Catlin v National Australia Bank Ltd - [2002] WASCA 224

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: CATLIN & ANOR -v- NATIONAL AUSTRALIA BANK LTD [2002] WASCA 224

CORAM: WALLWORK J
MURRAY J
PARKER J

HEARD: 19 JUNE 2002

DELIVERED : 16 AUGUST 2002

FILE NO/S: FUL 80 of 2002

BETWEEN: ADRIENNE MARIE CATLIN
ADRIAN CHARLES STEPHEN CATLIN
Appellants
AND
NATIONAL AUSTRALIA BANK LTD
Respondent

Catchwords:

Practice and procedure - Stay of execution pending appeal against order of summary judgment in mortgage action - Grounds for exercise of discretion - Turns on own facts

Legislation:

Nil

Result:

Stay of proceedings refused

Category: B

Representation:

Counsel:

Appellants: In person
Respondent: Ms P E Cahill

Solicitors:

Appellants: In person
Respondent: Jackson McDonald

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

Commercial Bank of Australia v Amadio (1983) 151 CLR 447
Commonwealth Development Bank of Aust Ltd v Nertec Pty Ltd [1999] WASCA 311
Federal Commissioner of Taxation v Myer Emporium Ltd (No 1) (1986) 160 CLR 220
Garcia v National Australia Bank Ltd (1998) 194 CLR 395
Hamersley Iron Pty Ltd v Lovell (No 2) (1998) 20 WAR 79
Inglis v Commonwealth Trading Bank of Aust (1972) 126 CLR 161
State Bank (Vic) v Parry [1989] WAR 240

Case(s) also cited:

Nil

JUDGMENT OF THE COURT: This is an application for a stay of execution of a summary judgment granted to the respondent by Bredmeyer M in an action for possession of the appellants' home in Karratha. The Master ordered that the appellants give possession of the property to the respondent within 35 days. That order has not been executed. On the hearing of the application we granted a stay to preserve the status quo pending our decision. The stay sought by the appellants is pending the determination of their appeal against the Master's judgment.
The jurisdiction to grant the stay is an inherent jurisdiction implicitly recognised by the Rules of the Supreme Court 1971, O 63 r 15(1)(a) which provides that:
"Except so far as the Full Court or a Judge may direct, an appeal shall not operate as a stay of execution or of proceedings under the decision of the court below."
That rule makes it clear that the prima facie position is that the successful party at first instance should be able to enforce the judgment obtained unless the unsuccessful party persuades the Full Court or a Judge that execution should be stayed.
The other rule which is relevant in this context is O 47 r 13(1)(a) which provides that:
"The Court if satisfied by the judgment debtor or other person liable to execution under a judgment or order that by reason of special circumstances it is inexpedient to enforce the judgment or order … may stay the execution for such period and on such terms as the Court thinks fit."
Two things should be noted. The first is that a stay will not be granted unless special circumstances requiring it are demonstrated. If it is granted, the stay may be on terms.
As to the latter point, we have mentioned that the action in which judgment was given in favour of the respondent was an action for possession of land. It was grounded on an allegation of default under a mortgage by the appellants as mortgagors. In Inglis v Commonwealth Trading Bank of Aust (1972) 126 CLR 161, the High Court determined an appeal by affirming the judgment of Walsh J at first instance, refusing an injunction to restrain a mortgagee from exercising a power of sale under the mortgage in aid of the recovery of the mortgage debt. At 164 Walsh J said:
"A general rule has long been established, in relation to applications to restrain the exercise by a mortgagee of powers given by a mortgage and in particular the exercise of a power of sale, that such an injunction will not be granted unless the amount of the mortgage debt if this be not in dispute be paid or unless, if the amount be disputed, the amount claimed by the mortgagee be paid into court."
At 164‑5 his Honour remarked that the authorities which he had been able to examine established that as a general rule:
"nothing short of actual payment is regarded as sufficient to extinguish a mortgage debt. If the debt has not been actually paid, the court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due. The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed."
The rationale behind the general rule is therefore that at least in a case where the efficacy of the mortgage security itself is not under challenge, even where the mortgagor makes a claim against the mortgagee which it is asserted might be set off against the mortgage debt, the mortgagee should not generally be deprived of its security except upon the provision of an equivalent security by payment or other effective security provided at least to a stakeholder, or to the court. The decision in Inglis has been applied by this Court: eg, Commonwealth Development Bank of Aust Ltd v Nertec Pty Ltd [1999] WASCA 311.
As to the necessity to regard the grant of a stay as an exceptional remedy requiring the establishment of special circumstances, quite apart from the decision in Inglis, the law is clear enough. In our respectful opinion, it may be stated in the words of Dawson J in Federal Commissioner of Taxation v Myer Emporium Ltd (No 1) (1986) 160 CLR 220 at 222‑3. In that case, speaking of the power to stay proceedings after the grant of special leave and pending the determination of an appeal by the High Court his Honour said:
"It is well established by authority that the discretion which [the rule] confers to order a stay of proceedings is only to be exercised where special circumstances exist which justify departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal. Special circumstances justifying a stay will exist where it is necessary to prevent the appeal, if successful, from being nugatory. Generally that will occur when, because of the respondent's financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance. However, special circumstances are not limited to that situation and will, I think, exist where, for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed."
In this State, the leading authority is State Bank (Vic) v Parry [1989] WAR 240, a decision of Malcolm CJ, and reference may be made to the more recent decision of this Court in Hamersley Iron Pty Ltd v Lovell (No 2) (1998) 20 WAR 79 where the authorities were extensively reviewed. In that case, Anderson J, relying on the words of Dawson J quoted above to describe the sense in which a necessity to preserve the subject matter of the litigation might be discerned, said at 89 – 90:
"As I understand the cases, however, unless a stay is necessary to preserve the subject matter or integrity of the litigation in the broader sense described above the circumstances will not be regarded as sufficiently exceptional to enliven the discretionary jurisdiction to provide a stay. Only if the applicant can show that a stay is necessary to that end will the court go on to consider matters such as whether the [appeal] has a prospect of success, whether a stay will occasion hardship to the respondent, where the balance of convenience lies and so on. I think such matters are always treated as secondary to the question whether a stay is necessary to preserve the subject matter or integrity of the litigation. They come into play only if it appears that the refusal of a stay will substantially deprive the applicant of the benefit to be derived from the appeal. Thus an applicant may fail to obtain a stay even if the applicant can show that unless there is a stay the appeal will be futile."
In our opinion, it will be seen to be important to bear those words in mind in this case.
The learned Master in his reasons described the respondent's action as arising in this way. The appellants had a home loan secured by a mortgage. The mortgage contained a provision (not unusual in these circumstances) that the mortgage was to secure "loans, advances or banking accommodation provided or to be provided by the mortgagee". The original advance was the sum of $150,000, in respect of which the appellants gave the mortgage in December 1995. In December 1997 the respondent provided to the appellants what is described as a FlexiPlus mortgage facility. At the same time an advance was made to a company under which name, as trustee for their family trust, the appellants operated a business known as Adrienne's Café. This facility became relevant because the appellants guaranteed this loan to the extent of $50,000. The mortgage was upstamped to secure the advances so made.
There was pleaded to be something of a history of defaults commencing in 2000 in respect of the loan provided in relation to Adrienne's Café. However, the important allegation is that by June 2001 the appellants were in default to the extent of just under $270,000 in respect of which a demand for payment was made in accordance with the mortgage procedure. It was alleged that there had been no payment. A notice to quit possession of the property was served, but possession was not given. The respondent issued its writ. The application for summary judgment was supported by affidavit and, having examined the evidence, the Master pronounced himself satisfied that the grounds for an order for possession had been made out. There is no reason to dissent from that conclusion.
The prima facie entitlement to judgment having therefore been made out, the question was whether this was indeed one of those cases where judgment ought to be given because it was clear that the appellants had no defence to the claim or whether, on the other hand, they could persuade the Master that there was an issue or question in dispute by way of defence which ought to be tried so that they should be given leave to defend. A number of matters were raised. The Master found merit in none of them. From that decision the appeal is brought. Shortly after it was instituted, Master Sanderson heard the appellants' application for a stay pending the decision of the appeal. The Master dismissed it. That is the application which is renewed before us.
There can be no doubt that if this is not one of those exceptional cases in which a stay should be granted and it is refused, then the property in Karratha the subject of the appeal will be lost and the appellants will be substantially deprived of the benefit to be derived from their appeal even if they should be successful. The financial issues between the parties may be adjusted of course but the property will be gone. It therefore becomes a question of considering whether there is arguable merit in the appeal which might lead this Court on the hearing of the appeal to set aside the order of summary judgment made by the learned Master.
The appellants contend that the respondent was not entitled to include a claim for $50,000 in its demand made by the notice dated 7 June 2001, which the Master noted was in respect to the café's trading account. In Mr Catlin's affidavit dated 18 June 2002, this amount is identified as the amount of their guarantee provided in relation to the funds advanced to that business. He says that the appellants challenge the amount of the alleged indebtedness of the café, by which we take him to mean that the appellants would dispute, not that money owing in respect of the trading account of the café was subject to the mortgage security to the extent that the appellants had provided their guarantee in the sum of $50,000, but that there had been no default in terms of the moneys advanced in respect of the trading of the café in respect of which any demand for payment could properly be made. Mr Catlin's affidavit provides no information beyond the bare assertion of a dispute. This is not a matter raised by the grounds of the appeal and, indeed, in argument before us, it appeared that there may be no more to this point than the identification of the wrong account concerned with the business of the café, by number, in the notice of demand dated 7 June 2001.
The first matter raised by way of appeal arises out of the fact that in October 2001 it appears that the appellants were charged with a series of fraud offences in connection with the writing of cheques on various accounts operated with the respondent. The process allegedly employed was to write cheques apparently transferring funds (not in fact available) from one account to another so as to place the second account apparently sufficiently in credit to enable cheque withdrawals from that account in payment of creditors. The appellants are alleged to be joint offenders who wrote a total of 1,513 allegedly false cheques of that type in respect of three accounts operated with the respondent, knowing that there were insufficient funds to honour them. The period during which these offences are said to have been committed was between the end of October 1997 and the end of November 1999. The result, so it is alleged, was to create a total debit balance of the three accounts concerned of nearly $670,000. Cheques to a total face value of over $121.23M were allegedly written and caused, so it is claimed, the respondent to suffer a loss in the sum of nearly $590,000 in addition to the sums claimed by the respondent to be secured by the mortgage, in respect of which the alleged default of the appellants grounds the action for possession. We were told that the appellants have been committed for trial in the District Court and that they propose to defend the charges brought against them.
The Master saw the criminal proceedings as being irrelevant to the respondent's capacity to seek summary judgment and to the stay of proceedings sought by the appellants. They rely on their right of silence in the criminal proceedings in respect of which, of course, they have not yet been called upon to make their defence. They were spoken to by the police investigating the respondent's complaint, but they declined to participate in an interview. Their contention is that if obliged to reveal their defence in the civil proceedings, they may say something or disclose facts which bear upon the criminal proceedings. They saw they should not be put in that position but, in our view, the argument is entirely without merit and the Master did not err when he held that this provided no defence to the respondent's action for possession.
If there was something to be said to show an arguable defence and to provide cause for the Master to give them leave to defend, the material had to be provided on affidavit in the summary judgment proceedings. This was not done and in our view the appellants must suffer the consequences. Despite the criminal investigation, the respondent was entitled to pursue its claim to recover in respect of the alleged default under the mortgage. It was entitled to pursue its security and to bring the action for possession. On the present state of the proceedings, we find it difficult to see how the appellants could be harmed if the information they provided to show that they ought to be given leave to defend the civil proceedings also bore upon or was part of their defence to the criminal proceedings. Nor can we see how information which would incriminate them in the criminal proceedings could provide any defence to the action for possession by in any way impugning the efficacy of the respondent's mortgage security.
There is a claim that the Master erred in denying the appellants' natural justice in the proceedings before him. It appears that the matter arises in the following way. The hearing before the Master was on 15 May 2002. At that hearing the appellants apparently neglected to bring to the learned Master's attention an affidavit sworn by Mrs Catlin on the date of the hearing. By a letter dated 21 March 2002, they wrote to the Master and told him so and presented to him in written form the arguments which they wished to advance in respect of the position of Mrs Catlin. They copied that letter to the solicitors for the respondent who wrote to the Master on 12 April 2002 in response to their arguments.
The appellants' submissions were effectively concerned with the question whether, so far as Mrs Catlin was concerned, she ought to be relieved from her obligations under the mortgage because when she signed the guarantee, she thought that it was nothing more than a business loan document. The effect of the guarantee was not explained to her. The respondent presented the factual arguments concerned to show that the proposition was without merit and referred to a number of authorities upon which it relied. That letter was in turn copied to the appellants. They say that they would have sought to rebut those arguments but it appears that before they took any further steps in that regard and before they asked for the matter to be listed for further argument, if that was their wish, the Master delivered his decision on 3 May 2002.
We can see nothing in this point which might provide an arguable ground of appeal against the Master's decision. An exchange of letters of this kind is generally undesirable, but the process was initiated by the appellants. If what they put in their letter was to be taken into account, they could have no complaint that the respondent availed itself of the opportunity through its solicitors to present contrary arguments. The Master dealt with this question in pars [29] ‑ [39] of his judgment. He did so by referring to the issue raised in Mrs Catlin's affidavit. He reviewed other evidence which bore upon the question, contained in an affidavit sworn by the respondent's solicitor on 7 December 2001. The learned Master thoroughly reviewed the evidence. He found that the guarantee was not explained to Mrs Catlin and that she signed the document apparently without adverting to its contents because she "trusted the bank".
The Master noted that there was much explanatory material in the paperwork. He noted that Mrs Catlin was an active director of the company which ran the business, Adrienne's Café. The Master found that she had a good knowledge of the appellants' business affairs and he could find nothing in the evidence to establish an arguable defence of undue influence or unconscionable conduct of a kind adverted to in the seminal decision of the High Court Commercial Bank of Australia v Amadio (1983) 151 CLR 447, and developed in subsequent decisions. The Master particularly referred to Garcia v National Australia Bank Ltd (1998) 194 CLR 395.
There is in fact no complaint about the learned Master's conclusion in this regard. The complaint is difficult to discern, but appears to be that the Master should not have had regard to the letter written by the respondent's solicitors without telling the appellants that he proposed to do so and without giving them the opportunity to make further submissions to him about it's contents. We think there can be no valid complaint in respect of that matter and, in truth, there is no indication that the Master had regard to the arguments presented in either letter, although it is apparent that he had regard to the affidavit evidence on either side which bore upon the contention that Mrs Catlin had an arguable defence of this kind.

A related issue concerns a letter from the appellants to the respondent dated 7 December 1999. It was tendered in evidence at the hearing before the Master by counsel for the respondent. It was received in evidence and marked as an exhibit over the objection of the appellants that it was not properly proved. It appears that the letter contained what was effectively an admission by the appellants that their total liability to the respondent exceeded $800,000, including the business debt and those facilities directly secured by the mortgage given over their home. The letter appears to have been part of the evidence concerning the values of the house and the business as assets, but it is of no great materiality. It is referred to by the Master in his judgment at par [14].
This ground of appeal, in our view, has no prospect of success. It appears not to be denied that the letter was written by the appellants and sent to and received by the respondent. The parties had the capacity to present to the Master any arguments about its contents which seemed appropriate. Even if there was a problem of a formal kind in relation to the way in which the document was introduced in evidence, the matter appears to provide no ground for considering that the decision of the Master should be set aside.
The appellants complain that the respondent, having appointed a receiver of the company carrying on the business, Adrienne's Café, on 22 May 2000 pursuant to the terms of a deed of debenture, the receiver continued to trade until ultimately the business was sold on 13 October 2000 for a sum which the appellants contend was at a gross undervalue (about half the true value which ought to have been realised) so that a much greater sum should have been available to discharge their indebtedness to the respondent. It appears that the appellants would contend that, at the least, the receiver acted negligently and that he acted in breach of a duty to obtain the best price reasonably possible, a breach of duty in which the respondent is said to be implicated.
The argument was advanced to the Master. He dealt with the evidence and the argument at pars [11] - [21] of his judgment. We do not propose to canvass the matter in detail or refer in detail to the evidence before the learned Master. The short point, in our opinion, is that if the appellants have such an arguable claim against the respondent, it is a claim for damages which in no way impugns the respondent's capacity to pursue its rights under the mortgage security in respect of defaults in payment. It is not a matter which challenges the efficacy of the security or, indeed, the evidence as to the appellant's indebtedness under it.
Although the learned Master referred to the rule in Inglis' case at this point of his judgment, it seems to us, with respect, that the argument does not even have the status of a matter which would raise the need to consider whether the appellant should be required to provide alternate security if they were to be allowed to raise the matter by way of defence. We think the appellants' submission at this point refers to a damages claim which they may pursue, rather than any matter which may legitimately prevent the respondent from pursuing its rights under its security. As a ground of appeal this point has no prospect of success.
The appellants further contend that the learned Master erred in failing to have regard to their offer made to the respondent to compromise the debt by the payment of the sum of $500,000. They contend that an officer of the respondent agreed on its behalf on 19 June 2000 to accept such a settlement, but by selling the business on 13 October 2000 the respondent made it impossible for the offer of compromise to be put into effect. It seems that there was to be some refinancing of at least part of the debt, upon which the appellants hoped to reach an agreement with the respondent.
At pars [22] ‑ [24] the Master referred to this and the evidence by which the appellants sought to establish that until the receiver signed the offer to purchase the business known as Adrienne's Café the appellants had in place, or had promised to them, finance to enable them to raise the sum of $500,000. The Master found no arguable defence in the facts established before him and we can see no error in his approach. This was a proposal. It was not, it would seem, ever accepted by the respondent, although the appellants contend that an officer of the bank had indicated that the offer of compromise might be approved.
However, if there was an accepted offer of compromise, there is nothing to indicate that it was in terms which would preclude the respondent from relying upon its security at a later time, given that there is no suggestion that there was any tender of payment of any kind, let alone pursuant to an accepted offer of compromise, by the time the operative notice of demand upon which the respondent relies was given. As counsel for the respondent put it to us, the appellants have acknowledged their debt. It is not contested that they were in default. No payments had been made or tendered and the debt continues, having regard to the accrual of interest, to grow.
In the final analysis, none of the grounds of appeal appear to us to offer arguable prospects of success. In those circumstances there should, we think, be no stay of the proceedings in respect of the judgment for possession granted by the Master, despite the impact that the order for possession may have upon the utility of the appeal. The application is dismissed.