Australia and New Zealand Banking Group Ltd v Olawa Pty Ltd

[2013] WASC 415

AUSTRALIA & NEW ZEALAND BANKING GROUP LTD -v- OLAWA PTY LTD [2013] WASC 415

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2013] WASC 415
Case No:	CIV:2674/2012	Heard:	30 OCTOBER 2013
Coram:	MASTER SANDERSON	Delivered:	21/11/13
No of pages:	7	Judgment Part:	1 of 1
Result:	Summary judgment granted
Category:	B
PDF Version

Parties:	AUSTRALIA & NEW ZEALAND BANKING GROUP LTD (ACN 005 357 522) OLAWA PTY LTD (ACN 008 992 130) FRANCIS PETER BERTOLA HELEN TERESE BERTOLA
Catchwords:	Mortgage action Plaintiff's application for summary judgment Turns on own facts
Legislation:	Nil
Case References:	Nil

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : AUSTRALIA & NEW ZEALAND BANKING GROUP LTD -v- OLAWA PTY LTD [2013] WASC 415 CORAM : MASTER SANDERSON HEARD : 30 OCTOBER 2013 DELIVERED : 21 NOVEMBER 2013 FILE NO/S : CIV 2674 of 2012 BETWEEN : AUSTRALIA & NEW ZEALAND BANKING GROUP LTD (ACN 005 357 522)

Plaintiff

AND

OLAWA PTY LTD (ACN 008 992 130)
First Defendant

FRANCIS PETER BERTOLA
HELEN TERESE BERTOLA
Second Defendants

Catchwords:

Mortgage action - Plaintiff's application for summary judgment - Turns on own facts

Legislation:

Nil

Result:

Summary judgment granted

Category: B

Representation:

Counsel:

Plaintiff : Ms K F Banks-Smith
First Defendant : Mr L A Warnick
Second Defendants : Mr L A Warnick

Solicitors:

Plaintiff : Herbert Smith Freehills
First Defendant : Paiker & Overmeire
Second Defendants : Paiker & Overmeire

Case(s) referred to in judgment(s):

Nil


1 MASTER SANDERSON: This is the plaintiff's application for summary judgment. The plaintiff needed an extension of time within which to bring the application. Affidavit evidence was led by the plaintiff to explain the delay in making the application. No objection was taken by the defendants to the extension being granted and accordingly there will be an extension of time to bring this application.

2 The application was supported by three affidavits of Roland Davis, the first sworn 22 August 2013, the second sworn 12 September 2013 and the third sworn 15 October 2013. In response the defendants rely on an affidavit of the first-named second defendant sworn 26 September 2013. Certain objections were taken by the plaintiff to parts of this affidavit. It is not necessary to detail any of these objections. The paragraphs complained of played no part in the determination of this application.

3 The relevant facts emerge from the statement of claim and they can be summarised as follows. Prior to September 2010 the first defendant had certain finance arrangements with Permanent Custodians Ltd. By written agreement dated 6 September 2010 the plaintiff agreed to provide the first defendant with financial accommodation. This involved two loans. An amount of $1,300,000 by way of an ANZ revolving agri line facility for the purposes of working capital and $1,935,000 by way of an ANZ business loan. The effect of these two loans was to refinance the Permanent Custodians' facility.

4 It was a term of both loans made by the plaintiff they would be repaid by 31 December 2010 out of the proceeds of sale of a properly known as Coonawarra owned by the first defendant. The plaintiff secured its loans by a mortgage over the Coonawarra property and a charge over all of the first defendant's assets and undertakings. It obtained from the second defendants a guarantee and indemnity limited to $3,235,000. In turn that guarantee and indemnity was supported by a mortgage over a property known as San Pedro owned by the second defendants. It is worthy of note the securities taken by the plaintiff both with respect to the mortgages and the guarantees replaced equivalent security which had been granted to Permanent Custodians.

5 The first defendant failed to sell Coonawarra and to repay the loans by 31 December 2010. As a consequence a default notice dated 5 January 2011 was sent to the first defendant by the plaintiff.

6 Not withstanding the event of default under the plaintiff's initial facilities by written agreement dated 23 May 2011 the parties agreed the plaintiff would increase the revolving agri line facility by $300,000 to $1,600,000 for the purposes of assisting with the first defendant's working capital requirement. It was also agreed the business loan would be extended to 28 February 2012 in the same amount as the initial advance - that is $1,935,000. The second defendants provided a further guarantee executed on or about 2 June 2011 as security for the performance of the first defendant's obligations under the revised facilities.

7 At the same time as the parties entered into this revised arrangement an asset management agreement dated 2 June 2011 was entered into by all three parties. Pursuant to this agreement certain acknowledgments were made and an asset realisation strategy was agreed. Essentially the first defendant and the second defendants were to dispose of Coonawarra and San Pedro in accordance with an agreed timetable so that the debt to the plaintiff would be repaid. In fact the defendants did not dispose of either Coonawarra or San Pedro and have failed to make repayment of the debt. As at 25 June 2012 an amount of $3,681,116.50 was owed by the defendants to the plaintiff.

8 Between 25 June 2012 and 3 September 2012 the plaintiff sent to the defendants various default notices, notices of demand and a notice to quit. None of this produced any response. The defendants have failed to vacate Coonawarra and San Pedro. The plaintiff now seeks repayment of the amount it is owed and possession of both properties.

9 At par 27 of her written submissions counsel for the plaintiff provided a broad overview of the grounds upon which the defendants opposed the application. It is a fair summary of the defendants' position and I can do no better than provide a direct quote:

The grounds advanced by the defendants in the Bertola Affidavit, as being the grounds upon which the defendants should be given leave to defend the claim, can be summarised as follows:

(a) Olawa is not indebted to ANZ, but is, in fact, indebted to PCL as the defendants did not 'authorise or direct' ANZ to discharge the PCL Facility (Bertola Affidavit at [5.1], [9], [12] arid [14]); and

(b) ANZ engaged in unconscionable conduct. In essence, this allegation relies upon the following:


(1) the defendants 'did not notice' that the letter of variation to the PCL Facility dated 5 May 2009 (5 May 2009 PCL Variation) changed the Final Repayment Date of the PCL Term Loan (which loan was re-paid as a consequence of funds advanced pursuant to the ANZ Business Loan) from the year 2031 to 31 March 2010 (Bertola Affidavit [24]), even though the defendants signed that letter by way of acceptance;

(2) whilst the facility was still a PCL Facility (but with ANZ as servicer), by a variation to the PCL Facility entered into on 21 May 2010 (21 May 2010 PCL Variation), the defendants agreed to commence marketing Coonawarra by 31 August 2010 with a view to a sale by 31 December 2010; and

(3) although the defendants agreed to the terms of the Initial ANZ Facility, which had substantially the same terms regarding repayment as the PCL Facility, it is alleged that:


(A) the defendants were 'pressured' into doing so, knowing that Olawa 'would not be able to repay the Business Loan Facility by 31 December 2010' and 'deliberately structured the new facility to force Olawa into early default' (Bertola Affidavit [40]);

(B) ANZ took advantage of the improper reduction in the term of the PCL Facility, to impose the same repayment date of 31 December 2013; and

(C) for the reasons set out at (a) above, ANZ did not advance any funds, as the PCL Facility was not repaid.

10 With respect to the first argument put by the defendants it is alleged there was no claim money was advanced. The defendants say so far as the first transaction is concerned there were three steps. First a facility was offered and accepted. Second the facility was drawn down by some action taken by the first defendant. Third the money drawn down under the facility was paid to Permanent Custodians to discharge the Permanent Custodians facility. The defendants say the plaintiff has established step one. They say however steps two and three have not been proved. With respect there is no substance in that argument. The plaintiff's facility was executed by the second defendants and the first defendant and by its terms contemplates the advance of funds. It is clear the facility was to be with the plaintiff rather than Permanent Custodians. Whether this was an accounting exercise or not is of no consequence. The fact is the securities held by Permanent Custodians were discharged and new securities were taken in the name of the plaintiff. It was a classic refinancing.

11 Counsel for the defendants made much of the fact the plaintiff had taken over the loan book of Permanent Custodians. That may well be so but it does not alter the nature of the transaction. The fact is one lender was being replaced with another and the defendants knew it.

12 The defendants also acknowledged the amended arrangements in writing. They knew they were dealing with the plaintiff and they were quite happy to accept the advance of funds on the plaintiff's terms. They were after all obtaining a benefit from the refinancing. To now suggest somehow that these funds have magically disappeared so the defendants are not indebted to the plaintiff or anyone else is at odds with commercial reality.

13 If all that was not enough in the asset management agreement the first defendant expressly acknowledges that it is liable to the plaintiff for the relevant debts. The defendants all knew what they were doing and why and all acknowledged the necessity to sell Coonawarra and San Pedro to repay the money that was outstanding.

14 During the course of his submissions counsel for the defendants did not develop the unconscionable conduct argument beyond what was contained in his written submissions. In reality no aspect of the unconscionability argument had merit. Nonetheless I should briefly summarise how the unconscionability claims are answered.

15 In May 2009 the defendants signed a letter of variation which effected an amendment to the Permanent Custodians' loan facility. Correspondence from Permanent Custodians at the time indicated they had serious concerns about the status of the facility. It is clear then the variation letter was not a standard extension but was driven by real concerns on the part of Permanent Custodians as to the ability of the defendants to repay the facility.

16 The terms and conditions which accompanied the Permanent Custodians' facility provided that the loan could be made repayable on demand in the event that circumstances arose that in the lender's opinion may have a 'material adverse effect, on the borrower's business, assets or financial condition of the borrower's ability to perform any of its obligations under a facility document'. The change of date for the repayment of the Permanent Custodians' loan occurred prior to the plaintiff becoming the servicer of the Permanent Custodians' facility. The change of date had no connection with the plaintiff and there is no evidence the plaintiff was on notice that the defendants considered the reduction in the term to be improper. Moreover the conditions imposed by the 21 May 2010 Permanent Custodians' variation precisely reflected the conditions anticipated by the 5 May 2009 Permanent Custodians' variation. No concerns or issues are raised by the defendants with respect to either variation as it related to Permanent Custodians. There can be no unconscionable conduct in these transactions.

17 As to the allegation the plaintiff 'pressured' the defendants into signing the initial facility two things can be said. First it is not disputed that the Permanent Custodians' facility was in default. Second the relevant term of the initial ANZ facility regarding the marketing and sale of Coonawarra and repayment of the ANZ facility precisely reflects the terms of the Permanent Custodians' facility. That cannot amount to unconscionable conduct.

18 Nor is there any force in the allegation the plaintiff's facility was 'deliberately structured' to force the first defendant into early default under the facility on terms which were more favourable to the plaintiff than the Permanent Custodians' facility. In fact both facilities were to all intents and purposes the same. Further there was agreements which acknowledged the terms of the plaintiff's facility and provided to the defendant not only a further advance but forbearance in enforcement of the securities. There is simply nothing in the evidence which would support an argument there has been any form of unconscionable conduct on the part of the plaintiff. In fact looking at the plaintiff's conduct as a whole they seem to have gone to considerable lengths to provide the defendants with every opportunity to market both Coonawarra and San Pedro on their own terms to allow eventual repayment of the debt.

19 In my view there is no defence to the plaintiff's claim and there ought be judgment for the plaintiff. The defendants should pay the plaintiff's costs of the action and of this application including reserved costs.