Commonwealth Development Bank of Australia Ltd v Kerr

[2001] QSC 234

SUPREME COURT OF QUEENSLAND

CITATION:                  Commonwealth Development Bank of Australia Limited v            Kerr & Ors [2001] QSC 234  

PARTIES:  COMMONWEALTH DEVELOPMENT BANK   LIMITED

(Applicant/Plaintiff)

v

ROBERT GEORGE & JOAN SHIRLEY KERR

(First Respondents/First Defendants)

and

ROBERT JOHN & CHERYL DAWN KERR

(Second Respondents/Second Defendants)

FILE NO:  s270/2000    

DIVISION:                   Trial Division

DELIVERED ON:       28 June 2001

DELIVERED AT:        Rockhampton

HEARING DATE:       11 May 2001

JUDGE:  Dutney J

ORDERS:1.  Application for summary judgment refused;

2.Each party’s costs that party’s costs in the cause;

3.  Leave granted to the defendants to amend their   defence to plead the issue on which they have   succeeded before me.

CATCHWORDS:          MORTGAGES – RECOVERY OF POSSESSION OF    LAND – application for summary judgment – whether      respondent has raised a question to be tried –   unconscionable conduct – conditional leave – payment    into court – whether appropriate where no money claim    and security not said to be inadequate

Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, followed
  Hall v Westpac Banking Corporation (1987) NSW
Conv R 55-368, cited
  Commercial Bank of Australia Limited v Amadio (1982) 151 CLR 447, considered
  DMS Shipping & Trading Co Ltd v Lionheart Asia Ltd [1996] 2 Qd R 20, distinguished

COUNSEL:Mr L. Kelly for the Applicant/Plaintiff

Mr A. Arnold for the Respondents/Defendants

SOLICITORS:             Allen Allen & Hemsley for the Applicant/Plaintiff

Swanwick Murray Roche for the Respondents/Defendants

1. DUTNEY J: By an application filed on the 5^th June 2000 the Commonwealth      Development Bank of Australia Limited (“CDBA”) sought recovery of possession of land at 147 Stewart Street Rockhampton (“the Rockhampton Land”) from            Robert George Kerr and Joan Shirley Kerr, the first defendants, and land at           MS166, “Oakdale”, Kalluda Road, Calliope (“the Calliope land”) from the first      defendants and Robert John Kerr and Cheryl Dawn Kerr, the second defendants.

1. CDBA claimed as mortgagee under Mortgage number 601639376 in relation to    the Rockhampton land and Mortgage number 602799219 in relation to the           Calliope land.

1. A defence to the CDBA claim was filed on 19^th July 2000.

1. On 4 April 2001 an application for summary judgment in relation to the claim for            possession of the Calliope land was filed.

1. The facts are relatively simple.  RG Kerr and JS Kerr are the parents of RJ Kerr.            CD Kerr is the wife of RJ Kerr.  On 13 December 1988 RG & JS Kerr applied to CDBA for a loan of $150,000 to purchase the Calliope land (“the first facility”).            RJ Kerr and CD Kerr joined the application because they were to be joint      registered proprietors.

1. Later, on 22 December 1988 RJ Kerr and CD Kerr applied to CDBA on their own           behalf for a second facility of $140,000 to discharge some existing debts.

1. The security required by CDBA for the first facility was a mortgage over the        Calliope land, a stock mortgage, an equitable mortgage over brands or marks and a      mortgage over the Rockhampton land.

1. The security required by CDBA for the second facility was a mortgage over a      property at Lawrence Avenue, North Rockhampton and a bill of sale over the       assets of a milk run at Frenchville.

1. In an application for summary judgment I am concerned only with whether the     respondent has raised a question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99.

1. In June 1992 RG & JS Kerr received a letter from CDBA offering to extend the    term of the second facility over a term of 20 years at reduced monthly payments    subject to a condition linking the securities for the first facility to cover the second   facility.  RG & JS Kerr signed the letter and returned it to CDBA but only after       deleting the reference to the Rockhampton land and writing:

   “It is not agreed that property at 147 Stewart Street be      linked to cover Mr & Mrs RJ Kerr loan number 40163779-3”

2. RG & JS Kerr had further contact with officers of CDBA in relation to CDBA’s   requirements but no agreement was reached.  Contact ceased in 1997.  This might            be because the terms of the mortgage over the Calliope land made it security for      the second facility in any event.  Under the mortgage, “mortgager” was defined as    “Robert John Kerr and Cheryl Dawn Kerr as joint tenants inter se and Robert           George Kerr and Joan Shirley Kerr as joint tenants inter se as tenants in common in equal shares.”  The “debtor” was defined as Robert George Kerr and Joan      Shirley Kerr.  The money secured included:

   “All moneys…now or hereafter to become owing or           payable          to the bank by the debtor and the mortgagor or either of        them either alone or on joint or partnership account or on      any other account whether as principal or surety”.

3. Clause C35 of the mortgage relevantly provided:

   “Except to the extent that such interpretation shall be        excluded by or repugnant to the context… when two or more    mortgagors are parties hereto, [mortgagor] shall mean and      include the mortgagors or any of them…”

4. Plainly this meant the property was security for money owning by RJ Kerr & CD Kerr on a separate account.  If authority to support this interpretation was required          reference could be made to Hall v Westpac Banking Corporation (1987) NSW      Conv R 55-368 at 310-311,312.

1. The first facility has never been in default.  The first facility is not due for           repayment before June 2003.

1. Mr RG Kerr deposes that he would not have borrowed from the CDBA if he had known or been made aware that the securities for the first facility were also   security for the second facility.

1. The real question is whether there is anything raised by the material filed which    might, if it is accepted, relieve the defendants from the consequences of the terms    of the mortgage they entered into.

1. The defence filed raises two issues.  It contends for a construction of the mortgage         which does not allow it to be used for the second facility.  I am satisfied that        construction is not open.  It also raises the question of an estoppel based on the   letter of June 1992 and the subsequent negotiations.  I can see no basis for relief      founded on such an estoppel.  The money had already been borrowed and the      liability incurred before that letter was sent.  It is plain to me that whatever belief           the letter engendered was not causative of any action or inaction on the part of the        plaintiffs.

1. In a supplementary affidavit sworn 17 May 2001 Mr RG Kerr deposes to his        paucity of education (Grade 7), lack of business experience and naivety in dealing    with the bank.  He says, in essence, that he did not know the second facility had      even been sought or obtained.  He says he received no advice in relation to the      mortgage and that his dealings with bank were through his son RJ Kerr.  Mrs JS Kerr swears to similar commercial disadvantage.  The affidavits are undoubtedly   directed to raising an issue similar to that considered in Commercial Bank of          Australia Limited v Amadio (1982) 151 CLR 447.

1. Mr Kelly for CDBA counters by pointing to the distinguishing features of the      present case.  Of most emphasis is that in Amadio the disadvantaged parties were          purely guarantors who derived no personal benefit.  Here RG Kerr & JS Kerr were          borrowers in relation to the purchase of the Calliope land.

1. In the end, this is an application for summary judgment.  While there are obvious           deficiencies in the defendants’ case I am left with the position that “it is not            possible to say without doubt, on the whole of the material, that there is no           question to be tried” (Fancourt at 99).

1. Here, both facilities were entered into at about the some time.  Each had specific,           clearly defined securities.  There was no suggestion raised by the mortgagee that      the security for one facility would also be security for the other.  In relation to the second facility RG Kerr and JS Kerr were not borrowers and derived no obvious          benefit.  There is sworn evidence that the money would not have been borrowed in relation to the first facility if the true consequence of entering into the mortgage    was made known.  In a very loose sense, the terms of the mortgage over the         Calliope land make the first defendants guarantors of the second facility.  It does     not seem to me to be beyond argument that it is unconscionable to allow the bank           to recover against the first defendant’s property in circumstances where they were   not informed by the bank of the second facility or of the risks to themselves if it    were granted.  As the claim is against the land I do not think it should be     determined against one pair only of 2 pairs of tenants in common.  Possession is      sought against all registered proprietors.

1. In the result I dismiss the application for summary judgment.

1. A submission has been made that I should require payment of the money claimed            to be owed to CDBA or a substantial portion of it into court as a condition of leave    to defend the action.  There is no suggestion the bank’s security is not adequate to           cover the debt owed to CDBA.  It is likely on the material, although not stated       expressly that to order payment of the debt as a condition of leave to defend would       be tantamount to giving judgement on the basis that such an order could not be     met: cf DMS Shipping & Trading Co Ltd v Lionheart Asia Ltd [1996] 2 Qd R 20. There is, in fact, no money claim by CDBA in the action. I do not, therefore consider this to a proper case to require a payment into Court.

1. CDBA seeks costs of the application even if it is not granted on the basis that the issue on which the respondents succeeded was not included in the defence.  While          I have some sympathy for CDBA on this issue it cannot be ignored that they have failed in the application.  It seems to me to be a proper case in which to make each         party’s costs that party’s costs in the cause.

1. I give leave to the defendants to amend their defence to raise the issue on which   they have succeeded before me.