Carnemolla and Anor v Bendigo & Adelaide Bank Ltd and Ors

[2013] HCATrans 198

[2013] HCATrans 198

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S93 of 2013

B e t w e e n -

SEBASTIAN CARNEMOLLA

First Applicant

LUCIA CARNEMOLLA

Second Applicant

and

BENDIGO & ADELAIDE BANK LTD

First Respondent

LEON ANGELOPOULOS

Second Respondent

PC WHOLESALE

Third Respondent

Application for stay

GAGELER J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON THURSDAY, 22 AUGUST 2013, AT 9.36 AM

Copyright in the High Court of Australia

____________________

HIS HONOUR:   I will take the appearances from the respondents first.

MR G.A. SIRTES, SC:   I appear with MR A.M.B. CORNISH for the respondent Bank, your Honour.  (instructed by Curwoods Lawyers)

MR M.W. SNEDDON:   If your Honour please, I appear with my learned friend, MR K.P. TANG for the second respondent.  (instructed by Laliotis Lawyers)

HIS HONOUR:   I hold a certificate from the Deputy Registrar stating that he expects no appearance for the third respondent.  Yes, Mr Carnemolla, you appear for yourself?

MR S. CARNEMOLLA appeared in person. 

MR CARNEMOLLA:   My wife is very sick so I will pass on the hearing totally to my daughter, Angie Wolfe, which is present, with your permission, your Honour, because she read and write English – I cannot read or write English, your Honour.

HIS HONOUR:   Thank you.  Would you stand up, please?  You are the daughter of ‑ ‑ ‑

MS WOLFE:   My name is Angelina Wolfe and I am daughter of Lucia and Sebastian Carnemolla.

HIS HONOUR:   Thank you.  I propose to grant you leave to appear on their behalf.

MS WOLFE:   Thank you.

HIS HONOUR:   Ms Wolfe, you are moving on a summons filed on 7 June 2013.

MS WOLFE:   Yes.

HIS HONOUR:   I want to identify the evidence upon which you rely.

MS WOLFE:   Okay.

HIS HONOUR:   I see from the file that there are three affidavits - each of your father.  One was filed on 7 June, another on 12 June and the other of 5 August.

MS WOLFE:   That is correct.

HIS HONOUR:   I have read those affidavits.  Is there any other evidence that you wish me to have regard to?

MS WOLFE:   Well, there is quite a lot of evidence, your Honour.  I am not too sure what you would like at the moment.

HIS HONOUR:   I just need to identify what it is that you wish me to take into account.

MS WOLFE:   Yes, okay.  So we have also included three exhibits – attachments to the submissions.  That was presented to the High Court last week.  So I am assuming you have those three exhibits as well.

HIS HONOUR:   I have the applicants’ submissions on the summons and yes, there are documents attached.

MS WOLFE:   Three exhibits that were attached, yes.

HIS HONOUR:   You wish me to take those into account?

MS WOLFE:   Yes, please.

HIS HONOUR:   All right.

MS WOLFE:   My parents have also provided a copy of a bank cheque which was deposited, which is also part of this as well.  So they would like to submit that as well, a copy of the bank cheque.

HIS HONOUR:   Where is that copy of the bank cheque?

MS WOLFE:   I have got it here, your Honour.

HIS HONOUR:   All right.  Is there anything else you wish to ‑ ‑ ‑

MS WOLFE:   Okay, so we have got that here.

HIS HONOUR:   I will come to that in a moment.

MS WOLFE:   Yes, yes.  Would you like that now?

HIS HONOUR:   You might just identify whether there is any other material, apart from that, that you want me to have regard to.

MS WOLFE:   They do have bank statements that they did not bring with them, but we were not sure if this was a full hearing today.

HIS HONOUR:   I am dealing only with the summons, I am not retrying the matter that was heard and determined in the Supreme Court.

MS WOLFE:   Okay, yes.

HIS HONOUR:   Nor is this a hearing of the application for leave to appeal.  I am dealing just with the summons.

MS WOLFE:   Okay.

HIS HONOUR:   Yes.

MS WOLFE:   At this stage, I think we will just leave it with what we have given you at the moment.

HIS HONOUR:   All right.  So let us be clear, I have the three affidavits.

MS WOLFE:   Yes.

HIS HONOUR:   You wish me to take into account also the three documents exhibited to the applicants’ submissions on the summons filed on 14 August.  Mr Sirtes, should I admit those as exhibits on the application?

MR SIRTES:   Yes, your Honour.

HIS HONOUR:   Yes, I admit the three documents annexed to the applicants’ submissions filed on 14 August as exhibits in the application.

EXHIBIT 1:Three documents annexed to the applicants’ submissions filed on 14 August 2013

HIS HONOUR:   Mr Sirtes, the affidavit on which you rely is that of Mr Symons of 16 August?

MR SIRTES:   Affirmed 16 August and filed that day, your Honour.

HIS HONOUR:   Yes, thank you.

MR SIRTES:   May it please the Court.

HIS HONOUR:   There is no other evidence of the respondents?

MR SIRTES:   Not from us, your Honour.

MR SNEDDON:   None from the second respondent, if the Court pleases.

HIS HONOUR:   Thank you.  Yes, Ms Wolfe, thank you.

MS WOLFE:   Okay.

HIS HONOUR:   This is your opportunity to make such submissions as you wish to make in relation to the summons for a stay.  Having regard to the fact that I have read the affidavits, if you wish to highlight anything in your written submissions or in the material exhibited, please do so.

MS WOLFE:   Okay.

HIS HONOUR:   Thank you, go ahead.

MS WOLFE:   You want me to – yes, I can start.

HIS HONOUR:   This is your opportunity to talk ‑ ‑ ‑

MS WOLFE:   To talk – okay, fantastic.

HIS HONOUR:   If you wish to.

MS WOLFE:   I do wish to talk, okay.  Sorry, this is all very new to me.

HIS HONOUR:   That is fine, go ahead.

MS WOLFE:   Your Honour, my parents are here today because they received a letter of eviction from Adelaide Bank on 1 August 2013 to vacate the property that they are in at the moment which is 1120 Oxford Street, Smithfield and they are to vacate by 3 September 2013.  Now, they would like to appeal this eviction letter for the following reasons.  Firstly, as you have mentioned, a summons and affidavits were presented to the High Court and, within those, they are attempting to seek justice regarding mortgage fraud and subsequent financial loss due to the fabrication of a false mortgage by their broker, Leon Angelopoulos.

Now, they had gone to see a solicitor in 2009.  His name was Peter Ives.  It was discovered in that year that a false loan mortgage and application had been filed on 21 October 2005 and that was to refinance the land at Levuka Street, Cabramatta.  This refinance was supposed to have been completed the year before.  Okay, so according to their understanding, their broker, Leon Angelopoulos, had come into their home and said that “I will refinance Oxford Street, Smithfield with Levuka Street, Cabramatta”.  They signed the Oxford Street loan papers and then three days later I signed the Levuka Street, Cabramatta paper along with my husband because we were the mortgage holders of Levuka Street, Cabramatta.

Now, when they had discovered in 2009 that that refinance of Levuka Street, Cabramatta had not taken place and there was another loan application and contract that was produced on 21 October 2005 that was supposed to have been signed in a café in Earlwood, they had absolutely no knowledge of that.  They had no idea how an application could have been produced.  They had not gone to a café in Earlwood and they realised that there was something that did not quite add up which then their solicitor, Peter Ives, said “It looks like there’s a case here of mortgage fraud”.  So therefore he advised my parents that they stop paying repayments to Adelaide Bank so that the case could be investigated.  So since then my parents have stopped paying repayments on the mortgage.

We are here today, your Honour, because my parents think that being evicted from their home is extremely unfair because of a case of mortgage fraud.  I would like to bring that case forward with your permission.  That mortgage application and contract on 21 October 2005, that was supposed to have been signed in a café in Earlwood by my parents and Leon Angelopoulos and Michael Sarokous is completely false.  There are five crucial pieces of evidence to prove that this is false.

The first piece of evidence is the fact that if there was a refinance to have happened on the property of Levuka Street, Cabramatta, then that refinance could only be done by the mortgage holders.  Now, I was currently the mortgage holder of Levuka Street, Cabramatta and so was my husband, Steven Wolfe.  We had signed in four names – my parents, myself and my husband – back in 27 February 2003 and we have a document to prove that we had done that – a loan application and contract.  We were the mortgage holders of Levuka Street, Cabramatta – my husband, myself and my parents.

Now, for a refinance to take place there should have been the names of both my parents, myself and my husband.  Now, that loan application does not have my name on it, nor does it have my husband’s name on it.  A refinance cannot take place unless it is agreed by the four mortgage holders.  So that is the first crucial piece of evidence and I have actually put all that in a statutory declaration that you have received.

The second thing that we would like you to consider, your Honour, is the forensic testing that was done by my parents and that was also put in the summons that you have received.  Now, my parents have been requesting since 2009, or since the first trial, they have been requesting for the original documents of 21 October 2005 loan that was supposed to have been signed in this café in Earlwood. 

Now, these original documents could not be produced by Adelaide Bank.  The only copy that they received was a faxed copy.  Now, my parents would like, and have requested, not only through the Supreme Court and also through the Court of Appeal that Adelaide Bank produce the original loan documents.  Now, on both occasions in the Supreme Court and the Court of Appeal, the Adelaide Bank has said that they cannot be produced; that the only things they have is the faxed copy that was received by my parents.

Now, we consider this to be very unjust because, according to the Australian Act of 1900, banks, brokers and corporations should be keeping loan documents and applications – the original loan documents and applications and contracts for 30 years.  So we would like to know why they cannot be produced.  We would like to know why the original documents cannot be presented to the court and why they have not been able to present them to now, to the present day.

So first of all, they have not been reprimanded for not abiding by that law of keeping the original loan documents.  The second thing that we find is also very unjust is the fact that during the Court of Appeal the President of the Supreme Court, Judge Allsop, he had made an order and judgment and he requested that the loan – sorry, that Adelaide Bank produce these original documents for the 2005 loan and that it be stamped by a neutral solicitor to prove that they are the original copies.

Now, once again, during that trial, the Bank were unable to produce the original documents and they were not given – they were not struck out for not being able to abide by the judgment and order given by the judge at the time and there was not a reversal in favour of my parents.  In actual fact my parents were dismissed from that.

So the reason why my parents want the original documents, not a faxed copy, is so that they can have forensic testing done.  Now, they actually did go ahead with the forensic testing on the faxed copies, having no other choice but to use those copies.  Now, those two separate forensic tests were done – the first one by Mr Chris Anderson on 11 May 2012, the second forensic testing was done by Mr Stephen Dubedat on 19 March 2013.  I will just read out a section of what is in that report: 

Mr Dubedat stated in his report that a portion of the base line was missing on certain parts of page 57 –

of that loan application –

especially under the signature of witness and also under the two dates –

So the date, 21 October 2005, the baseline was missing underneath both dates –

at the bottom of the page of the mortgage agreement.  According to Mr Dubedat, this gives evidence that the original entries have been erased with correction fluid or something similar.

There is also some information that my mother’s signature, Lucia Carnemolla, has also been tested as being false.  Now, that is what came out of the second forensic testing report.  Again, we request that the original documents be brought forward so that they can be tested as well for forensic testing.  So that is the second crucial piece of evidence that we have with the forensic testing done on that false document. 

The third crucial piece of evidence that I would like to bring forward today is just to give you a little bit of a background.  In 2005, my parents decided to do a loan transfer.  They decided to transfer the Levuka Street, Cabramatta loan out of my name and my husband’s name and to be placed in their name because of the dire circumstances they were in financially and thought that if they had taken us off the loan then obviously that would help us to be able to then buy our own home and to be out of the situation.

They approached their solicitor, Mr John Izzo, and asked for a loan transfer.  Now, this was done in December 2005.  Mr Izzo said that he would proceed with the loan transfer so that our names – my name and my husband’s name could be taken off.  Now, at the particular time that my parents were with their solicitor, he signed all these documents and they were told “You’re doing a loan transfer.  You’re taking your daughter’s name and her husband’s name off the Levuka Street, Cabramatta loan”.

Then my parents find out later, again, that a refinance was done by their solicitor, Mr Izzo, and the refinance was for Levuka Street, Cabramatta.  So they had signed a refinance without realising because they were just told “Sign here, sign here, sign here” and they thought they were signing just for a loan transfer.  So, again, that was done without their knowledge.  So they had, in fact, on that day signed for a loan transfer and signed for a refinance of Levuka Street, Cabramatta.

Now, the question that I would like to raise before this Court is why was a refinance done on Levuka Street, Cabramatta by their solicitor, Mr Izzo, on 21 December 2005 when they were supposed to have gone to a café to sign for a refinance with Leon Angelopoulos, their broker, and another broker who they have never heard of, Michael Sarokous.  They were supposed to have met with and signed for a refinance and then it was done again two months later by their solicitor. 

So I do not quite understand why a refinance would happen – two refinances of the same property, Levuka Street, Cabramatta – why that would be done in a matter of like four months.  Now, when my parents found out they went to their solicitor, Mr Izzo ‑ ‑ ‑

HIS HONOUR:   May I just interrupt you?

MS WOLFE:   I am sorry, yes.

HIS HONOUR:   What you are telling me is the story that was told ‑ ‑ ‑

MS WOLFE:   The story, yes.

HIS HONOUR:   ‑ ‑ ‑ to the trial judge and on which certain findings of fact were made.

MS WOLFE:   Yes.

HIS HONOUR:   There is no need to tell me the same story.

MS WOLFE:   Okay, okay.  Do you want me to finish that off, or not continue?

HIS HONOUR:   I think it is not necessary to tell me again the evidentiary material before the trial judge.

MS WOLFE:   Okay.  So basically the reason why my parents are here today is so that the eviction letter can be set aside because of a case of mortgage fraud and because of mortgage fraud they would like that letter to be put aside.  I was going through the reasons why we believe that mortgage

fraud actually took place because my parents did not go to a café on 21 October 2005 and did not sign an application, a loan application with Leon Angelopoulos and Michael Sarokous and on the basis of mortgage fraud they would like you, your Honour, to consider setting aside the eviction letter.

HIS HONOUR:   Yes, I understand.  Thank you very much.  Mr Sirtes, Mr Sneddon, I do not need to hear from you.

MR SIRTES:   If your Honour pleases.

MR SNEDDON:   If your Honour pleases.

HIS HONOUR:   There is before me an application for a stay of execution pending the determination of an application for special leave to this Court.  The background, in broad outline, is as follows.

The applicants for special leave and the applicants for the stay are husband and wife.  They made a loan application to refinance a loan secured on their family home and on an adjoining lot.  The application was made to the third respondent and witnessed by the second respondent.  The third respondent forwarded the loan application to a mortgage manager appointed by the first respondent, Adelaide and Bendigo Bank Ltd, to assess loan applications and then make a recommendation as to whether or not the application should be approved.  The recommendation was that a loan be approved.  The Bank accepted that recommendation, the security was given, and loan moneys were advanced.  The applicants defaulted on their loan.

In the Supreme Court of New South Wales, the Bank sought an order for judgment of the outstanding balance of the loan, interest and an order for possession of the mortgaged property.  The applicants sought to defend those proceedings, alleging unconscionable conduct and misrepresentations.  The trial judge, Justice Hislop, rejected the applicants’ defences, granted the Bank possession of the property and granted leave to the Bank to issue a writ of possession.  Those orders were made by his Honour on 14 October 2011.  The execution of the writ of possession was stayed pending the determination of an appeal by the applicants to the Court of Appeal.  The Court of Appeal, comprising McColl and Barrett JJA and Tobias AJA, dismissed the appeal on 14 May 2013.

On 21 May 2013, the Bank filed a writ for possession.  On the same day, the applicants filed an application for special leave to appeal to this Court.  The grounds set out in their proposed notice of appeal to this Court state that the Court of Appeal “failed to comprehend the nature of all the matters brought forward in their case”, erred in disallowing further evidence sought to be adduced by them and erred in finding that it was open to the trial judge to prefer the evidence of the second respondent to their own.  They also state that investigation carried out by them has revealed that important files submitted to the Supreme Court of New South Wales, and that would have been important for the determination of the appeal by the Court of Appeal, were missing from the registry.

The applicants subsequently filed a notice of motion in the Court of Appeal seeking a stay of proceedings on the writ for possession of their family home, pending determination of the application for special leave as filed in this Court.  That motion was heard and dismissed by Barrett JA on 3 June 2013.  In reasons for judgment, which analysed separately and carefully each of the proposed grounds of appeal to this Court to which I have referred, his Honour found that there was not a substantial prospect that special leave would be granted, that a grant of stay would cause loss to the first respondent, and that the balance of convenience favoured the Bank. 

The present application is again for a stay of proceeding on the writ of possession in respect of the applicants’ family home.  It was made to this Court by summons on 7 June 2013.  The application is opposed by the Bank and by the second respondent. 

“A stay to preserve the subject‑matter of litigation pending an application for special leave to appeal is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted.”  Those are the words of Brennan J in Jennings Construction Ltd v Burgundy Royale Investments [No 1] (1986) 161 CLR 681 at 684. His Honour, in that case, identified four considerations as material to the exercise of the Court’s discretion whether to grant a stay:

first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies.

Those are the considerations which guide me in considering whether or not it is in the interests of justice that a stay be granted in the present case.

Turning to the first of those considerations, I see no reason to depart either from the analysis or the conclusion of Barrett JA.  Having considered for myself the applicant’s draft grounds of appeal, having read the reasons for judgment given by the Court of Appeal, taking into account what has been said on behalf of the applicants before me this morning in relation to those grounds, and without foreclosing the possibility that an appeal panel might be persuaded to a different view, I am not at this stage affirmatively satisfied that the applicants have a substantial prospect of obtaining special leave to appeal.

The second of the considerations identified by Brennan J can, for present purposes, be put to one side.  The applicants have sought, and were refused, a stay of proceedings in the Supreme Court of New South Wales.  They have not come to this Court prematurely.

Turning to the third consideration, the evidence before me establishes that the amount owing by the applicants to the Bank as at 15 August 2013 was in excess of $1.8 million, with interest accruing daily, and that the Bank expects a significant shortfall on the sale of the mortgaged property.  The consequence of that is that the Bank is in a worse position the longer execution of the writ of possession on the family home is stayed.

As to the fourth consideration, I accept that considerable weight is to be given to the fact that the applicants stand to lose their family home as a result of execution of the writ of possession.  I, nevertheless, conclude that the balance of convenience lies with the Bank in circumstances where its losses are accruing daily and where the application for special leave does not at this stage appear to have substantial prospects of success.

Weighing all of those circumstances, I am not persuaded that it is in the interests of justice, in this case, that the Court exercise the exceptional power to grant a stay.  The application for a stay of execution will be dismissed. 

Now, subject to anything that might be put to me, I propose as to costs that the costs of the application be the respondents’ costs in the application for special leave to appeal.  Is there any opposition to that, gentlemen?

MR SIRTES:   No, your Honour.

MR SNEDDON:   No, your Honour.

HIS HONOUR:   In those circumstances, the orders that I make are as follows:

1.The applicants’ summons filed on 7 June 2013 is dismissed.

2.The costs of the summons are the respondents’ costs in the application for special leave to appeal.

MR SIRTES:   If it please the Court.

MR SNEDDON:   If your Honour pleases.

HIS HONOUR:   The Court will now adjourn.

AT 10.08 AM THE MATTER WAS CONCLUDED