Abram & Anor v Bank of New Zealand

[1997] HCATrans 192

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S144 of 1996

B e t w e e n -

JOSEPH ABRAM

First Applicant

JANETTE DAWN ABRAM

Second Applicant

and

THE BANK OF NEW ZEALAND

First Respondent

MICHAEL J. FITZPATRICK

Second Respondent

Application for special leave to appeal

DAWSON J
GAUDRON J
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 4 AUGUST 1997, AT 12.40 PM

Copyright in the High Court of Australia

DAWSON J:   Mr Abram, you appear in person, do you?

MR J. ABRAM:   Yes, your Honour.

DAWSON J:   Do you also appear for your - is your wife present?

MR ABRAM:   No, she is not.

DAWSON J:   Yes, very well.

MS N.E. ABADEE:   I appear for the first respondent.  (instructed by Clayton Utz)

MR P.F. LINEY:   I appear for the second respondent.  (instructed by Colin Biggers & Paisley)

DAWSON J:   Mr Abram.

MR ABRAM: I rely on the documents that have been filed, but I just want to talk about one section of this case. In the application book, if I can take your Honours to page 106, which is the decision of the Full Bench in the Federal Court, paragraph (k), from line 35 onwards, deals with the issuing of section 57(2)(b) notices under the Real Property Act and, basically, the finding is that they are not required.  For example, at line 55 it says:

we have assumed that a s.57 notice is a condition of obtaining an order for possession. It is not. BNZ was not seeking to sell the land.

Now, maybe that is correct, but it is not correct at the same time, because what has, in fact, happened is the Bank announced, even in the court, they intended to sell the land.  It has sold the land.  Whether they have the power of sale or not is in dispute in the Supreme Court, and is sort of on hold pending all these appeals being finalised. 

The result of that kind of thinking is that the Real Property Act is actually bypassed what Parliament - an Act of Parliament is actually bypassed in a sort of a sneaky way by having a clause in a memorandum to the mortgage that says that the Bank is entitled to possession - sorry, that it is entitled to demand the full amount, which is what that section there on page 106, that:

By its letter of 22 July 1992 ( received by the Abrams in August) BNZ required payment of $172,664.36.  It was entitled to do this under clause 5(a) of the terms together with clause 1 of the memorandum.  The demand was not complied with.

Now, the Real Property Act - I do not know if your Honours have this, but I filed this as - that is just a couple of pages out of section 57 of the Real Property Act 1900. Now, if I can take your Honours to the page that has got No 72 at the top - the last page - and down to paragraph 4, it says:

Where a notice is served under subsection (2)(b) and the requirements of the notice are complied with within the time applicable to the notice under subsection (3)(d), the default to which the notice relates shall be deemed not to have occurred.

Now, surely if you can demand the full amount of the mortgage, and that is the default to which the notice relates, then there is nothing that is going to continue as though the default has not occurred because the mortgage has been called up. There is no mortgage any more. Surely that is not what Parliament intended. So, is the Bank, as a mortgagee, or anyone else as a mortgagee, by the contract allowed to bypass an Act of Parliament? This judgment says, yes, they can do it. And to sort of compound it - rub salt into the wound - the solicitor that offered to explain the mortgage in his evidence says that what will happen if there is a default is basically - he is talking about section 57, which is in the written case. He gets the timing wrong as to the numbers of days that are given and so on, but he is basically talking about section 57.

He does not say in his evidence, “Mr Abram, if you miss one payment the Bank is going to call up the whole amount and that is it.”  The other aspect of this particular case which is not - which relies on the facts of this case only, is that the mortgage secured a loan which was - the mortgage secured an existing unsecured loan which was in the name of only myself, but not my wife, and that was not explained to her.  So she, in effect, secured a loan which she got no benefit from and knew nothing about.

GAUDRON J:   But it was found that nothing turned on that, was it, because it was not - that was not, in fact, called up, was it?

MR ABRAM:   Yes, it was.

GAUDRON J:   Was it?

MR ABRAM: There was a section 57(2)(b) notice issued to her for that amount. Now, I think that was withdrawn without notice, or something like that.

GAUDRON J:   Yes.

MR ABRAM: But nonetheless, the Bank fully relied on that. Now, other people out there who have got loans with the same Bank, with similar contracts, have got, in effect, a high interest rate, what they think is an unsecured loan, like we did, which is, in fact, secured. If those people receive the 57(2)(b) notice, like we did, and did not go to court, which is how this matter started - if we had not taken this matter to court, the Bank would not have dropped those section 57(2)(b) notices. And they dropped it not immediately, but well into the proceedings.

But the point I am making is that by having this clause in the memorandum - and by the way, the solicitor who explained this mortgage did not have a copy of the terms and conditions when he was making the explanation, that is also in his evidence.  That, in effect, bypasses the laws in New South Wales.  Now, it is my understanding that the Real Property Act 1900 came into effect to stop people from foreclosing a mortgage for silly little reasons, without notifying the mortgagor as to why they were doing it. That is all I have to say about the matter. The rest is - I rely on what has been filed. Thank you, your Honour.

DAWSON J:   Yes, Ms Abadee.

MS ABADEE: Yes, your Honours, I rely upon the written submissions that have been filed with this Court. In answer to your Honour Justice Gaudron’s question earlier to Mr Abram, I should make that clear. The section 57 notices in relation to the credit card facility were, in fact, withdrawn, and your Honours, our premise was correct, which is that they were not relied upon.

Your Honours, it is our submission, as we have indicated in our written summary of argument, that this is not an appropriate case for the granting of special leave.   There is no question of law of general application, and nor does the case raise any particular matter of public interest.  In so far as your Honours might be concerned, perhaps, about the particular provisions, the trial judge did make a finding that, in certain circumstances, he may have been inclined to find that either the “all moneys” provision, or, alternatively, the provision providing for repayment upon demand may have been unjust.  In the circumstances and the facts of this case, he declined to exercise his discretion under the Contracts Review Act to make such a finding, essentially for the reason that, in this case, although there was a provision in the mortgage and in the terms allowing the Bank to make a demand without a default, in the circumstances of this case it was the undisputed default on the part of Mr and Mrs Abram that triggered the demand for repayment.

His Honour made findings of fact that it was clear from the correspondence which had been forwarded to Mr and Mrs Abram that they had to make interest-free payments.  He also made a finding of fact that, where there was a conflict on the evidence between Mr Abram’s version of what he was told by Mr Fitzpatrick and Mr Fitzpatrick’s own evidence as contained in his affidavit and in his oral evidence, Mr Fitzpatrick’s evidence was to be believed on that point.

Your Honours, if I might take you to the finding of the trial judge in that respect, that is in the application book at page 38, and that is in the reasons of his Honour Justice Moore.  Halfway down that page you will see that the trial judge made a finding:

Mr Fitzpatrick conducted the meeting in the way he described in his evidence.  In particular, I find that the memorandum of mortgage was explained in the way described by Mr Fitzpatrick and the confirmation of explanation -

of that mortgage, which had been signed by Mr and Mrs Abram, was attached to the memorandum at the time it was signed.  Those are significant findings.  A finding that was also made by his Honour was that, as a matter of causation in relation to possible breaches of duty, or breaches of contract in respect of the way in which the mortgage was explained by the solicitor, as a matter of causation his Honour found that no loss was caused to the applicants as a result of any deficiency in the explanation.

If I could take you to page 56 of the appeal book, which contains the critical finding in that respect, his Honour considers whether, assuming that there had been a breach of any of the relevant provisions of the Trade Practices Act, it could be said that:

the Abrams suffered loss or damage by -

his Honour having looked at the meaning of the word “by” -

the proscribed conduct.

At line 34, his Honour made the critical finding, which is that:

it is more probable than not that the Abrams would have provided the mortgage in 1989 even if the memorandum of mortgage had been explained to them -

His Honour noted that:

Their concern at the time was the interest rates and charges being levied by NAB .

with which the had an existing mortgage, and he further indicated that:

their case, as pleaded, was that they effectively received no explanation at all.

Now, there was no evidence before the court that had the two provisions which caused some concern to the trial judge - namely, the “all moneys” clause and the provision for repayment upon demand - been explained in a more fulsome manner to the Abrams, that they would not have entered into the mortgage, and that is the basis of his Honour’s finding; that it was more probable than not that, even if they had received that full explanation, they would have still gone ahead and provided the mortgage.

The other matter which his Honour regarded as being of considerable significance, and which the Full Court seized upon also as being a matter of significance largely in relation to the exercise of discretion as to whether to grant relief under the Contracts Review Act, was the fact adverted to again at page 56 of the application book by his Honour the trial judge, and that is the fact that in June 1992 Mr and Mrs Abram refused to make any more payments into either the Smarter Mortgage Account - - -

GAUDRON J:   That is not exactly correct, is it?

MS ABADEE:   Your Honour, there was some dispute about that, and that was picked up by the Full Court.  There was a letter sent by Mr Abram in which he said, “I will not be making any more cash payments into this account.”  The reference to “this account” was a reference to the credit card facility.  The Full Court did note, at page 99 of the application book - they dealt with that issue, and there is no dispute, and we do not dispute that that was an error by the trial judge; that it was not in that letter that Mr Abrams indicated that he would be making no more payments into the Smarter Mortgage Account and that, in so far as his Honour the trial judge had made that finding, his Honour had erred.

But the Full Court there refers to the fact that the judge had pointed out that it was nonetheless clear, although his Honour was wrong in that particular point, that as from that time of June 1992 it was clear that the Abrams intended to make no further payments because it was, in fact, on 9 June 1992 that they commenced proceedings seeking damages in the order of $5 million, a declaration that they did not owe the $170,000 which they had expended, and an injunction to restrain the Bank from acting upon the mortgage.

Your Honour, if I might refer you to the findings of his Honour the trial judge in relation to the conduct by the Abrams in that respect, his Honour, at page 49 of the application book - I am sorry, your Honours, if I might take you back, in fact, to an earlier stage of his Honour’s reasons.  In the application book, at page 16, at line 40, his Honour makes a finding that:

it is clear that by this stage -

and that stage was September 1992, if you go back to the previous page -

the Abrams had decided that no payments would be made and any claims for payment would be resisted.

And his Honour notes that they had, by that stage, commenced the proceedings in the Federal Court.  His Honour repeats that finding at page 17 of the application book, at lines 39 to 45.   He states:

the Abrams had, by this time, made a decision not to make any payments and to contest the matter in whatever way that they believed was open to them.

Your Honour, if I could then take you to page 49 of the application book.  At the top of that page his Honour states:

It is clear from the evidence that from 5 May 1992 no deposits were made into the Smarter Mortgage Account -

and then he refers to demands for interest.  His Honour refers, at lines 16 to 17, to evidence by Mr Abram, in which Mr Abram apparently said:

in June 1992 he refused to pay BNZ any more money.

At the bottom of that page, his Honour makes a finding - and this is dealing with the issue of relief under the Contracts Review Act - that it was:

the conduct of the Abrams in -

firstly -

failing to pay interest and -

secondly -

commencing legal proceedings against BNZ to avoid any liability -

It was that conduct which disentitled them to relief under section 7.  So, your Honour Justice Gaudron, in response to your query, certainly there was a mistake made by the trial judge in that that letter of 9 June did not state that no further payments would be made into the Smarter Mortgage Account but, as a matter of fact, no payments were made into that account after 5 May 1992.

Your Honours, the trial judge found that there was no doubt, and the correspondence indicates, that the Abrams, whatever they did not know, certainly knew that they had an obligation to make monthly payments of interest.  If I could just refer your Honours to page 7 of the appeal book, which refers to the first letter, dated 9 February 1989, from the Bank to Mr Abram.  Clause 2 of that letter explains how the product works in that it:

Operates similar to an overdraft facility where you can repay and redraw amounts.....A monthly repayment of interest is required -

If I could then take you to pages 8 to 9 of the application book, where the letter from the Bank of 29 March is set out.  Your Honours will see, at around about line 45, that the second paragraph of that letter makes clear that a copy of the terms and conditions is enclosed with that letter.  And at around about lines 54 to 55, at the end of the third-last paragraph, there is the statement:

All we ask is that you deposit sufficient funds each month to cover the amount of your monthly interest.

At lines 59 to 61, the letter says:

The minimum you need to deposit by the 20th of each month is the amount of interest detailed on your statement.

So, it could not, with respect, be clearer, from those initial pieces of correspondence, that there is an obligation to make monthly repayments of interest. 

If I might also refer Your Honours to his Honour’s findings in relation to the evidence of Mr Fitzpatrick as to the explanation that he gave.  At pages 21 to 22 of the application book his Honour, in his reasons, sets out the evidence given by Mr Fitzpatrick as to the explanation that he would have given, that it was his procedure to give, and your Honours will see, from lines 50 on, his Honour sets out in full the evidence of Mr Fitzpatrick as to what he would have told Mr and Mrs Abram in relation to their obligation to pay interest.  You will see that in those concluding lines on that page, Mr Fitzpatrick’s evidence is that he would have told the Abrams:

this is a loan and not a gift.  The Bank wants the money back with interest.....your first obligation is to make prompt and punctual payment of interest.

At the top of page 22 of the application book, lines 15 to 33, there is a further extract from that evidence of Mr Fitzpatrick as to what Mr Fitzpatrick told the Abrams would happen if they defaulted in those repayments, and I think it is to that passage that Mr Abram was referring the Court earlier.  So, your Honour, our submission are these; there is no matter of public importance to be determined here, and nor are there are - there are no questions of public interest, nor are there any questions of law which need to be determined by this Court.

Most of the decisions in relation to which Mr Abram complains were decisions relating to the exercise of discretion by the trial judge, either on matters of procedure, or in relation to the trial judge’s making a decision declining to grant review under the Contracts Review Act, as he was entitled to do by virtue of the words used - the opening words in section 7(1), and the words of section 9(5).  So, those were issues of discretion in relation to which this Court would find there has been no error by the trial judge in the exercise of the discretion, nor has there been any error by the Full Court in upholding the exercise of that discretion.

The only other substantive matter which has been brought to your Honours’ attention was the finding that, as a matter of fact, the Abrams would have entered into the mortgage in any event, even if they had been given a more fulsome explanation.  Your Honours, I do not propose to repeat the matters set out in the written submissions.  Unless there is anything further with which I can assist the Court, those are my submissions.

DAWSON J:   Thank you, Ms Abadee.  Mr Liney, do you want to add anything?

MR LINEY:   I think I need not, your Honour, save to say this; the question of section - I should just say that all that was sought by the Bank was an order for possession, not the exercise of a power of sale, in relation to the mortgage debt only, not the credit card debt.  So that, in relation to the credit card debt, all that was sought and recovered was the amount of the debt; the rest of the relief is founded solely on the mortgage instrument.

As to the factual matters, I think Ms Abadee has covered all that I need say on behalf of the second respondent, which is in a slightly different position.  We, admittedly, failed to explain two aspects; firstly, the presence of an “all moneys” provision and, secondly, the presence of a “repayable on demand” provision.  However, the Court has found that explanation of those matters would have made no difference, that has been dealt with.  And nextly, however, there is also this point; the mortgage debt was not, in fact, called up on demand, but following default.  So, the non-explanation of that was causative of nothing.  Secondly, the Bank elected not to treat the credit card debt as secured by the mortgage, so the non-explanation of the “all moneys” provision in the mortgage was also causative of nothing.  If the Court pleases.

DAWSON J:   Mr Abram, do you wish to say anything in reply?

MR ABRAM:   Yes, your Honour.  Page 22 of the application book, between lines 15 to 30, there is a quoted paragraph, which is Mr Fitzpatrick’s evidence, which was accepted by his Honour Justice Moore as the explanation that he would have given.  Now, that says:

“... if you don’t make your payments on time, the Bank can come to you and say ‘look if you’re not fair dinkum about this we will have our money back now thank you very much”.  However, the Bank can’t commence any legal proceedings against the property unless and until it has given you a notice in writing telling you what you have done wrong and giving you an opportunity, normally 28 days, in which to fix things up.  If you fix things up -

and so on, and I am not going to read the rest of it - he is referring to section 57 of the Real Property Act, nothing else.  He is not talking about the Bank demanding all its money back and so on, and he talks about “if you fix it up, it continues.”  He is not talking about calling up the full amount. 

So, it is not all right to say that, you know, what triggered these events was that there was not a payment and the Bank called up the full amount, because that is what Mr Fitzpatrick is saying is not going to happen.  We took the Bank to court primarily over the fact that we had signed a mortgage that secured the credit card facility which existed for years before the mortgage was signed, in my name only.  I am the only one that benefited from that loan, and I did not know that I was securing it.  It is not quite correct to say, “Oh, there is no evidence.  They would not have done it,” and so on.  There was evidence before his Honour to the fact that we shopped around to about three or four banks - moved from the National Australia Bank, for example, to the Bank of New Zealand because we had lots of fees and so on which the Bank of New Zealand did not have.

But no one in Australia would sign a mortgage in the knowledge that they are securing their Bankcard to that mortgage.  It is ludicrous to suggest that.  The Contracts Review Act concerns itself whether the contract was - there was something wrong with the contract at the time that it was signed.  How can the behaviour, years later, when you find all these things wrong with the contract and you take the Bank to court, how can that be construed as doing away with all your rights to have the contract reviewed under the Contracts Review Act.  I know the judge has discretion to look at the conduct of the parties, but if the thing was unfair at the point that it was signed, nothing can fix that. 

There is a matter of public interest here; a badly explained mortgage, admitted to by the solicitor who did the explanation.  He said that he waived this 28 page memorandum around, which has got 600 paragraphs full of legal gobbledegook, and said - his explanation, “:You can read this if you like, it will cure insomnia,” or words to that effect.  No explanation given at all about any of the 600 paragraphs and 28 pages of legal gobbledegook.  Yet, the terms of what was contained in there are binding.  Thank you, your Honours.

DAWSON J:   Thank you, Mr Abram. 

No point of principle arises in this case which would warrant the grant of special leave.  The application turns on its own particular facts and we see no reason to doubt the application by the Full Court of the law to those facts.  The one error made by the trial judge as to the effect of a letter dated 9 June 1992 was held by the Full Court not to affect the ultimate outcome of the case.  We accept that view.  Accordingly, special leave to appeal is refused.

MR LINEY:   We do seek costs, your Honour.

MS ABADEE:   Yes, we seek costs as well, your Honour.

DAWSON J:   Can you say anything about costs, Mr Abram?

MR ABRAM:   I do not think it makes any difference.

DAWSON J:   Is refused with costs.

AT 1.07 PM THE MATTER WAS CONCLUDED