ANZ Banking Group Ltd v Taylor
[2013] VCC 746
•19 June 2013
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST
BANKING & FINANCE DIVISION
Case No. CI-12-03551
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD | Plaintiff |
| v. | |
| ROSS TAYLOR & ORS | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 and 12 June 2013 | |
DATE OF JUDGMENT: | 19 June 2013 | |
CASE MAY BE CITED AS: | ANZ Banking Group Ltd v. Taylor & Ors | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 746 | |
REASONS FOR JUDGMENT
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Catchwords: Banking – Bank forbearing to enforce its rights whilst borrower and guarantor took steps to sell security properties – Whether bank’s response to offers to sell constituted conduct which was unfair or unreasonable in breach of the Banking Code of Practice or was unconscionable in breach of s. 22 of the Australian Consumer Law.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B. Carew | Corrs Chambers Westgarth |
| For the Defendants | Mr M. Black | Waters Lawyers |
HIS HONOUR:
1The plaintiff (“ANZ”) seeks to recover from the first defendant (“Mr Taylor”) and the second defendant (“Rolyat”) the balance owing pursuant to facilities provided by ANZ to Mr Taylor and his companies, and guarantees given in relation to those facilities. Certificates provided by a bank officer on 7 June 2013 noted that the indebtedness of each of the first and second defendant to the plaintiff on that date was:
a.for one facility, $657,658.72 and interest accruing at $211.49 per day;
b.for a second facility, $39,553.32 and interest accruing at $11.25 per day.
2The certificates take account of monies agreed to be paid by the third defendant (“Ms Reid”) pursuant to a settlement which resulted in the proceeding against her as a guarantor being withdrawn.
3The formalities of proof of the facilities, the guarantees, the issue of default notices and the entry into an Asset Management Agreement by the parties in September 2010, were agreed.
4The first and second defendants (“the defendants”) seek to be relieved from any obligation pursuant to the facilities or guarantees to repay ANZ the amount presently owing, on the basis that ANZ has:
a.engaged in unconscionable conduct in breach of s. 22 of the Australian Consumer Law;
b.failed to act fairly and reasonably towards the defendants in a consistent and ethical manner in breach of ANZ’s obligations pursuant to clause 2.2 of the Australian Banker’s Association Code of Banking Practice 2004.
5The defendants essentially rely upon the following matters:
a.ANZ’s rejection of three offers obtained by Mr Taylor to purchase a security property in Domain Road, South Yarra:
i.an offer notified on 21 November 2011 for $2.65 million with a deposit of $25,000 and settlement on 11 January 2013; or by a deposit of $200,000 payable in 3 tranches over 7 months, as notified on 2 December 2011;
ii.an offer notified on 19 March 2012 for $2.2 million with a 10% deposit within 21 days, settlement within 10 months and interest at 6.5% payable from after 30 days until settlement;
iii.an offer notified on 30 March 2012 for $1.8 million with a 10% deposit and settlement in 60 days;
b.ANZ’s acceptance of a sale made upon Ms Reid’s behalf at or following an auction on 12 May 2012 for $1.825 million payable by a 10% deposit within 16 days and settlement within 6 months.
6The issue for determination in the proceeding is whether the conduct of ANZ constituted unconscionable conduct in breach of s.22 or breached ANZ’s obligation under the Code to act fairly and reasonably.
Mr Taylor’s default on loan facilities
7In 2007 and 2008, Mr Taylor and associated companies borrowed from ANZ to acquire a property in Domain Road, South Yarra. The intention was to renovate the existing residence and subdivide the property to create a vacant allotment at the rear. The securities offered to ANZ included the South Yarra property and properties at Kew and Portsea.
8Mr Taylor is an accountant and had a significant investment in a chain of pharmacies. In March 2009, Mr Taylor was in dispute with his business partner and his access to ready funds was curtailed. Mr Taylor and his companies were unable to make payments under the facilities with ANZ. In January and February 2010, ANZ served notices which terminated the facilities, accelerated the indebtedness and demanded payment. Since early 2009, Mr Glynn Sadler was the ANZ manager responsible for handling the facilities, the guarantees and the securities.
Asset Management Agreement – September 2010
9In September 2010, an Asset Management Agreement was entered into between ANZ and four parties, who were defined in the Agreement as “Debtors”. They were Mr Taylor, his domestic partner Ms Reid and the companies Roylat and T.R. Administration Pty Ltd (“TR”). The Debtors made certain acknowledgements in the Agreement in respect of the facilities, the guarantees and the securities.
10The acknowledgements included that:
a.the facilities, guarantees and securities were “binding and fully enforceable” by ANZ;
b.ANZ had validly terminated the facilities and made all amounts, owing to ANZ pursuant to the facilities, immediately due and payable;
c.ANZ had validly made demands for payment pursuant to the guarantees, which had not been complied with;
d.interest and costs continued to accrue on the amounts payable to ANZ in accordance with the facilities, the guarantees and the securities;
e.ANZ was “immediately entitled to exercise its rights and powers” under the facilities, the guarantees and the securities;
f.the “arrears” (defined as “all amounts including principal interest that would have otherwise been payable under the facilities…had the facilities not been terminated”) were specied at $266,157.54 as at 16 August 2010 “in respect of the TR facilities”;
g.the further amounts immediately due and payable to ANZ as at 16 August 2010 were:
i.$1,854,925.95 – Rolyat Facilities;
ii.$3,561,506.22 – Taylor Facilities;
iii.$3,120,000 – Taylor Guarantees;
iv.$3,400,000 – Reid Guarantees;
v.$2,400,000 – TR Guarantee;
vi.$1,266,157.54 – Rolyat Guarantee;
h.the following securities as at 16 August 2010 secured repayment of:
i.$1,266,157.54 – Portsea Mortgage;
ii.$3,400,000 – South Yarra Mortgage;
iii.$3,400,000 – Kew Mortgage;
iv.the Debtors needed to “obtain the Bank’s written consent before entering into a contract for sale for the South Yarra Property, or a subdivided portion of the South Yarra Property as approved by relevant statutory bodies”.
11Pursuant to the Agreement, Mr Taylor had an obligation to “pay the arrears [of $266,157.54 as at 16 August 2010] to [ANZ] by 11 November 2011”, otherwise a “Default Event” would occur and ANZ would “become immediately entitled to exercise all rights and powers available to it pursuant to the Facilities, the Guarantees, the Securities”. The arrears were apparently paid by the agreed date.
12Further, the Debtors agreed, “in addition to their existing obligations” to:
a.“cause and procure the entry into a Contract of Sale for the Portsea Property by 31 January 2011”;
b.“cause and procure the entry into a Contract of Sale for the South Yarra Property, or a subdivided portion of the South Yarra Property as approved by relevant statutory bodies, by 31 December 2010”.
A failure to perform either of these obligations was also defined in the Agreement as a “Default Event”.
13ANZ also agreed to “forebear from taking any further steps to enforce the rights and powers pursuant to the Facilities, the Guarantees and/or the Securities unless and until a Default Event occurs”.
Sale of Portsea and Lot 2 South Yarra
14The Portsea property was sold by Contract of Sale, signed by the purchaser on 18 March 2011 and by Mr Taylor as the vendor on 2 April 2011, for $1,698,000 payable by a 10% deposit and the balance on 18 July 2011. The sale settled on 26 July 2011. The sale on 2 April 2011, rather than as provided for by 31 January 2011, constituted a Default Event under the Asset Management Agreement.
15Mr Taylor sold the vacant allotment at the rear of the South Yarra property as Lot 2 on a proposed plan of subdivision. A Contract of Sale between Mr Mark Sambucco as purchaser and Mr Taylor as vendor was executed on 1 November 2010 for $1,955,000 with a deposit of $100,000 and the balance due on 30 May 2011, or 14 days after the vendor had given notice to the purchaser of registration of the plan of subdivision. Settlement was not effected until 31 October 2011 because of delays in the registration of the plan of subdivision. The property was sold with architect’s plans for a residential dwelling on the allotment.
16On 16 February 2011, Mr Taylor’s solicitors wrote to ANZ’s solicitors a letter which included the following statement: “The common intention is to have your client repaid and, as discussed, ultimately the exit by Mr Taylor to another banking institution. All the decisions along the way have been made as a result of this open communication with the best interests of both parties in mind”.
Lot 1 South Yarra – ANZ’s refusal to finance the completion of renovations
17To meet the indebtedness to ANZ, the sale of the existing dwelling on Lot 1 of the South Yarra property became necessary. Mr Taylor had purchased the property prior to 2007. In late 2007 or early 2008, he commenced extensive renovation work to the existing dwelling. The building was gutted, a basement excavated and new floors laid. Building work ceased in June 2009. Although the structure remained, the works were substantially incomplete.
18On 12 August 2011, Mr Taylor sought an additional $600,000 from ANZ to complete the home renovation. In order to properly assess the application, ANZ obtained a valuation of the property. AVA Property assessed the property as having, at 5 September 2011, a market value, “as is” of $2,490,000 and ”as if complete” of $3,350,000.
19On 26 October 2011, Mr Taylor wrote to Mr Sadler asking ANZ “to reconsider my original proposal of 12-8-11 to fund the completion costs and sell the property upon completion”. Mr Taylor referred to advice from “two agents” who, contrary to the AVA Property valuation, had assessed the “as if complete” value of Lot 1 at $4 million and the “as is value” at “about $2m”. Mr Sadler responded that he “would prefer to rely on a sworn valuation rather than an agents opinion any day” and said, “it is highly unlikely that the Bank will provide any additional funding to complete the dwelling”.
Proposed sale by Mr Taylor for $2.65 million – 21 November to 21 December 2011
20Mr Taylor met with Mr Sadler on 4 November “to discuss debt clearance options”. In an email on 21 November 2011, Mr Taylor said that, “At our meeting we agreed that I should pursue the private leads that I had been working on with a view to mitigating loss, and you kindly gave me until 4 December to see if I could achieve a sale “ [of Lot 1]…The contract was to be unconditional…If a sale was not achieved in this time frame, then I agreed to sell the property by public auction”.
21Mr Taylor noted that he and Mr Sadler agreed that achieving the AVA Property “as is” value of $2.49 million would be “highly unlikely”. Agents were “suggesting a sale price” of about $2.2 million, and “there was some interest at around the $2 million mark from builders and developers”.
22Mr Taylor then noted in the email that, “an agreement has now been struck to sell the property for $2,650 k… The deposit is $25k and the settlement date is 11 January 2013, or earlier by an agreement between the parties. The contract is unconditional”. Mr Taylor noted that this “outcome is financially neutral at current interest rates. This is much better than what was likely to be a huge loss if the property had been sold to the developers for about $2m”.
23Mr Taylor’s email had been sent at 11:34am. At 11.47am, Mr Sadler responded, “Thank you for the update, but a sale on these terms wouldn’t be acceptable to the Bank (ie. such a small deposit and such a long settlement term)”.
24On 2 December 2011, Mr Taylor emailed Mr Sadler stating, “Since my email to you on 21 November 2011 and our telephone conversation on that day, I have received advice from the Purchasor that they are willing to increase the deposit amount to $200,000, which will be payable in 3 tranches - $25,000 on signing; $75,000 on 31 March 2012 and $100,000 on 30-06-12. This brings the deposit up to a more substantial amount as we were discussing, and I note this deposit is double that which was paid for the sale of the land at South Yarra which took about the same time to settle. The consideration remains at $2,650k, as does the settlement date, being 14 months from the contract date which will be about 9-2-13, or earlier by agreement between the parties”.
25Mr Taylor’s email was sent at 5:10pm on the Friday. At 8:15am on Monday 5 December 2011 Mr Sadler responded, “Unfortunately this still isn’t satisfactory and we’ll be proceeding as previously foreshadowed”. At 1:36pm on 5 December 2011, Mr Sadler sent a further email as follows: “I refer to our telephone discussions earlier today and confirm that the Bank will continue to reserve its rights in relation to the existing defaults but will refrain from taking further action until close of business on this Friday 9/12/2011, by which time a signed unconditional contract of sale (satisfactory to the Bank) must be provided. In this regard a full 10% deposit must be paid upon signing of the contract otherwise the maximum term the Bank will agree to is 90 days”.
26On Friday 9 December 2011 at 4.57pm, Mr Taylor emailed Mr Sadler stating, “I have just been advised by the purchaser that they have agreed to meet your deposit requirements as referred to below”. No further details were referred to in the copy of the email included in the Court Book. It is not clear whether this copy is incomplete or the details were not provided. It is noted that in the 2 December 2011 email, the total deposit of $200,000 was to be paid in tranches over about 7 months from the signing the contract.
27At 8:41am on Monday 12 December 2011, Mr Sadler responded as follows: ”I confirm that we will withhold further recovery action until Monday 19/12 to enable you to provide us with a signed copy of the unconditional contract of sale and evidence that the deposit has been paid in full. I will then seek senior management approval of the transaction and then come back to you [with] the full terms and conditions that are required”. Mr Taylor replied at 9:40am: “Thanks for your assistance. I will keep working on this and get back to you later in the week”.
Mr Taylor engages selling agents – 21 December 2011 – 16 January 2012
28On 21 December 2011, Mr Taylor sent an email to Mr Sadler confirming matters discussed in “our telephone conversation on Monday [19-12-11]” and stating: “Although the purchaser I have been negotiating with has agreed to your deposit requirements of 10% because they wanted a 14 months settlement period, they will not be able to fund it right now as they are in the midst of a refinance as a result of which they expect that the deposit will be met towards the end of January. As I indicated to you, this is not entirely satisfactory, but I am willing to persevere with them as the price they have offered [$2650k] is a good outcome”.
29“I am also mindful of the need to address repayment of the remaining facilities and the asset management agreement. With this in mind, I confirm that I am willing to put the property in the hands of an agent during the week commencing Monday 19-1-12…In volunteering to take this action it puts some certainty around the sale process and it still keeps the door open for the currently interested parties and any others who may come my way, but it also broadens the market by publicly declaring that the property is for sale. Hopefully we can achieve a sale price similar to the one being considered by the purchaser and two interested parties at the moment.”
30“I am grateful for your indications of support for the above course of action and your offer to forebear any further action to allow me time to formalise the appointment of an agent. Can I suggest that that this time frame be until Monday 16-1-12? I will keep you updated after I meet with the agent. Thank you once again for allowing me to proceed with an orderly realisation of the South Yarra property”.
31Mr Salder responded on 22 December 2011, as follows: “Thank you for the update. Please note that whilst the Bank will continue to reserve its rights in relation to the existing defaults, we will refrain from taking further recovery action until 16/1/2012 to enable you to provide us with a signed sale/auction authority from a suitable agent (as well as their marketing proposal) for the South Yarra property. If this is satisfactory then a further variation to the existing agreement can be prepared to cover the sale of this property within an agreed upon time frame”.
32On 16 January 2012, Mr Taylor emailed Mr Sadler informing him that he had met with an agent “to move the listing of South Yarra forward”. He foreshadowed meeting one of the agent’s representatives later that week. Mr Sadler responded, “That will be fine”. Mr Taylor subsequently executed an exclusive auction authority in respect of Lot 1. The authority noted an auction date of 2 March 2012 although apparently it was intended that “expressions of interest in relation to the purchase of the South Yarra property will be called for by 2 March 2012”. The authority is dated 1 February 2012 but may have been signed earlier.
ANZ’s solicitors clarify Bank’s position – 30 January – 22 February 2012
33On 30 January 2012, ANZ’s solicitors sent a letter to Mr Taylor’s solicitors headed “TR Administration Group” and referring to the auction authority. The letter noted that ANZ was “prepared to forbear from taking any further enforcement action against your client“ on condition that “Mr Taylor acknowledged” in writing that a “Default Event has occurred under the AMA” and that, “By 5:00pm on 16 March 2012, your client provides our client with an executed, unconditional contract of sale in a form acceptable to our client (in its sole and absolute discretion) with a settlement period of no more than 90 days from the date of execution”.
34On 20 February 2012, Mr Taylor emailed Mr Sadler as follows: “I was ringing you earlier this morning as I am a bit confused about a letter I have just received from Corrs acting on your behalf. This letter seems to be seeking from TR Administration Group undertakings that can’t be given. Apart from this is contradicts my understanding of what I have agreed with you”.
35Mr Sadler responded as follows: “The correspondence that I have seen from Corrs certainly reflects the position I believe that we had agreed upon. If that’s not the case I [will] be happy to hear your views. Please note that if this matter isn’t bedded down by the end of the week I will be instructing our agents to look at taking possession of the South Yarra property and then selling as mortgagee”.
36Mr Taylor replied later on 22 February after having spoken with Mr Sadler, noting that it had been the “the letter from Corrs dated 30-1-12” he had been referring to in his earlier email. Mr Taylor denied that he had breached the Asset Management Agreement as the Agreement only provided for the sale of part of the South Yarra property, which had been achieved with the sale of Lot 2.
37Mr Taylor expressed a further concern, about the sale of Lot 1. He said, “If there is to be an auction, possibly as part of a modified EOI campaign, it may not occur until Saturday 17-3-12. If this is [the] case there would need to be a few days grace beyond this to deliver an unconditional contract. If the EOI campaign (and a possible private auction within that campaign) looks like producing, then 16-3-12 should be sufficient time to have a documented outcome”.
38Mr Taylor concluded, “It is my understanding that we are in agreement on the fact that you will forbear taking any further action under the AMA until the outcome of current sale process is known…Glynn, you did say this morning that you thought the AMA had expired. Perhaps it is me, but I couldn’t see an expiry date referred to. Even if this is the case, then we have agreed to sell and are now selling the remaining property”.
Proposed sale by Mr Taylor for $2.2 million – 19 to 20 March 2012
39On 19 March 2012, Mr Taylor emailed Mr Sadler enclosing a copy of a report from the agent “Bennison Mackinnon in relation to the sale” of Lot 1. Despite “a very thorough and professional sales campaign…selling on an incomplete basis has produced a best offer of $2.2 million plus interest at 6.5% pa until settlement, as detailed in the report. It is this offer that they are focusing on completing at the moment, as they indicate in their report.. The final conclusion, is that an auction is not recommended as this is likely to produce a worse outcome than that achieved under the EOI sale campaign”.
40The agent’s report dated 16 March 2012 contained a summary “limited to those people who we believe have an interest in purchasing the property”. Seven persons were named. Four indicated an interest at between $1.3 million and $1.7 million. Two indicated an interest at $1.8 million, one on a settlement of 30 days and the other at 60/90 days.
41Mr Sambucca was the remaining person. He had expressed interest at “$2,200,000, $10,000 deposit, balance of deposit to make up 10% in 21 days and interest of 6.5% payable 30 days - 10 months [to settlement]”. Mr Sambucca had been the purchaser of Lot 2 by Contract of Sale dated 1 November 2010 which settled on 31 October 2011. Mr Sambucca had made the earlier offer to purchase Lot 1 for $2.65 million which was the subject of emails from Mr Taylor between 21 November and 21 December 2011, although Mr Sadler was not informed of this until a later date.
42The agents said that “it is impossible to fully predict the outcome of the EOI”. They recommended that “a reserve price in the vicinity of $2,100,000 be considered”. They recommended “accepting the offer made by Mr Sambucca” and that “an auction in the current climate would almost certainly lead to a lower sale price”. They said, “our intention is to document the highest offer on Monday [19 March] for your consideration”.
43Mr Taylor’s email to Mr Sadler did not contain any documentation of “the highest offer”. The email was sent at 2:51pm. Mr Sadler responded at 3:35pm as follows: “Unfortunately as previously flagged to you a sale on extended terms isn’t acceptable to Bank, so I’m prepared to allow you a further 48 hours to provide us with the best offer on normal commercial terms (ie. maximum settlement term of 90 days), otherwise further action will need to be taken”.
44Mr Taylor replied on 19 March at 5.49pm raising three matters:
a.Mr Taylor suggested that “the offer is not uncommercial in its terms“ and referred back to Mr Sadler’s “deposit requirement [for] a 14 month settlement period was 10%” in the November/December emails. Mr Taylor noted that the $2.2 million offer “has a 10 month or earlier settlement with compensation for interest over that period, which by my rough calculation comes to about $100k”. He asked Mr Sadler to inform him as to “what your concerns are [as] then perhaps the purchaser can address this”.
b.Mr Taylor referred to the proceedings he had issued in the Family Court against his domestic partner, Ms Reid. In an earlier email that day Mr Taylor has referred to an order of the Family Court for the sale of Lot 1 which provided “for the property to be auctioned if it is not sold under the EOI campaign”.
c.Mr Taylor asked for 72 hours rather than the 48 hours Mr Sadler referred to.
45Mr Sadler responded on 20 March stating that, “The Bank doesn’t have to discharge its mortgage if its not happy with the terms of the sale”. He noted the sale price was below the current sworn valuation, the excessive settlement term, the lack of information about the purchasor’s financial capacity, ANZ’s unwillingness to perhaps be faced with the prospect of having to sell the property in 6-10 months time in an uncertain market and the inadequacy of the interest offered to cover the whole of the debt secured by the property. Mr Sadler asked Mr Taylor for a “satisfactory repayment proposal of the balance of the debt”. He indicated no further action would be taken “until Friday 23/3/2012”.
46Further emails were exchanged that day. Mr Sadler told Mr Taylor that ANZ had “no intention of releasing any security at this time” and he estimated that “if we allowed the proposed contract of sale to go ahead the shortfall at settlement could be in excess of $500k, so we need to have this addressed now”.
Proposed sale by Mr Taylor for $1.8 million – 26 to 30 March 2012
47On 26 March 2012, Mr Taylor asked for further time as a “Section 32 and Contract are now with the Purchaser’s solicitor for review”. Mr Sadler agreed to “hold fire for another couple of days”.
48On 26 March 2012, Mr Taylor has been in the Family Court “all day”. He consented to orders made that day by the Family Court including that “if he obtains an offer for the sale of the Domain Road property prior to 30 March 2012, [he advise Ms Reid] the details prior to signing the Contract of Sale”.
49Otherwise, “as and from 4pm on 30 March 2012 [Ms Reid was to] have the sole conduct of the sale of the property” on certain conditions including that she sell “by public auction no later than 12 May 2012 [and] the reserve price for the sale be $2,100,000 or as otherwise agreed in writing”. Mr Sadler was apparently not informed of the terms of the order until an email by Mr Taylor on 2 April 2012.
50On 30 March 2012 at 4:23pm, Mr Taylor emailed Mr Sadler stating that “the terms of the contract seem to have been agreed. At this stage the agent is meeting with the purchaser at or before 5:30pm this afternoon to sign the contract. Unless things change, I believe the sale price to be $1.8m, deposit 10% and settlement in 60 days. I can elaborate further on Monday if that is OK with you. Although Susie [Ms Reid] is agitating for an auction, the prediction from the agents is that an auction will produce an outcome of about $1.5m. Hence I am hopeful of completing the sale later today”.
51At 4:26pm, Mr Sadler responded, “At that level I’m not sure that the Bank will consent to the sale either, unless you can provide us with a firm proposal for clearance of the residual facilities”.
52Mr Taylor immediately replied, “Unfortunately that is what the market is for an incomplete house. I know that you have believed otherwise, but I have always been aware that the consideration was going to be about $2m. I have tried extremely hard to achieve a better outcome, but sadly to no avail”.
Auction by Ms Reid – 12 May 2012
53On Monday 2 April 2012, Mr Taylor informed Mr Sadler by email that at about 5.30pm on Friday afternoon, Ms Reid “walked into” the agents’ office “with an Order from the Family Court that she take over the sale of the property from 4:00pm that day. The agent was just going out to meet the Purchaser and [Ms Reid] instructed them not to. Thus there is no signed contract that I am aware of at the moment”. Mr Taylor then tried to persuade ANZ to instruct the agent to sell the property to the Friday buyer, whom Mr Taylor said, “is still keen to proceed”.
54Ms Reid engaged other agents and the property was auctioned on 12 May 2013. Mr Taylor said that he did not attend the auction and did not find out for some time later the details of the sale. Only two pages of the Contract of Sale are in evidence. The property was sold to Mr Sambucca for a price of $1.825 million with a 10% deposit ($10,000 upon signing and the balance by 28 May 2012) and with settlement “6 months from date of sale”. It seems apparent that the property was sold after auction because of the terms of sale. ANZ also took no part in the sale and were provided with an unexecuted copy of the Contract of Sale on 17 May 2012 and a copy of the executed document by letter dated 5 June 2012. Mr Saddler said the bank did nothing to upset the sale as it was satisfied the market had been “fully tested”.
55On 3 May 2012, ANZ’s solicitors had written to Ms Reid’s solicitors informing them that although ANZ considered that there had been a Default Event under the Asset Management Agreement, “our client is content to allow your client to continue to conduct the sale campaign” for the property provided ANZ was kept informed. The letter noted that ANZ “reserves the right to take over the conduct of the sale campaign at any time”. The letter stated ANZ’s understanding “that the property is likely to be sold for an amount that is less than [the reserve price of] $2.1 million”. The letter noted that Ms Reid’s Kew property might be sold in the event of a shortfall and suggested Ms Reid “make a proposal to our client as to how she intends to deal with any shortfall”.
56In a further letter dated 22 May 2012, ANZ’s solicitors noted that “despite repeated requests [Ms Reid] did not provide our client with information in relation to the marketing of the South Yarra Property when requested and the only attempt to do so was made at 3pm on the day before the auction”. A response from Ms Reid’s solicitors on 5 June 2012 indicated that the property was sold with a 10% deposit, $10,000 upon signing the contract and that “an extension has been granted for the payment of the balance of $172,500 to 28th June 2012”.
57Mr Taylor stated in evidence that he had never agreed to the sale of Lot 1 for less than the reserve of $2.1 million referred to in the Family Court order. In a letter dated 1 November 2012, the solicitors engaged by Mr Taylor to prepare the sale documents (prior to Ms Reid taking over the sale of the property) wrote to ANZ. In the letter, the solicitors stated, “We understand that the sale price is clearly below the reserve price stipulated by the family law court order. If that is correct then in our view that invalidated the sale, and any activities undertaken in reliance upon it. The order does not compel Ross [Taylor] to sign any further documents that apply pursuant to a (complying) sale, though one would anticipate that his advice would be to do so”. ANZ’s solicitors in a letter dated 9 November 2012 responded that, “Our client is not involved in the Family Court proceeding between Mr Taylor and Ms Reid and takes no position in relation to it. If Mr Taylor considers that orders made by the Family Court have been breached, this is a matter for Mr Taylor”.
58In a letter dated 16 November 2012, Mr Taylor’s solicitors reiterated that, “worthy of note is the fact that the sale secured by Ms Reid’s lawyers is demonstrably not in accordance with the terms of the Family Law Court order authorising them to continue the process”. Mr Taylor took no action to set aside the Contract of Sale and did not make an application to the Family Court. On 30 October 2012, Mr Taylor had signed a Discharge and Variation Authority which authorised ANZ at settlement to receive and apply the proceeds of the sale of Lot 1 to the facilities. The sale settled on 18 December 2012.
Oral evidence and credibility
59Mr Sadler gave evidence for the plaintiff and Mr Taylor for the defendants. They were the only witnesses. Their oral evidence added little to the recitation of events in their emails and the documents they referred to. I have set out the contents of the emails in some detail because it is upon those matters the defendants rely for their defences. There were no issues of credibility that arose.
Defendants’ submissions
60The defendants submitted that “the plaintiff has acted both unreasonably and unconscionably in its conduct in refusing to accept the attempts by the [defendants] to procure a purchaser for Lot 1…over an extended period of time”.
61The defendants asserted that even though the bank had not taken possession of the property nor engaged an agent to conduct a sale, it had “nevertheless been in control of the sale of that property” because Mr Taylor needed to seek the ANZ’s approval before entering into a contract and as ANZ “considered that it had the final say, and the right of veto”.
62Defendants’ counsel, Mr Black, in his final submissions analysed the actions of ANZ which he said were “unreasonable and/or unconscionable”. These included:
a.failing to take account of the special circumstances involved in the sale of an uncompleted home;
b.rejecting offers put by the defendants for “inconsistent and contradictory reasons”;
c.rejecting offers quickly and without appropriate consideration;
d.taking a different approach to the sale of Lot 1 than it had taken in relation to the sale of Lot 2;
e.accepting the sale arranged by Ms Reid although the terms were less favourable than the offers put by Mr Taylor.
Legal propositions
63There was little dispute about the applicable law:
a.the ABA Code of Banking Practice 2004 applied to the provision of banking services by ANZ to the defendants;
b.clause 2.2 of the Code provided that ANZ “will act fairly and reasonably towards [the defendants] in a consistent and ethical manner. In doing so will consider your conduct, our conduct and the contract between us”;
c.a mortgagee selling (or concurring with any other person in selling) mortgaged land pursuant to s. 77(1) of the Transfer of Land Act 1958 (Vic) must act “in good faith and having regard to the interests of the mortgagor”;
d.section 22 of The Australian Consumer Law provided, at the relevant time, that “a person must not, in trade or commerce, in connection with…the supply…of services to another person…engage in conduct that is, in all the circumstances, unconscionable”;
e.to be unconscionable, “the conduct must demonstrate a high level of moral obloquy on the part of the person said to have acted unconscionably…What is required is some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise the conduct of the party” (Tonto Home Loans Australia Pty Ltd v Travares [2011] NSWCA 389 per Allsop P at paragraphs 291 and 293);
f.where it holds security, “the creditor had three sources of repayment, the creditor could sue the debtor, sell the mortgage securities or sue the surety. All these remedies could be exercised at any time or times simultaneously or contemporaneously or successively or not at all” (China and South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 533 at 545 per Lord Templeman);
g.“if the mortgagee can decide when he wishes to exercise the power of sale there can be no liability attaching to him for failure to exercise it at any particular point of time” (Westpac Banking Corporation Ltd v Kingsland (1991) 26 NSWLR 700 at paragraph 707 per Cole J);
64Three areas of dispute between the parties in relation to the application of these legal principles were:
a.whether ANZ was providing banking services or supplying services in trade or commerce in relation to the sale of Lot 1;
b.whether the sale was governed by the Asset Management Agreement;
c.whether ANZ was effectively selling Lot 1.
65I consider that during the period Mr Taylor was attempting to sell Lot 1 that:
a.the Asset Management Agreement did not make specific provision for the sale of Lot 1 but did generally reserve ANZ’s rights pursuant to the facilities, guarantees and securities;
b.ANZ was engaging in conduct which had sufficient connection to the provision of banking services or the supply of services in trade or commerce as to enliven obligations to act reasonably and in good conscience;
c.ANZ, by the Asset Management Agreement, and by its actions subsequently in relation to Lot 1, did not undertake the sale of the property but expressly agreed to forebear from taking “further steps to enforce the rights and powers pursuant to the Facilities, the Guarantees and/or the Securities”.
Conclusions on the facts
66Mr Taylor, and the “Debtors”, defaulted under the terms of the facilities in 2009. By February 2010, ANZ had, against the Debtors (including the guarantors), terminated the facilities, accelerated the indebtedness and demanded payment. The Asset Management Agreement in September 2010 contained acknowledgements by the Debtors of the amounts “immediately due and payable” to ANZ and the bank’s forebearance from taking further steps to enforce its rights.
67Lot 2 of the South Yarra property was sold by Contract of Sale dated 1 November 2010 and settled on 31 October 2011. The Portsea property was sold in March or April 2011 and settled on 26 July 2011. After the realisation of those properties, ANZ was still owed about $2.5 million.
68Between about late October 2011 and mid January 2012, Mr Taylor attempted to find a purchaser for Lot 1. In January 2012, Mr Taylor engaged agents to seek to sell the property. The agents attempted to do so until 30 March 2012 when Ms Reid took over the sale of the property in accordance with the consent orders made in the Family Court on 26 March.
Offer to purchase at $2.65 million – 21 November 2011
69On 21 November 2011, Mr Taylor notified Mr Sadler that “an agreement has now been struck” to sell Lot 1 for $2.65 million on a deposit of $25,000 and settlement on 11 January 2013. The terms of sale made this proposal unrealistic whether or not “an agreement” had been reached.
70On 2 December 2011, Mr Taylor informed Mr Sadler that the purchaser was willing to pay a deposit of $200,000 in three tranches over about a seven month period. This proposal was also unrealistic and it could not be said that the refusal by ANZ to embrace the offer was unreasonable or unconscionable.
71On 9 December 2011, Mr Taylor wrote that the purchaser had agreed to meet the bank’s “deposit requirements”. It is not clear what the precise terms of this proposal were. In any event, Mr Sadler’s response on 12 December 2011 was to ask Mr Taylor to provide ANZ with “a signed copy of the unconditional contract of sale”.
72Rather than producing the Contract of Sale, Mr Taylor replied on 21 December that the purchaser would “not be able to fund [the 10% deposit] right now as they are in the midst of a refinance” and the purchaser expected “that the deposit will be met towards the end of January”.
73Mr Taylor in his email noted that “this is not entirely satisfactory” and referred to two other interested parties from whom he hoped offers would emerge early in the new year. He noted that it was encouraging to have “three prospects”. But continued, “they remain that until the contract is signed and the deposit paid”. In these circumstances, it cannot be said that ANZ acted unreasonably or unconscionably.
Offer to purchase at $2.2 million – 19 March 2012
74As a result of the sales campaign conducted by the agents engaged by Mr Taylor during February and March 2012, a number of “expressions of interest” were received. Mr Taylor sent the agent’s report to Mr Sadler on 19 March. The agent’s recommendation was to accept the offer of $2.2 million with a 10% deposit, settlement in 10 months and interest of 6.5% in the meantime.
75The offer was from Mr Sambucca who had purchased Lot 2 (and therefore may have been prepared to offer a “premium” for Lot 1). Mr Sambucca had in December 2011 offered $2.65 million on extended terms. He had apparently agreed to meet the ANZ’s requirement for a 10% deposit, but when Mr Sadler requested Mr Taylor to obtain a signed contract, Mr Sambucca was not able to fund the 10% deposit.
76The agent’s offer to Mr Taylor to “document” Mr Sambucca’s offer by 19 March came to nothing. Mr Sadler gave Mr Taylor a further 48 hours to provide ANZ “with the best offer on normal commercial terms”, and later, an extension to 23 March. Mr Sadler also sought some indication of how the shortfall at settlement of about $500,000 would be addressed.
77In the circumstances, the responses by Mr Sadler appear entirely appropriate to protect the interests of ANZ. The bank would have received little comfort from an undocumented offer with an extended contract date obtained by the agent as an “expression of interest”. The offer was below the bank’s valuation and would have left a $500,000 shortfall which Mr Taylor did not address. The bank’s responses to the agent’s report were not unreasonable or unconscionable.
Offer to purchase at $1.8 million – 30 March 2012
78Mr Taylor informed Mr Sadler in an email dated 30 March that he believed a sale would be completed later that day at a sale price of $1.8 million, a deposit of 10% and settlement in 60 days. What Mr Taylor did not tell Mr Sadler was that on 26 March he had consented to orders in the Family Court allowing Ms Reid to take over the conduct of the sale if, by 4pm on 30 March, Mr Taylor had not obtained a binding contract, or before executing any contract, had notified its terms to Ms Reid.
79The pre-conditions Mr Taylor had agreed to in the Family Court were not met by him. Ms Reid, therefore, took over the conduct of the sale. In the circumstances, there can be little basis for complaint by Mr Taylor about the bank’s responses to the information he supplied. There may have been an offer. If there were, there is no evidence that Ms Reid was consulted. No documented offer or sale was concluded before the expiry of the time limit in the Family Court order.
Sale by Ms Reid following the auction – 12 May 2012
80Ms Reid achieved a binding contract to sell the property at $1.825 million with a 6 month settlement. The bank required that it be kept informed about the marketing campaign. Otherwise, ANZ did not interfere with the sale.
81Neither did Mr Taylor, notwithstanding his belief, supported by legal advice, that the sale was not valid. He chose not to challenge the sale and, in fact, executed a document to permit settlement to occur. There is no basis for the defendants’ assertions in relation to the bank’s conduct. The property was appropriately realised by a sale at a price fairly assessed by the market.
Allegations by the defendants in relation to ANZ’s conduct
82Mr Sadler was at all times responsive to the communications from Mr Taylor. It is clear from the emails that, quite apart from the correspondence, Mr Taylor had meetings with Mr Sadler and spoke to him by phone.
83Mr Sadler made appropriate responses to the email correspondence. This covered a period of about 5 months from late October 2011 to late March 2012. Different responses were made at different times. There may have appeared to be inconsistencies in the approach ANZ took between the sale of Lot 2, which was completed in accordance with the Asset Management Agreement, and the attempts by Mr Taylor to sell Lot 1 about 12 months later when the substantial indebtedness of Mr Taylor and the other debtors had been outstanding for a considerable period.
84There is nothing about the bank’s conduct during the long period of forebearance, during which it permitted Mr Taylor to attempt to obtain the best price for the property, which could be described as unfair, unreasonable or to which any degree of “moral obloquy” attached which might lead to the conduct being characterised as unconscionable. The bank’s facilities and guarantees should be enforced.
Orders
85The defence raised by the defendants fails. The plaintiff is entitled to judgment against the defendants that the defendants pay to the plaintiff the sum of $697,212.04 and interest from 7 June 2013 to today of $2,672.88, total judgment $699,884.92.
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Certificate
I certify that the preceding 19 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 19 June 2013.
Dated: 19 June 2013
Catherine Kusiak
Associate to His Honour Judge Anderson
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