Commonwealth Bank of Australia v Psevdos - [2015] SASC 139

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
COMMONWEALTH BANK OF AUSTRALIA v PSEVDOS
[2015] SASC 139
Judgment of The Honourable Justice Bampton
11 September 2015
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - SECURITY FOR COSTS
PROCEDURE - COSTS - SECURITY FOR COSTS
The Commonwealth Bank of Australia (the CBA) and Mr Psevdos as trustee for Orio Investment Trust made loans to Schutara Pty Ltd (Schutara) – Schutara granted each lender a mortgage over real property (the Schutara property) as security – a dispute arose as to which mortgage had priority – following a trial in the Supreme Court the CBA mortgage was found to have priority over the Psevdos mortgage – Mr Psevdos was ordered to pay costs of the entire action on an indemnity basis – Mr Psevdos filed a notice of appeal to the Full Court against that decision – the CBA applied for security for costs – whether special circumstances exist justifying the making of an order for security.
Held:
1. Special circumstances exist.
2. Mr Psevdos to pay security for costs in the sum of $15,000.
3. Appeal stayed pending payment of security.
Supreme Court Civil Rules 2006 (SA) r 295(1)(g), referred to.

COMMONWEALTH BANK OF AUSTRALIA v PSEVDOS
[2015] SASC 139
Civil: Application
BAMPTON J.

On 21 May 2015, Mr Psevdos sought to appeal a judgment of Parker J delivered on 30 April 2015. The notice of appeal was served on the respondent, the Commonwealth Bank of Australia (the CBA). The cheque Mr Psevdos tendered to the Supreme Court Registry in payment of the appeal filing fee was dishonoured on 2 June 2015.
On 2 June 2015, unaware that the appeal had not been regularly instituted, the CBA made application for an order that Mr Psevdos pay security for costs in respect of his appeal.
Background
The trial of this matter concerned competing equitable interests in real property known as Trenance, Bonython Road, Bugle Ranges (the Schutara property). The CBA sought a declaration that its equitable interest has priority over any equitable interest held by the appellant, Mr Psevdos, acting as trustee of the Orio Investment Trust.
The CBA entered into a loan agreement in the sum of $2,550,200 with the registered proprietor of the Schutara property, Schutara Pty Ltd (Schutara) on 5 June 2009. Schutara gave a mortgage over the Schutara property to the CBA as security. Subsequently, on 29 June 2009, Schutara entered into a written loan agreement with Mr Psevdos, as trustee for Orio Investment Trust, in the amount of $378,000. Schutara granted Mr Psevdos a mortgage in registrable form as the agreed security. Mr Psevdos then lodged a caveat claiming an equitable interest as mortgagee over the Schutara property. The CBA became aware of the caveat and the CBA mortgage was amended to be expressly made subject to Mr Psevdos’ caveat so as to enable registration. The CBA mortgage was then registered subject to the caveat.
On 30 April 2015, Parker J found in favour of the CBA, holding that the lodgement of Mr Psevdos’ caveat and the registration of the CBA mortgage subject to the caveat did not bear upon the priorities as between the parties’ competing equities.
Justice Parker was satisfied that the CBA mortgage had priority over Mr Psevdos’ mortgage. His Honour said that:
·the CBA mortgage was first in time and Mr Psevdos was unable to establish any act or neglect on the part of CBA such as to make it inequitable for it to retain its priority;
·the failure by the CBA to lodge a caveat did not of itself constitute postponing conduct;
·the CBA’s position was strengthened by the fact that Mr Psevdos had notice of the CBA’s prior equitable interest when he entered into the loan agreement and executed the mortgage; and
·he was satisfied that the better equity lay with the CBA.
The trial of the matter commenced on the basis that a number of central factual issues concerning the making of the Psevdos loan and mortgage and lodgement of the caveat were in dispute. Justice Parker stated that the trial was protracted by about four days hearing evidence in relation to those matters.
The circumstances of the abandonment of the defence
On the fifth day of the trial before Parker J, a document was produced on subpoena from Mr Psevdos’ conveyancer, Ms Graetz, in relation to the transactions that are the subject of the underlying dispute. During the course of the morning on 27 February, the CBA uplifted and inspected the subpoenaed file.
During Mr Psevdos’ cross-examination, counsel for the CBA placed before him an email dated 29 June 2009 (the Graetz email) that had come from Ms Graetz’s conveyancing file produced under subpoena. In the Graetz email addressed to Mr Psevdos, Ms Graetz wrote “I also confirm your instructions that I am not to caveat the properties known as Tenance – Bonython Rd Bugle Ranges via Mt Barker Road until the CBA refinance has gone through. I check searched these titles today and note that the mortgage to Provident is still registered and there are no unregistered documents showing up therefore CBA’s mortgage has not been lodged to date”. Mr Psevdos was cross-examined about the Graetz email in the context of his evidence that he knew nothing of the CBA mortgage. Mr Psevdos gave evidence that he had no recollection of the email. It was put to him that he responded to the Graetz email saying “And the Cba needs to register first on the balance of five lots Bonython Road”. In other words, the CBA submitted that Mr Psevdos was not merely being told by his conveyancer of the proposed CBA mortgage coming in as a first registered mortgage but that he responded in a confirmatory way to his conveyancer. It was put to Mr Psevdos that he had collected the original Graetz file and delivered it to his solicitors for the purposes of discovery being made in the proceedings and yet the file, as discovered, had removed from it, or did not include within it, documents such as the Graetz email regarding the registration of the mortgage. Following this cross-examination, counsel for Mr Psevdos informed the Court that he had instructions that the equitable argument would not be pursued.
Thereafter, Mr Psevdos abandoned more than half of his defence and sought not to challenge the evidence of the CBA that its equitable interest as mortgagee was superior to his, relying instead on the registration argument.
Following delivery of judgment by Parker J, Mr Psevdos was ordered to pay the CBA’s costs of the trial and costs thrown away by reasons of the amendments to the defence on an indemnity basis.
The application for security
The CBA’s application first came on for hearing before me on 17 June 2015 at which time I raised with Mr Psevdos that his cheque had not been honoured. Mr Psevdos told me that it had taken 14 days for the cheque to be banked, that he had spent the money and that he would attend the Registry after the hearing. He said he would be able to pay the filing fee in cash. He said:
That chequebook has been discontinued, there’s $130 in that particular account. I’ve actually used the wrong chequebook and its taken 14 days for that to be banked.
Mr Psevdos also said that he has wound down his operations pending the resolution of this matter but that “I am supported. I am of means.”
I stood the matter over for an hour, allowing Mr Psevdos an opportunity to attend the Registry to pay the filing fee. The filing fee was paid and when the matter resumed I heard the CBA’s submissions.
I then adjourned the matter allowing Mr Psevdos an opportunity to file and serve an affidavit deposing to:
·submissions made by counsel for the CBA regarding the topic of impecuniosity;
·the issue of why the cheque was dishonoured; and
·the winding down of his business.
Mr Psevdos filed an affidavit sworn 24 June 2015 deposing that he “sincerely regrets any inconvenience caused” and apologising for the dishonouring of the cheque. Other than asserting that he is “in a position to meet the costs of not only the appeal but also reasonable costs on an indemnity basis of the trial if the appeal fails”, Mr Psevdos did not provide any further information regarding his capacity to meet an adverse costs order. Nor did he adequately address the other matters I had asked him to depose to.
Mr Psevdos’ submissions
Mr Psevdos argued before me at the adjourned hearing that the Graetz email referred to above was produced to him without notice and that he regrets the abandonment of much of his defence. He contended that the evidence at trial did not support the judgment of Parker J.
Mr Psevdos submitted that there was sufficient equity in the Schutara property to protect the CBA and any costs in the event that his appeal failed. He argued that if the CBA got on with selling the Schutara property, there would be a realisation and there would no be need for the argument.
Mr Psevdos said he was not, at the time of the argument, writing any mortgage business, that he has restructured his business, he has seconded his staff to other firms, and that he is not renewing his financial licence until this matter has resolved. He said that he is, in effect, taking sabbatical leave pending resolution. He said given Parker J’s judgment, even though there were no findings of credit against him, the fact that he had indemnity costs ordered against him compromised his licence.
Conclusion
In order to enliven the Court’s discretion to order security for costs of the appeal the CBA needs to establish two matters. First, that there are special circumstances warranting the making of the order and, second, that it is appropriate for the Court to exercise its discretion.
Following argument, on the CBA’s application (FDN 35) pursuant to rule 295(1)(g) of the Supreme Court Civil Rules 2006, I ordered that Mr Psevdos pay security in the sum of $15,000.
As the notice of appeal challenges Parker J’s findings on grounds that were abandoned at trial, many of the grounds are in my view without merit and arguably an abuse of process.
I am satisfied that collectively the following matters amount to special circumstances justifying the ordering of security:
·the reasons of Parker J for making the indemnity costs order following the abandoning of the much of the defence.
·Mr Psevdos’ information that he had wound down his business pending resolution of the appeal. In the absence of any affidavit from Mr Psevdos deposing to his financial position, this information suggests he may not have capacity to meet the outstanding indemnity costs order.
·the dishonour of the cheque tendered to the Registry and the failure to remedy the matter until the dishonour was brought to Mr Psevdos’ attention.
·Mr Psevdos said he is receiving income by way of trailing commissions but he chose not to depose to this in an affidavit, choosing to rely on his asserted interest in the Schutara property. Mr Psevdos said that if I did not accept his oral submissions, then he could not persuade me otherwise. He said if I was asking him to produce his “own personal position”, he was not prepared to do that and he did not think he was required to.
The appeal is stayed pending payment of the security.