Bertola v Australia and New Zealand Banking Group Limited - [2014] WASCA 66

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: BERTOLA -v- AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED [2014] WASCA 66

CORAM: PULLIN JA
MURPHY JA

HEARD: 18 MARCH 2014

DELIVERED : 31 MARCH 2014

FILE NO/S: CACV 141 of 2013

BETWEEN: FRANCIS PETER BERTOLA
Appellant
AND
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
Citation  :AUSTRALIA & NEW ZEALAND BANKING GROUP LTD -v- OLAWA PTY LTD [2013] WASC 415
File No  :CIV 2674 of 2012

Catchwords:

Appeal - Appeal against summary judgment - Whether any of the grounds of appeal had any reasonable prospect of succeeding

Legislation:

Nil

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

Appellant: Dr John Walsh of Brannagh
Respondent: Mr D W John

Solicitors:

Appellant: Dr John Walsh of Brannagh
Respondent: Herbert Smith Freehills

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

Australia and New Zealand Banking Group Limited v Olawa Pty Ltd [2013] WASC 415
Samuels v The State of Western Australia [2005] WASCA 193

REASONS OF THE COURT: This appeal was listed to consider the appellant's application for a stay pending the hearing of the appeal, and for the appellant to show cause why the appeal should not be dismissed pursuant to r 43(2)(g)(i) of the Supreme Court (Court of Appeal) Rules 2005 (WA) (Rules) on the basis that none of the grounds of appeal had any reasonable prospect of succeeding. After hearing submissions for the appellant, the court made an order dismissing the appeal and ordering the appellant to pay the respondent's costs to be taxed. These are the reasons for those orders.
The judgment the subject of the appeal is a judgment of Master Sanderson dated 21 November 2013, whereby the master granted leave for the respondent to apply for summary judgment and entered judgment against the appellant, his wife and a company, Olawa Pty Ltd, in terms that 'the defendants deliver up vacant possession' of two properties, one known as 'Coonawarra' on the South Coast Highway, Gairdner, and the property known as 'San Pedro' in Bremer Bay. The appellant, his wife and Olawa were also ordered to pay the respondent $4,357,527.30 being principal, interest and costs due under the 'Second ANZ Facility' executed on 2 June 2011 as at 21 November 2013. In addition, the appellant, his wife and Olawa were ordered to pay costs and interest from the date of judgment until payment.

The master's reasons for decision

The master referred to the facts which emerged from the statement of claim and affidavits in support of the application for summary judgment. They were that before September 2010, Olawa had finance arrangements with Permanent Custodians Ltd with the loan being due for repayment by 31 December 2010.
By an agreement dated 6 September 2010, the respondent agreed with Olawa to provide Olawa financial accommodation in the form of two loans, one in the sum of $1.3 million and one in the sum of $1.935 million (a total of $3,235,000). Those funds were advanced by the respondent and used to repay the Permanent Custodians' facility.
It was a term of both loans that the respondent would be repaid by 31 December 2010 out of the proceeds of sale of Coonawarra. The respondent secured its loans by a mortgage over the Coonawarra property and a charge over all of Olawa's assets and undertakings. Olawa was the registered proprietor of Coonawarra. The respondent also obtained from the appellant and his wife a guarantee and indemnity limited to a principal of $3,235,000, plus interest and costs. The guarantee and indemnity was supported by a mortgage over San Pedro, the registered proprietors of which were the appellant and his wife. The securities taken by the respondent replaced equivalent securities which had been granted to Permanent Custodian.
Coonawarra failed to sell and the loans were not repaid by 31 December 2010. A default notice was issued. Notwithstanding the event of default, on 23 May 2011, Olawa, the appellant and his wife executed a written agreement whereby the parties agreed that the respondent would increase the $1.3 million loan by $300,000 for the purpose of assisting Olawa's working capital requirements. It was also agreed that the other loan would be extended to 28 February 2012 in the same amount as the initial advance. The appellant and his wife provided a further guarantee which was executed on 2 June 2011 which secured performance of Olawa's obligations under the revised facilities.
At the same time, an asset management agreement was entered into whereby Olawa and the appellant and his wife were to dispose of Coonawarra and San Pedro in accordance with an agreed timetable so that the total debt could be repaid. Neither Coonawarra nor San Pedro sold and the debt to the respondent has not been repaid.
Between 25 June and 3 September 2012, the respondent sent default notices, notices of demand and a notice to quit. None produced any response from the appellant, his wife or Olawa. Coonawarra and San Pedro were not vacated. That prompted the respondent to issue a writ seeking possession of both properties and judgment for the debt.
At the hearing of the respondent's application for summary judgment, Olawa and the appellant and his wife advanced arguments as to why judgment should not be entered. The arguments were summarised by counsel for the respondent at the hearing before the master. The summary was quoted by the master and it is set out below. The references in the summary to the 'PCL Facility' and the 'PCL Variation' are references to arrangements between Permanent Custodians and the appellant and his wife before the respondent became the financier.
(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.
The master rejected all of the arguments. The reasons for doing so are set out in Australia and New Zealand Banking Group Limited v Olawa Pty Ltd [2013] WASC 415.
An appeal notice was filed on 12 December 2013. It named the appellant and his wife as appellants.
The registry noted that the appeal notice had only been signed by the appellant. The appellant was informed that it would have to be signed also by the female appellant. The appellant dealt with this by striking out the name of Mrs Bertola. In consequence, the appeal was only brought by the appellant.
The appellant, who was represented by lawyers before the master, filed notice that he was representing himself. He drew the grounds of appeal. It is not in dispute that the appellant, as a guarantor, is entitled to contest the judgment for the debt and the judgment for possession of San Pedro. However, he has no right to seek an order setting aside the judgment for possession of Coonawarra. That would be a matter for Olawa. At the hearing on 18 March 2014 the appellant was represented by counsel.

The grounds of appeal

The appellant's grounds of appeal, shorn of particulars, read as follows:
(1)Master Sanderson erred in fact and law when characterising the transaction as 'a classic refinancing';
(2)Master Sanderson erred in fact and law when finding that no aspect of the unconscionability argument had merit;
(3)Master Sanderson erred in fact and law when ordering the appellant to pay the sum of $4,357,527.30;
(4)Master Sanderson erred in fact when stating that the application was supported by three affidavits of Roland Davis, rather than four affidavits;
(5)Master Sanderson erred in law and fact when accepting the verbal assurances of counsel for the respondent when s 33 of the Property Law Act 1969 (WA) requires proof of ownership of the debt.
The appellant has filed an affidavit in support of the application for a stay of proceedings. In it, he deposes that 'I am currently preparing an application to the Federal Court of Australia for relief'. He states that if the orders are not stayed, then 'the Receivers/Managers of the properties, Coonawarra and San Pedro; and the liquidators of Olawa Pty Ltd, will seize and sell the assets at a discount to the purchase price, to third parties and these transactions will not be capable of being reversed'. In par 5 he deposed that the 'Receivers/Managers [McGrathNicol], have already seized tractors, seeders and other plant and equipment and place[d] them in a secondhand dealer's yard'. He deposes that the plant and machinery was owned by Olawa on behalf of the Bertola Family Trust. He also refers to other unspecified equipment which the appellant says it 'appears' that the receivers and managers have seized.
An affidavit filed in opposition to the application for a stay and sworn by Roland Andrew Davis, a manager employed by the respondent, provides more information about the appointment of receivers and a liquidator. The position is that the respondent appointed receivers, namely James Thackray and Norman Oehme, of McGrathNicol, as receivers and managers of Olawa's assets. On 19 December 2013, an order was made to wind up Olawa and a liquidator has been appointed.
On 16 January 2014, the court made a property seizure and sale order with respect to Coonawarra. In consequence, the receivers gained possession of Coonawarra.
Mr Davis also deposed that on 28 January 2013, he received a letter dated 23 January 2014 from lawyers, Iffla Wade, attaching two contracts dated 7 October 2013 for the sale by the appellant and Mrs Bertola of the San Pedro property. This information is relevant to the stay application.
It is appropriate to deal first with the question about whether any of the grounds have any reasonable prospect of succeeding. If they do not, then the application for a stay must fail because the appeal will have to be dismissed. Counsel appeared by telephone link and made submissions on behalf of the appellant.

Whether any of the grounds have any reasonable prospect of succeeding

A ground of appeal is required to have a rational and logical prospect of succeeding, that is, it would not be irrational, fanciful or absurd to envisage it succeeding; in effect, that it has a real prospect of success: Samuels v The State of Western Australia [2005] WASCA 193 [56].
None of the proposed grounds have any reasonable prospect of succeeding for the following reasons.

Ground 1

This ground alleges that Master Sanderson erred in characterising the transaction as a 'classic refinancing'. The description of the transaction does not in any way affect the master's reasoning. In any event, it was an apt description. Funds were raised in the transaction with the respondent which were employed to discharge the indebtedness of Olawa to Permanent Custodians. The point advanced by counsel for the defendants at the hearing before the master and repeated by counsel for the appellant, was that there was no evidence that the respondent advanced the $3,235,000 used to discharge the Permanent Custodians debt. There is no merit in this point. It is a submission made against the evidence. Mr Davis deposed in par 9(a) ‑ (d) of his affidavit sworn 12 September 2013 that the money was advanced to Olawa and paid to Permanent Custodians. The Permanent Custodians securities were then discharged and the ANZ securities were registered to secure repayment of the monies advanced. There was nothing to contradict that evidence. Ground 1 has no merit.

Ground 2

The appellant contends that Master Sanderson erred in finding that 'no aspect of the unconscionability argument had merit'. The appellant's particulars in support of this ground complain about a change in the term of the Permanent Custodian loan to 31 December 2010. Any complaint about that variation is no longer of significance because the transaction with the respondent was entered into on the basis that the loan was to be repaid on 31 December 2010. The appellant in his particulars to ground 2 of appeal says that he raised 'no written concerns with respect to the variations at the time'. His particulars say that he and his wife were not happy with the letter of offer they received from the respondent, and that they believed it was 'very unreasonable' that the facility expired on 31 December 2010. Those submissions do not in any respect establish any basis for a claim of unconscionable conduct by the respondent. Ground 2 has no merit.

Ground 3

This ground alleges error concerning the formal judgment itself. The particulars to this ground of appeal assert that the appellant fell into default:
[A]s part of a securitised loan scheme of a type that originated in the United States of America where the right of recovery is limited to possession and sale of the secured property … [and that] … the respondent … [is] manager of [the] scheme based on a failed United States model where the courts will limit the recovery to 'in rem', the secured property acquired with the loan.
The particulars add:
There was no forensic accounting put forward by the respondent showing how the claim for liquidated damages had been calculated.
The assertion is not relevant to the transaction involving the respondent. As to the particulars, the affidavits filed by the respondent prove the amount of the debt.
Ground 3 has no merit.

Ground 4

This ground alleges that Master Sanderson erred by stating that the application was supported by three affidavits sworn by Roland Davis, rather than four affidavits. It is true that there were four affidavits and not three, but the mistake in reference to the number of affidavits has nothing to do with the master's reasoning supporting the judgment.
Counsel appearing for the appellant accepted that this ground had no merit.

Ground 5

This ground asserts that Master Sanderson erred 'when accepting the verbal assurances of counsel for the respondent when s 33 of the Property Law Act 1969 requires proof of ownership of the debt'. The particulars refer to submissions made by counsel during the course of the application for summary judgment. The particulars to the ground of appeal refer to a passage in the transcript where the master asked counsel for the respondent where a piece of evidence was found, and counsel referred to the affidavit of Mr Davis. Section 33 of the Property Law Act is not relevant. The ground of appeal has no merit.

Conclusion

Because none of the grounds of appeal had a reasonable prospect of succeeding, the appeal was dismissed pursuant to r 43(2)(g)(i) of the Rules. Costs were ordered against the appellant.
As a result, it was not necessary to deal with the application for a stay.