ANZ Banking Group Ltd v Panuccio
[2012] VSC 159
•17 May 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7824 of 2009
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ABN 11 005 357 522) | Plaintiff |
| v | |
| FILLIPO PANUCCIO (ALSO KNOWN AS PHIL PANUCCIO AND PHILIP PANUCCIO) | First Defendant |
| and | |
| MARIA PANUCCIO | Second Defendant |
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JUDGE: | McMILLAN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26 March 2012 | |
DATE OF JUDGMENT: | 17 May 2012 | |
CASE MAY BE CITED AS: | ANZ Banking Group Ltd v Panuccio & Anor | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 159 | |
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MORTGAGES AND SECURITIES – Default – Claim for possession of properties and for moneys due under loan facilities and guarantee and indemnity – Construction of terms of loan facilities to determine whether all moneys securities – Whether equitable mortgage exists over second defendant’s interest in property – Whether second defendant estopped from denying her interest mortgaged.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Carew | Norton Rose Australia |
| For the Defendants | No appearance | No appearance |
HER HONOUR:
Introduction
This proceeding concerns a loan given by the plaintiff (“the Bank”) to the defendants, which is now in default. The loan was secured by four mortgages granted by the defendants, as well as being personally guaranteed by them.
The Bank claims that it is entitled to possession of the four properties which are the subject of the mortgages and to judgment for sums owing by the defendants pursuant to a guarantee and indemnity and the four mortgages.
The Bank also claims that it has an equitable mortgage over the second defendant’s one quarter interest in one of the properties, or, in the alternative, that the second defendant is estopped from denying that her interest in the relevant property is subject to the Bank’s interest.
Procedural Background
By an amended statement of claim dated 15 March 2010, the Bank seeks:
(a) Against both defendants, payment of the sum of $2,944,479.11, plus accrued interest on that sum to the date of payment.
(b) Against the first defendant (“Mr Panuccio”), possession of the properties situated at and known as:
(i) Lot 1 Ranfurly Way, Mildura (“the Lot 1 Ranfurly Way Property”).
(ii) 217 and 231 Ranfurly Way, Mildura (“the Part Lot 6 and 3 Ranfurly Way Property”).
(iii) Lot 26 Fifteenth Street, Irymple (“the Fifteenth Street Property”).
(iv) 111 Commercial Street, Merbein (“the Commercial Street Property”).
(c) Against the second defendant (“Mrs Panuccio”):
(i) Possession of the Lot 1 Ranfurly Way Property.
(ii) A declaration that, as at 13 January 2006, Mrs Panuccio’s interest in the Commercial Street Property was charged to the Bank with repayment of the amount owed by Mrs Panuccio to the Bank pursuant to a guarantee and indemnity dated 13 January 2006 and given by Mr Panuccio and Mrs Panuccio to the Bank on account of P&M Panuccio Pty Ltd (ACN 006 759 235) (in its own capacity and as trustee for the P&M Panuccio Family Trust) (receivers and managers appointed).
(iii) A declaration that, as at 13 January 2006, the Bank had, and has, an equitable mortgage over all of Mrs Panuccio’s interest in the Commercial Street Property.
(iv) Consequential orders to do all things and take all steps necessary to execute a legal mortgage in respect of the Commercial Street Property.
Further, or in the alternative:
(v) Orders and directions for the sale of the Commercial Street Property pursuant to s 91(2) of the Property Law Act 1958.
The defendants filed a defence dated 21 April 2010. On 23 March 2012, the defendants’ solicitors sought and obtained leave to cease acting on behalf of the defendants. At the hearing on 26 March 2012, the defendants did not appear and the trial proceeded unopposed.
Each of the defendants filed a witness statement dated 5 August 2011. As neither defendant appeared to give evidence in the hearing, those witness statements were not admissible as evidence.[1]
[1]Supreme Court (General Civil Procedure) Rules 2005, r 40.02.
On 10 May 2010, the Bank served a Notice to Admit on each defendant. The Notices to Admit set out the facilities, the securities, the accounts, the notices and the demands and facts relied on by the Bank. The defendants did not serve notices disputing any of the documents or facts contained in the Notices to Admit. As a result, all of the documents set out therein are admitted as to their authenticity and execution and all of the facts set out therein are admitted by the defendants.
At the trial, the Bank tendered witness statements by four representatives of the Bank and those witnesses gave evidence. Those witnesses were Mr Donald John Auchettl, Mr John William Coombs, Mr Scott Dale Grover and Mr Kevin Francis Westcott. In addition, the Bank filed an affidavit of Mr Glynn Robert Sadler sworn 27 March 2012, in which Mr Sadler, a manager at the Bank, deposed to the indebtedness of the defendants as at 26 March 2012, being the sum of $4,074,044.74 with interest accruing.
The Factual Background
The defendants, as members of the Panuccio family, were longstanding commercial customers of the Bank. The first loan to the Panuccio family was made in 1959 and was given by the English, Australian and Scottish Bank Limited, which merged with the Bank in 1970.
The Panuccio family operated a fruit farming business (“the Farming Business”) which, from May 1987, was conducted through P&M Panuccio Pty Ltd (“the Company”).[2] The Farming Business was operated initially by the Mr Panuccio’s father, Stefano Panuccio. He passed control of the business to his two sons, Stefano (junior) and Mr Panuccio, who, together with their wives, Theresa and Mrs Panuccio, continued to operate the Farming Business.
[2] The Company is the trustee of the P&M Panuccio Family Trust. The various letters of offer to the Company from the Bank establish that the Company borrowed moneys in its capacity as the trustee of the P&M Panuccio Family Trust. The defendants are beneficiaries of the Family Trust.
In January 2001, Stefano (junior) passed away. By February 2003, Theresa had transferred to Mr Panuccio her one quarter share in the Commercial Street Property and her late husband’s one quarter share in the Commercial Street Property. As a result, the ownership of the Commercial Street Property is that Mr Panuccio owns three quarters and Mrs Panuccio one quarter, as tenants in common.
Mr Panuccio and Mrs Panuccio are also the joint registered proprietors of the Lot 1 Ranfurly Way Property and Mr Panuccio is the sole registered proprietor of the Fifteenth Street Property and the Part Lot 6 and 3 Ranfurly Way Property.
Since 2003, Mr Panuccio and Mrs Panuccio have been the sole directors of the Company. The Company and the defendants, both as directors of the Company and personally, have provided various securities to the Bank for advances given to the Company over the years. In respect of this proceeding, these securities include:
(a)A mortgage dated 6 February 1996, executed by the defendants, mortgaging their interest in the Lot 1 Ranfurly Way Property (“the Lot 1 Ranfurly Way Mortgage”).
(b)A mortgage dated 9 April 2003, executed by Mr Panuccio, mortgaging his interest in the Part Lot 6 and Lot 3 Ranfurly Way Property (“the Part Lot 6 and Lot 3 Ranfurly Way Mortgage”).
(c)A mortgage dated 10 April 2004, executed by Mr Panuccio, mortgaging his interest in the Fifteenth Street Property (“the Fifteenth Street Mortgage”).
(d)A mortgage dated 9 April 2003, executed by Mr Panuccio, mortgaging his interest (being three quarters thereof) in the Commercial Street Property (“the Commercial Street Mortgage”).
(e) A guarantee and indemnity dated 13 January 2006, executed by both defendants (“the Guarantee and Indemnity”).
The Business Loan to the Company
Prior to 2007, the Company’s working capital requirements were serviced by a Negotiator Account with the Bank (“the Negotiator Account”), which facility commenced at least as early as 16 July 2004. The Negotiator Account was an overdraft used by the Company to provide “working capital to meet seasonal expenses” for the Farming Business.
On 18 October 2005, the Bank gave the defendants, as directors of the Company, a letter offering an overdraft facility (“the 2005 Letter of Offer”). The 2005 Letter of Offer was made and accepted by the Company and the defendants for working capital requirements of the Company (“the 2005 Loan”). The 2005 Loan was to be reviewed on 11 November 2005. In fact, it was “rolled over” by way of various letters of offer from the Bank over the next two years.
On 11 October 2007, the Bank gave the defendants, as directors of the Company, a letter offering an ANZ Business Loan in the sum of $2,452,000 (“the 2007 Letter of Offer”). The securities for the loan included the four mortgages, as well as the Guarantee and Indemnity.
By letter dated 23 October 2007 to the Bank, the 2007 Letter of Offer was accepted by the Company and acknowledged by the defendants as guarantors (“the Business Loan”). The Business Loan was drawn down on 12 October 2007. What occurred as a result of the Business Loan was a transfer of debt in the amount of $2,452,000 from the Negotiator Account to the Business Loan account, as evidenced by the bank statements for both accounts.
The interest on the Business Loan was due in April 2008, but not paid. The default was managed by the Bank and the Company by a further refinance, as contained in a letter of variation dated 17 June 2008 to the Company and the defendants (“the 2008 Variation Letter”). On 17 June 2008, the variation was agreed to by the Company and acknowledged by the defendants as guarantors. The advances were made pursuant to the terms of the 2007 Letter of Offer and the 2008 Variation Letter (“the Agreement”).
By reason of the Agreement, the Bank secured payment of the moneys owed by the Company and the defendants by way of four registered mortgages as well as the Guarantee and Indemnity.
By about 30 June 2008, the Company was in breach of the Agreement, in that it had failed to pay the outstanding amounts to the Bank.
In or about August 2008, the Bank made a demand on the Company and then on each of the defendants for repayment of all moneys then owing by them to the Bank.
By letter dated 15 August 2008 from Mr Panuccio to the Bank, Mr Panuccio admitted the default under the Agreement.
The Bank sent further letters of demand, notices of default, and notices to pay pursuant to s 76 of the Transfer of Land Act1958 to the Company and the defendants,[3] but the default has never been remedied by any of them.
[3]A letter of demand was sent to the Company on 2 December 2008, a demand on each of the defendants under the Guarantee and Indemnity was made on 15 December 2008 and a demand for payment pursuant to each of the mortgages was made on 9 April 2009.
The Four Legal Mortgages
By reason of the defendants’ failure to pay the amount due and owing to it, the Bank seeks orders for possession of the properties the subject of the four legal mortgages.
The Bank submitted that the four legal mortgages are “all moneys” securities which embrace all the moneys owed to the Bank by the defendants, as well as the moneys owed to the Bank by the Company.
In support of that submission, the Bank relied on the relevant provisions contained in the respective Memorandum of Common Provisions (“MCP”) of each mortgage. The Lot 1 Ranfurly Way Mortgage incorporated MCP number AA479 and the other mortgages incorporated MCP number AA519. Both MCPs are identically worded in regard to a mortgagor’s obligations under the relevant mortgage.
The relevant “all moneys” clause of the MCPs is clause 5.1, which reads: “I will pay the principal money at the times ANZ and I agree. Otherwise I will pay it when ANZ demands it.”
The words “principal money” are defined in the MCPs to include:
at any time all money (unless otherwise agreed in writing by ANZ) which:
(a)I owe to ANZ at that time for any reason;
(b)any other person owes to ANZ at that time because of something ANZ does or does not do at my express or implied request;
…
In my view, the funds advanced to the Company are “principal money” as those words are defined in the four legal mortgages. The funds were advanced at the request of the defendants, as directors of the Company. Accordingly, the four legal mortgages secure the indebtedness of the Company to the Bank.
Pursuant to clause 5.1 of the MCPs, the defendants agreed to repay the “principal money” to the Bank when the Bank demanded repayment. The Bank has made demands of the Company and the defendants for the payment of those amounts. The amounts due and owing to the Bank have not been paid by the Company or the defendants.
In those circumstances, the Bank is entitled to orders for possession of the four properties the subject of the four legal mortgages.
The Guarantee and Indemnity
The Bank also seeks judgment against the defendants for the amount due and owing to it pursuant to the Guarantee and Indemnity.
The Bank contended that the Guarantee and Indemnity is also an “all moneys” security. It submitted that pursuant to the terms of the Guarantee and Indemnity, the defendants guaranteed the Company’s obligation to pay moneys to the Bank under the “Guaranteed Arrangements”.
The Guaranteed Arrangements are described in the Guarantee and Indemnity as “being each credit contract, as changed or replaced, that I agree or have agreed in writing is or will be covered by this Guarantee”. The Guarantee and Indemnity does not set out the “Guaranteed Arrangements”. However, by clause 1.1 of the Guarantee and Indemnity, the defendants guaranteed that the Company would pay to the Bank all the “Guaranteed Money” and perform the Guaranteed Arrangements.
The “Guaranteed Money” is defined in clause 2.1 as:
all money owing to ANZ for any reason under the Guaranteed Arrangements:
(a) by the customer alone, or together with me or one or more others;
(b) now or in the future;
(c) actually or contingently ...
At the end of the typed words of clause 2.1, there is a handwritten annotation initialled by the defendants as follows: “arising from the letter of offer to the Customer dated 18 October 2005” (“the Annotation”). The Bank submitted that the Annotation was added by the defendants at the time of the execution of the Guarantee and Indemnity. I agree with this submission, as on 18 January 2006 Ryan Maloney Anderson, the then solicitors for the defendants, sent a letter to the Bank which requested that the Bank take “note of the amendment to the Individual Guarantee and Indemnity in Clause 2.1 as discussed”.
Subsequent to the 2005 Letter of Offer, the loan to the Company was “rolled over” by the 2007 Letter of Offer and the 2008 Variation Letter. Each of these letters includes the following acknowledgement by the defendants:
Each of the guarantors acknowledges that the securities given, or to be given by us secure all present and future obligations of the client[s] to ANZ, including obligations in respect of the facilities.
In support of its submission that the Guarantee and Indemnity is an “all moneys” security, the Bank referred to and relied on the general principles relevant to the operation of an “all moneys” clause in the context of bank securities. In summary, the Bank submitted that there are three different approaches to be drawn from an analysis of the authorities on point.[4] In deciding whether a debt is captured by an “all moneys” clause, those approaches are as follows:
[4]Fountain v Bank of America National Trust and Savings Association (1992) 5 BPR 11,817; Smith v ANZ Banking Group Ltd & Ors [1996] NSWCA 482; Zell v Commonwealth Bank of Australia (1998) ANZ Conv R 570; McVeigh v National Australia Bank Ltd [2000] FCA 187; Ronan v ANZ (2000) 2 VR 531; Chacmol Holdings Pty Ltd v Handberg (2005) 215 ALR 748; GE Commercial Corporation (Australia) Pty Ltd v ACN 089 812 813 Pty Ltd [2008] WASC 205.
(a) It is necessary to consider the construction of the clause, the context in which the security was taken and the commercial purpose the security was intended to serve.[5]
(b) The primary question to be answered is one of construction, namely, whether the wording of the “all moneys” clause captures the debt.[6]
(c) The matters to be considered are the construction of the “all moneys” clause and the context in which the security was taken.[7]
[5]See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165.
[6]See Re Bankrupt Estate of Murphy: Donnelly v Commonwealth of Australia (1996) 140 ALR 46 (Hill J); Francesca Panebianco v Bendigo Bank Limited [1999] VSC 50.
[7]See Commonwealth Bank of Australia v Aspenview Productions Pty Ltd, Alexander McLean, Lana McLean and Krystyna Masluk [2001] VSC 444; ASIC v GDK Financial Solutions Pty Ltd (in liq) (No 4) [2008] FCA 448.
In my view, whichever analysis is used to interpret the relevant clauses in this case, the Guarantee and Indemnity constitutes an “all moneys” security. Not only are the terms of the Guarantee and Indemnity on their own wide enough to capture the debt owed by the defendants to the Bank, but the factual and documentary context in which the loans arose, starting from the 2005 Letter of Offer, supports this conclusion. As a result of the documents executed by the defendants since the 2005 Loan, they “agreed in writing” that “each credit contract, as changed or replaced“ since the 2005 Loan was a Guaranteed Arrangement, including the Agreement, which itself records that the security for the relevant lending includes the Guarantee and Indemnity. In this way, the defendants “agreed in writing” that the subject Letters of Offer were Guaranteed Arrangements and agreed to perform those Guaranteed Arrangements. They are currently in breach of that agreement, having failed to meet the demands referred to above.[8]
[8]See above paragraph 23.
Accordingly, I find that the Bank is entitled to an order that the defendants pay the sum of $4,074,044.74, plus accrued interest on that sum to the date of payment.
The Equitable Mortgage
The remaining issue to be determined is the Bank’s claim that it has an equitable mortgage over Mrs Panuccio’s interest in the Commercial Street Property. In support of this claim, the Bank submitted that it is entitled to an order that Mrs Panuccio execute a legal mortgage to it in respect of her interest in the Commercial Street Property. In the alternative, the Bank submitted that Mrs Panuccio is estopped from denying that her interest in the Commercial Street Property is subject to the Bank’s interest.
It is well established that an equitable mortgage may arise where money is advanced under a specifically enforceable agreement to grant a mortgage.[9] However, the Bank does not contend that Mrs Panuccio entered into a specific agreement that she would grant a mortgage to it over her share in the Commercial Street Property.
[9]See Investwell Pty Ltd (in liq) v Roberts [2011] NSWSC 1152, [31]; Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 214 ALR 392, 407.
Rather, the Bank submitted that when Mrs Panuccio executed the Guarantee and Indemnity, she agreed to give a legal mortgage in respect of her undivided share in the Commercial Street Property to the Bank by virtue of the term in the Guarantee and Indemnity which stated that the security for the Business Loan included a mortgage over her interest in the Commercial Street Property.
The term “Security” is defined in the Guarantee and Indemnity as follows: “[t]his guarantee is secured by each security that I agree or have agreed in writing is or will be security for this Guarantee. It includes each security referred to below (if any).”
The securities listed include a first registered mortgage over the Commercial Street Property given by Mr Panuccio and Mrs Panuccio.
The Bank referred to the case of Takemura v National Australia Bank Limited[10] as authority for the proposition that where money has been advanced before a contract is fully executed, a court will generally grant an order for specific performance of an agreement to execute a mortgage.[11] In that case, Young CJ in Eq said:[12]
The equity to grant specific performance comes from the maxim that equity looks on that as done which ought to be done, but also from a line of cases which indicate that equity rarely declines to grant specific performance where a contract has been executed on one side.
[10][2003] NSWSC 339.
[11]Takemura v National Australia Bank Limited [2003] NSWSC 339, [12], referring to Fry on Specific Performance (6th ed, Sweet and Maxwell London, 1921), para 54.
[12]Takemura v National Australia Bank Limited [2003] NSWSC 339, [17]; referring to Wight v Haberdan Pty Ltd [1984] 2 NSWLR 280; Hart v Hart (1818) 18 Ch D 670, 685.
The Bank concedes that the Guarantee and Indemnity does not create a specific obligation on Mrs Panuccio to grant a mortgage over her share in the Commercial Street Property. However, the Bank referred to the fact that she signed a guarantee which stated that a mortgage was agreed as between the Bank and both defendants in respect of the Commercial Street Property and submitted, on that basis, and relying on the equitable maxim that equity “looks on that as done which ought to be done”, that it has an equitable mortgage over Mrs Panuccio’s interest in the Commercial Street Property. The Bank submitted that, accordingly, it is entitled to an order that Mrs Panuccio execute a mortgage in respect of the Commercial Street Property.
In my view, to read “Security” in the Guarantee and Indemnity as creating such an obligation goes beyond the natural meaning of its words. There is no record of Mrs Panuccio signing an agreement specifically that she would grant a mortgage of her share in the Commercial Street Property. In these circumstances, I am not persuaded that an equitable mortgage exists or that an order for specific performance of the mortgage should be granted.
The Bank submitted, in the alternative, that Mrs Panuccio should be estopped from denying that her interest in the Commercial Street Property is subject to its interest.
The elements required to establish an equitable estoppel are set out by Brennan J in Waltons Stores (Interstate) Ltd v Maher:[13]
[13](1988) 164 CLR 387, 428-429; followed in Commonwealth of Australiav Verwayen (1990) 170 CLR 394, 502 (McHugh J).
(1)the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship;
(2)the defendant has induced the plaintiff to adopt that assumption or expectation;
(3)the plaintiff acts or abstains from acting in reliance on the assumption or expectation;
(4)the defendant knew or intended him to do so;
(5)the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and
(6)the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
The Bank contended that these elements are satisfied by the evidence as follows:
(a) The Bank assumed that the defendants would each cause all properties owned by them to be mortgaged to it, as part of which Mrs Panuccio would provide a first registered mortgage over her interest over the Commercial Street Property (“the Assumption”).
(b) From 8 April 2003 onwards, Mrs Panuccio signed a total of 14 offers, which listed the Commercial Street Mortgage as security for the loans. There was never any reference to the mortgage being only as to three undivided shares. By signing those letters of offer for the various loans provided by the Bank and the documents which alluded to the mortgage being a mortgage over the property, rather than a share thereof, Mrs Panuccio induced the Bank to adopt the Assumption.
(c) As a result of this Assumption, the Bank advanced the facilities to the Company.
(d) Mrs Panuccio intended the Bank to rely on the Assumption and advance the facilities. In this regard, the Bank relied on the evidence of the four bank witnesses that Mrs Panuccio intended them to rely on the Assumption.
(e) The Bank would suffer detriment if the Assumption was departed from, as the Bank would hold less security than what it relied upon when it advanced the funds.
(f) Mrs Panuccio has failed to do anything to avoid the Bank’s detriment, either by fulfilling the Assumption and executing a mortgage over her share in the Commercial Street Property, or otherwise.
Accordingly, the Bank submitted that it would be unconscionable or inequitable for Mrs Panuccio to depart from the assumption and that she should be estopped from doing so.
In my view, the Bank has established that Mrs Panuccio should be estopped from denying that her interest in the Commercial Street Property is held subject to the Bank’s interest. Accordingly, I am prepared to make the orders as sought by the Bank.
In view of my finding, it is unnecessary to consider the Bank’s argument, in the alternative, that the Court direct a sale of the Commercial Street Property pursuant to s 91(2) of the Property Law Act 1958.
Conclusion
I am satisfied that on the evidence before the Court, both through the undisputed Notices to Admit and the evidence of the Bank’s witnesses, the Bank has established the matters necessary to obtain possession of the mortgaged properties and judgment in respect of the debt owed to it by the defendants. Specifically, I consider that the Bank has proven the following:
(a)The Bank and the defendants entered into the Business Loan arrangements and the Agreement.
(b)Execution of the four legal mortgages referred to above.
(c)Those matters relied on by the Bank giving rise to a finding that Mrs Panuccio is estopped from denying that her interest in the Commercial Street Property is held subject to the Bank’s interest.
(d)The advances of funds to the Company by the Bank.
(e)Default by the Company and the defendants under the Business Loan and the Agreement.
(f)Demands made pursuant to the Agreement, the Guarantee and Indemnity and the mortgages, and failure by the Company and the defendants to meet the demands.
(g)Failure by the defendants to pay the amounts due under the Guarantee and Indemnity.
(h)The defendants remain in possession of the Lot 1 Ranfurly Way Property, the Pt Lot 6 and 3 Ranfurly Way Property, the Fifteenth Street Property and the Commercial Street Property.
I will hear counsel as to the appropriate form of orders and as to costs.
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