statutory duty has been breached. In Higton there was a finding by the trial judge that, but for the contract that did not proceed having been entered into, the property probably would have been sold for a particular sum which would have been enough to discharge the mortgage debt: p 173. Whether a mere failure to sell could amount to a breach of duty is perhaps debatable. In Higton (supra) there was some language in the judgment of Fitzgerald P at p 173 to suggest that a mere failure to enter into a satisfactory contract could amount to a breach of the mortgagee’s duty. On the other hand, the language of McPherson JA at p 182 suggests that there will be a breach of duty only if the mortgagee is actually “exercising the power of sale”. Pincus JA at p 184 merely said that a mortgagee “may commit a breach of the duty imposed by the section … by steps taken with a view to sale of the mortgaged property even if the sale is never completed.” I would not be prepared to conclude for the purposes of a summary judgment application that a breach of s 85 could not be constituted by a mere omission to sell.
- [59]In principle therefore it may be open to the defendant to assert that there has been a breach of the duty in s 85 of the Property Law Act which would give him a claim for damages against the plaintiff. That will not be available as a set-off against the plaintiff’s claim, but it is something which can be pursued by him by way of counterclaim, or for that matter by the new trustee which would of course also have a cause of action if there has been a breach of the duty in s 85. The present pleading is however completely inappropriate to pursue such a cause of action. It is necessary first to plead properly the existence of facts giving rise to the duty under s 85(1), and the terms of the actual duty imposed by the statute, and then it is necessary to allege with particularity what it is that is relied on as constituting the breach of that duty by the plaintiff, and how it is said that the defendant has suffered loss by that breach of duty, so as to give rise to the remedy in s 85(3).
- [60]It is not to the point to say that the defendant at one time obtained a valuation of the property at $880,000, because what really matters is what the plaintiff would probably have actually realised on a sale had the duty been complied with. That may run into the difficulty of showing that a sale would probably have occurred if reasonable care had been taken. It follows from s 85(3) that an entitlement to damages is available only where the person claiming has actually suffered loss by the breach of duty. That would have to be shown on the balance of probabilities, and it would not be sufficient to show that there had been merely the loss of a chance of a sale. It is also not to the point that there are documents showing the property as having zero value, though I expect that such documents are reflective more of the value of the equity of the new trustee in the property rather than the value of the property itself.[50]Given the defendant’s lack of success in marketing the property himself, and the failure to obtain an offer of anything like the amount claimed by the plaintiff in this proceeding, the assertion, in paragraph 21 of the counterclaim, that no amount would be owing to the plaintiff had it not been for its breach of duty seems fanciful.
- [61]The defendant also referred in the counterclaim paragraph 21 to the Corporations Act 2001 (Cth), ss 180-184 and 420A. The former sections are directed principally to the duties of directors of companies, but they extend to officers, which term is defined to include receivers and managers, so that in principle such duties can be owed by the second and third defendants.[51]It is however clear that these duties are duties owed to the company, relevantly here the new trustee company, and are not owed to the defendant, who therefore has no cause of action for breach of them. As to s 420A, this has been said to apply, to a receiver and manager selling company property, a duty like that contained in s 85 of the Property Law Act.[52]
- [62]This is a duty owed specifically by the second and third defendants, not by the plaintiff, so any breach of it will be actionable against them. There is however this important difference, that there is authority that a breach of s 420A is not actionable at the suit of a guarantor such as the defendant.[53]It follows therefore that the defendant has no counterclaim against the second and third defendants for breach of duty under any of these provisions of the Corporations Act.
- [63]I should also say something about the defendant’s claim for relief. He claimed an order that the second and third defendants by counterclaim be removed as receivers, which was evidently based on the assertion that they had been invalidly appointed, which was without substance. He claimed an order that the mortgage be declared discharged, but I am firmly of the view that in the events that have happened the mortgage remains a valid mortgage. He also sought an order that the guarantees given by him, and the other guarantor, to the plaintiff be released. There was no basis whatever shown for that relief. He also sought an order that the plaintiff or the second or third defendant pay “to the trust the difference between the original valuation obtained by the plaintiff of $880,000.00 and the highest bid the property received at auction.” Plainly there is no basis for any such order, even under s 85. A claim for damages if successful under that section would produce a very different form of relief, and it will be a claim by the defendant personally; there is no basis upon which an order can be made that the plaintiff or the other defendants pay money to the trust. There is no reason to think, and no basis alleged in the counterclaim, that any of them have wrongly received trust property, and in any case such relief is properly pursued by the trustee, not by a beneficiary.
- [64]The plaintiff advanced an argument that, as a result of the appointment of the receivers and managers, the new trustee ceased to be a trustee of the land the subject of the mortgage, which thereupon became vested in him as trustee. The new trustee remains the registered proprietor of the land in question, and as such is in law the owner of the land. At best this argument would lead to a conclusion that the new trustee holds the land on a bare trust for the defendant as trustee under the trust, but it is unnecessary to consider that argument because, in circumstances where the new trustee retains legal title to the land, the plaintiff’s legal rights in respect of the land are properly enforced against it. Finally the plaintiff claimed in the alternative an order that, as he put it, “reinstates the original status quo” which again is entirely unjustified in the light of the material before me.
- [65]It follows therefore that the defendant may have a money claim against the plaintiff for breach of s 85 of the Property Law Act, although one has not been properly pleaded at the present time. This however would be properly brought as a counterclaim, and there would be no right of set off against the plaintiff’s claim against him on the guarantee.
- [66]It is appropriate to strike out the counterclaim, but to give the defendant leave to re-plead a counterclaim against the plaintiff for damages under s 85 of the Property Law Act 1974. I am not however persuaded that the defendant has any arguable cause of action against the second and third defendants by counterclaim. They may well have owed duties to the new trustee, but on the authorities they owed no duty to the defendant, whatever the position may be in relation to the plaintiff, as a consequence of any act or omission on their part. In relation to the claims against the second and third defendants I am satisfied that there is no real prospect of the defendant successfully pursuing a claim against them, and there is no need for a trial of his claims against them, and I give judgment under r 293 against the defendant in favour of the second and third defendants by counterclaim.
Conclusion
- [67]On the plaintiff’s application therefore I give judgment under r 292 that the first defendant pay the plaintiff $617,440.17, in respect of the plaintiff’s claim other than the claim for enforcement costs and expenses. The balance of the plaintiff’s claim can proceed to trial under r 294(1). I give judgment under r 293 that the defendant’s counterclaim against the second and third defendants added by counterclaim be dismissed. I also order that the first defendant’s amended counterclaim filed 5 June 2015 be struck out, but with liberty to re-plead in accordance with these reasons. I will hear from the defendant when these reasons are delivered as to the time required for that. The plaintiff is entitled to its costs on the indemnity basis, under the guarantee and indemnity.
- [68]The defendant also filed an application on 7 August 2015[54]seeking various relief. The defendant has first taken the point that the second and third defendants added by counterclaim have, notwithstanding r 178(4), failed to file a notice of intention to defend with their answer to the counterclaim and so are in breach of r 135. In circumstances where I am giving judgment against the defendant in relation to the claims against those defendants it is not necessary to consider this point further. The defendant also sought an order under r 171(a) that the plaintiff’s claim be struck out because it discloses no reasonable cause of action, which is not the case, or in the alternative that it is a proceeding which has not been properly started for want of jurisdiction. No rational basis for the proposition that this court lacks jurisdiction in this matter was advanced by the defendant.
- [69]In the alternative he sought an order under r 16(e) setting aside the claim, which is in the same position, and summary judgment under r 293 against the plaintiff, and under r 292 in favour of the defendant against the plaintiff and the second and third defendants. For the reasons given above, and in the light of the outcome on the plaintiff’s application, these orders are not justified. He also sought an order under r 16(i) that the plaintiff is estopped from any further action against the property and the first defendant and the other guarantor, that the record of the registered mortgage be removed from the title deed, that the guarantees be released and that the references to the second and third defendants be removed from ASIC records relating to the new trustee. Even assuming that these are matters where the court could make such orders, plainly for the reasons I have given there is no basis upon which such orders would be made.
- [70]An order was sought under r 16(g) staying the claim pending the outcome of contract negotiations by the first defendant for the sale of the property. Given the length of time over which the attempts by the first defendant to sell the property have been unsuccessful, it would clearly be inappropriate to make that order, even if the matter of sale were not now properly in the hands of the second and third defendants. There is therefore no basis for any of the relief sought in that application, which is dismissed with costs. Although the defendant in correspondence foreshadowed an application to join the new trustee as a party to the proceeding, no such application was made.
Footnotes
[1] It is convenient to refer to the first defendant as the defendant. When it is necessary to refer to another defendant I shall do so expressly.
[2] Affidavit of Meagher, Exhibit SAM1; affidavit of defendant filed 30 July 2015 para 3.
[3] Ibid, Exhibit SAM3.
[4] Ibid, Exhibit SAM4.
[5] Ibid, Exhibit SAM5.
[6] Ibid, Exhibit SAM6.
[7] Ibid, Exhibit SAM7.
[8] Ibid, Exhibit SAM8.
[9] Ibid, Exhibit SAM9.
[10] Ibid, Exhibit SAM10.
[11] Ibid, Exhibit SAM11.
[12] Ibid, Exhibits SAM12 – SAM 19.
[13] Ibid, Exhibit SAM20: title to the mortgaged land was transferred to the new trustee: Exhibit SAM20.
[14] Affidavit of defendant filed 30 July 2015 para 5, 15.
[15] Affidavit of Meagher, Exhibit SAM5, clause D2.
[16] Affidavit of defendant filed 30 July 2015 para 13.
[17] Affidavit of Meagher, Exhibit SAM22.
[18] Ibid, Exhibit SAM24.
[19] Affidavit of Meagher, Exhibit SAM25.
[20] Affidavit of Meagher, Exhibit SAM5 clause D3.
[21] Affidavit of Schneider, Exhibit MDS1.
[22] Apart from the defence, see affidavit of defendant filed 30 July 2015 para 2.
[23] Affidavit of Meagher, Exhibit SAM23.
[24] Affidavit of defendant filed 30 July 2015 para 17.
[25] O'Donovan and Phillips “Modern Contract of Guarantee” para 6.2000, citing Sandtara Pty Ltd v Abigroup Ltd (1996) 42 NSWLR 491 and Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70.
[26] Affidavit of defendant filed 30 July 2015 paras 20-24.
[27] Besides, the last letter of variation of the guarantee, SAM19, referred expressly to the guarantee dated 3 December 2008, as did the deed of forbearance Exhibit SAM23.
[28] It is not entirely clear to me why the transaction was structured in this way, but I do not think that that matters. It clearly enough was structured in this way, and there is nothing about this structure which would render it ineffectual.
[29] Affidavit of defendant filed 30 July 2015 para 10.
[30] Affidavit of defendant filed 17 August 2015 para 2.
[31] Affidavit of defendant filed 30 July 2015 paras 33-37.
[32] Affidavit of Meagher, Exhibit SAM5 clause E8, E10.
[33] Affidavit of defendant filed 30 July 2015 paras 39-45.
[34] Ibid paras 72-75.
[35] See also Property Law Act 1974 s 57.
[36] Apart from oral and written submissions, see affidavit of defendant filed 17 August 2015, para 9.
[37]Reardon v Deputy Commissioner of Taxation [2013] QCA 46 at [39].
[38] Affidavit of Milacic filed 25 August 2015 para 3, Exhibit JM1.
[39] Affidavit of the defendant filed 17 August 2015, Exhibit JSU29.
[40] From Exhibit JM1.
[41] The difference seems to be that each payment is about 6.818% less than the invoice amount. This “discount” was not explained.
[42] Affidavit of Meagher, Exhibit SAM5 clause D5.
[43]Capital Finance Australia Ltd v Airstar Aviation Pty Ltd [2004] 1 Qd R 122.
[44] Affidavit of Milacic filed 25 August 2015, Exhibit JM2.
[45] There will be no point in contradicting factual issues on an application for summary judgment, since that would ordinarily simply give rise to a triable issue on facts.
[46] Exhibit SAM25.
[47] See Exhibit SAM7.
[48] See the analysis of the position of such receivers in Boz One Pty Ltd v McLellan [2015] VSCA 68 at [153]-[177].
[49] See also Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295, where the existence of a duty to take reasonable care to avoid causing economic harm to the mortgagor was expressly rejected. The contrary decision in Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410 should not be followed, as it was based on the decision in Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949, which is not the law in Australia: Westpac Banking Corporation Ltd v Kingsland (1991) 26 NSWLR 700; Upton v Tasmanian Perpetual Trustees Ltd (2007) 158 FCR 118 at [18]; Leach v Commonwealth Bank of Australia [2014] QSC 295 at [30].
[50] That is to say that the amount owing under the mortgage exceeds the value of the property.
[51]Re Excel Finance Corporation (1993) 41 FCR 346 at 363-4, where there is some discussion of the particular position of a receiver and manager appointed by the holder of a security.
[52]Star v Silvia (No. 1) [1994] 12 ACLC 600 at 607 per Young J.
[53]GE Capital Australia v Davis & Ors [2002] NSWSC 1146 at [45], National Australia Bank Ltd v C & O Voukidis Pty Ltd [2015] NSWSC 185 at [78].
[54] For some reason the filed stamp on this document says 7 August 2014, but that is obviously an error.