Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank - [2004] SASC 348

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
ANDREW GARRETT WINE RESORTS PT LTD & ORS v NATIONAL AUSTRALIA BANK
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Gray and The Honourable Justice Anderson)
4 November 2004
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - STAY OF PROCEEDINGS
Appeals against order for possession of real property - discharge of injunction - refusal of stay - extent of debt a triable issue - by its notice the bank claimed more than was due - injunction granted on terms that interest be paid - default on payment of interest - fraudulent misconduct alleged by appellants - bank issued further notice of default - injunction discharged - order of possession - applications for stay refused - orders made within discretion of court - no error established - appeals dimissed.
Real Property Act 1986 (SA), referred to.
Inglis v Commonwealth Trading Bank (1972) 126 CLR 161, considered.

ANDREW GARRETT WINE RESORTS PT LTD & ORS v NATIONAL AUSTRALIA BANK
[2004] SASC 348
Full Court: Doyle CJ, Gray and Anderson JJ

DOYLE CJ: I agree with the reasons given by Gray J for the orders that this Court made on 14 September 2004.
GRAY J: On 14 September 2004 this court, to the extent necessary, granted leave to Andrew Garrett Wine Resorts Pty Ltd and Averil Gay Garrett to appeal. The court made orders dismissing the appeals against an order for possession, orders refusing a stay of the order for possession and an order dissolving an injunction. My reasons for joining in the dismissal of the appeals follow.
The appeals related to orders made in respect of ‘Springwood’, a 600 acre property in the Adelaide foothills. The registered owners of Springwood are Andrew Garrett Wine Resorts Pty Ltd and Averil Gay Garrett.
In about June 2002 the National Australia Bank advanced $1.5 million to interests associated with Andrew Garrett. The advance was secured. The securities included a mortgage over Springwood. It is acknowledged by the registered owners that the advance of $1.5million has not been repaid. Later, further monies were advanced to the interests associated with Mr Garrett. These included the amount of $47,000.00 secured by a further mortgage over Springwood. A further sum of $600,000.000 was advanced in or about January 2003.
The National Australia Bank has established that at least $1.5 million was due and payable. As mortgagee the bank was entitled to take possession and sell Springwood. Section 137 of the Real Property Act 1886 (SA) provides:
The mortgagee or encumbrancee, upon default in payment of the principal sum, interest, annuity, or rent-charge, secured by any mortgage or encumbrance, or any part thereof, may enter into possession of the mortgaged or encumbered land and receive the rents and profits thereof, or may distrain upon the occupier or tenant of the land under the power hereinafter contained, or may from time to time let the said land for any term not exceeding one year, or may bring an action for recovery of the land either before or after entering into the receipt of the rents and profits, or making any distress as aforesaid, and either before or after any sale of the land shall be effected under the power of sale given or implied in his mortgage or encumbrance.
The National Australia Bank first gave notice in respect of a claim for $2.1 million. A master made an order for possession. An appeal was lodged. A Judge of this court considered that there was a triable issue arising in respect of the amount of the debt claimed to be due. The learned Judge took the view that it was arguable that by the bank’s notice claimed more than was due. The Judge considered that the validity of the notice raised a triable issue. In these circumstances the appeal was allowed.
An injunction was granted as follows:
Save and except for the making of a demand in compliance with Section 55A of the Law of Property Act for the sum of $1.5million pursuant to the mortgage dated 21 June 2002 and any claim made on pleadings in the consolidated proceedings until further order the National Australia Bank Limited is restrained from making any demand or taking any steps to enforce any rights with respect to the following mortgages whether by itself or by its agents or employees and whether directly or indirectly:
Registered Mortgage Number 9374752 dated 21 June 2002.
Registered Mortgage Number 9617285 dated 29 May 2003
The injunction was granted on terms that past and ongoing interest on the mortgage be paid.
Undertakings were noted as follows:
The plaintiffs by counsel undertake to abide by any order of the Court or a Judge may make as to damages in case the Court or a Judge shall hereafter be of the opinion that any person shall have sustained any by reason of this order by which the plaintiffs ought to pay.
Within 14 days of this order, the plaintiffs pay into Court outstanding interest pursuant to the terms of the bill facility dated 3 January 2003 from 21 July 2003 to 29 February 2004 of $195,864.23.
The plaintiffs are to pay into Court interest falling due under the bill facility dated 3 January 2003 at the end of each consecutive calendar month the first payment being due on 31 March 2004 until the determination of the consolidated proceedings or further order.
The judge also directed that there be an early trial of the action.
Although the undertakings do not refer to the rate of interest to be paid, the transcript of proceedings records that Andrew Garrett Wine Resorts Pty Ltd and Mrs Garrett by their counsel acknowledged that they would pay interest at the default rate. The judge proceeded to grant the injunction on this basis.
Payments of past interest were made at the default rate. Ongoing monthly interest repayments at the default rate were made. However, after several months the payments of interest ceased. There were delays in setting the matter down for trial. In the meantime the National Australia Bank had issued a notice of default claiming $1.5 million, the amount of the admitted debt.
The National Australia Bank then made application to discharge the injunction and for an order for possession having regard to:
-the failure to pay the default interest;
-delays in setting the matter down for trial;
-the new notice of default in respect of $1.5million admitted debt.
The Judge granted the National Australia Bank’s application, discharged the injunction and made an order for possession. In his reasons dated 28 July 2004 the Judge observed:
In my opinion, it is no longer appropriate to restrain the Bank from enforcing any rights it has under the mortgages. It was a condition of the relief granted that Resorts and Mrs Garrett pay interest falling due under the bill facility dated 3^rd January 2003 at the end of each consecutive calendar month. Resorts and Mrs Garrett have not made the payment due at the end of June, and it is clear from the evidence and the submissions made to me that they will not be in a position to make the payment due at the end of July. Before me, Resorts and Mrs Garrett were able to put the matter no higher than to say that they may be able to pay the interest instalments in the future. They were unable to specify any date by which they may be able to pay outstanding interest. In those circumstances I do not think it appropriate to continue the injunction. The trial of Action No 127 of 2004 is listed for November 2004. For the reasons I have already given, I do not think the fact that the date for trial is later than might have been anticipated is a reason not to discharge the injunction. In any event, the injunction must be discharged because I cannot be satisfied that interest will be paid by Resorts and Mrs Garrett on a date in the near future or at all.
Two applications for a stay of the order for possession were made to the Judge. Both applications were dismissed. In respect of the first application the Judge remarked:
I do not think that this is an appropriate case for a stay of execution. No arguable error in my reasons for the orders I made on 26 July 2004 has been identified. What Resorts appears to be saying is that it will shortly be in a position to provide cash and/or security to the court and that what lay behind the order with injunction , which I made on 5 May 2004, will again apply.
Even if appropriate cash and/or security to the court could be provided, it is by no means clear that, in view of the history of this matter, that fact would be relevant to whether the court would prevent at creditor from exercising its rights.
However, I am far from satisfied, having regard to the history of the matter, the material put before me, and the submissions made to me, that cash could be paid into court.
It follows from these conclusions that, in so far as this might be considered an application for me to revoke my orders of 26 July 2004, I would refuse it.
Similar reasons were given for the second refusal.
The registered proprietors sought to appeal from the order discharging the injunction, the order of possession and the two refusals to grant stays. Orders were made extending time in which the appeal papers were to be lodged and directing, in so far as may be necessary that the appeal documents be treated as applications for leave to appeal. These procedural orders were made with the consent of the National Australia Bank. The appeal process was expedited. The appeals were referred into court for oral argument.
It may be observed that the Judge’s initial orders allowing the appeal, setting aside the order for possession and granting the injunction were on terms that were favourable to the appellants. There was an admitted debt of $1.5 million. The appellants obtained injunctive relief without paying the amount of the admitted debt into court.
On appeal it was argued that there had been no default in the payment of interest. It was said that interest at default rates was not payable. It was claimed that National Australia Bank had deliberately miscalculated the claim for interest. It was said that in the circumstances, the appellants had paid more interest than was due. As a result it was said that the Judge’s reasons for discharging the injunction were flawed. It was claimed that the Judge proceeded under a misunderstanding.
During the course of the appeal it became evident that the Judge had intended that interest be paid at the default rate. As earlier observed this had been acknowledged by the appellants’ then counsel. It also appears that there had been some delay by the appellants in setting the matter down for trial. It was also acknowledged that the further notice in respect of the alleged debt had now been properly served in respect of the claim for $1.5 million.
In these circumstances it was well within the discretion of the Judge to discharge the injunction. In Inglis v Commonwealth Trading Bank[1] the High Court considered whether the exercise of a power of sale by a mortgagee should be enjoined pending final hearing.
[1] (1972) 126 CLR 161
Barwick CJ described the general rule as follows:[2]
The case falls fairly, in my opinion, within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument. Failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed by order upon the exercise of the respondent mortgagee's rights under the mortgage.
Walsh J observed:[3]
In my opinion, the authorities which I have been able to examine establish that for the purposes of the application of the general rule to which I have referred, nothing short of actual payment is regarded as sufficient to extinguish a mortgage debt. If the debt has not been actually paid, the Court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due.
The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed.
[2] (1972) 126 CLR 161 at 169
[3] (1972) 126 CLR 161 at 164-165
Having discharged the injunction, and being satisfied that a valid notice had been served, there was no reason to delay making an order for possession. The National Australia Bank was entitled to the order. No valid ground in opposition was advanced. On the hearing of this appeal no basis has been identified justifying the setting aside of the order for possession or the order discharging the injunction.
The refusal of both stays were orders made within the Judge’s discretion. From time to time it has been suggested that the debt was about to be repaid. At times it was said that the bank was frustrating repayment. However there was no evidence to support these assertions. No repayments have been made.
The appellants, in the course of submissions, asserted fraudulent misconduct by the National Australia Bank. Affidavits of an argumentative nature contained similar allegations. These allegations lacked particularity. They lacked supporting evidence. The appellants’ bare allegations about misconduct by the Bank do not provide a basis for allowing the appeals.
Even on the hearing of this appeal the appellant had been unable to provide for payment in of the amount admittedly due, subject to any possible counterclaims. The appellants were also unable to provide evidence that would definitely establish their ability to maintain payments of interest.
When the admitted facts are considered they allow the conclusion that at the very least the National Australia Bank advanced $1.5million, secured over Springwood. That debt is outstanding. This has been acknowledged. Demands have been made for repayment. In the ordinary course, if a mortgagor wishes to avoid an order for possession, payment of the debt, either to the bank or into court is a necessary precondition to a grant of relief. Neither has occurred. In these circumstances, in accordance with the decision in Inglis,[4] the orders made by the Judge were appropriate orders.
[4] (1972) 126 CLR 161
ANDERSON J I agree with the reasons of Gray J for dismissing the appeal.