Davis v Wheelihan

[1999] NSWSC 747

Reported Decision: [2000] ANZ ConvR 223
[2000] Aus Contract R 90-105
(1999) NSW ConvR 55-914

New South Wales

Supreme Court

CITATION:	DAVIS v WHEELIHAN [1999] NSWSC 747
CURRENT JURISDICTION:	COMMON LAW
FILE NUMBER(S):	13466/1995
HEARING DATE(S):	23-24 June 1999
JUDGMENT DATE:	27 July 1999
PARTIES :	THE ESTATE OF THE LATE HARRY DAVIS & ANOR v HEATHER LORRAINE WHEELIHAN
JUDGMENT OF:	Master Malpass

COUNSEL :	PLAINTIFF: MR D M LOEWENSTEIN DEFENDANT: ANGUS RIDLEY
SOLICITORS:	PLAINTIFF: HOLMAN WEBB DEFENDANT: H J PALMER & CO
CATCHWORDS:	Mortgage; Mortgagor not entitled to relief under either the Act or equitable doctrines; no agreement as alleged entitling mortgagee to recover moneys paid out to effect discharge of a caveat.
ACTS CITED:	Contracts Review Act 1980, s 7.
CASES CITED:	Baltic Shipping Company v Dillon (1991) 22 NSWLR 1. Beneficial Finance Corporation v Karavas (1991) 23 NSWLR 256. Garcia v The National Australia Bank (1998) 155 ALR 614. Nguyen v Taylor (1992) 27 NSWLR 48. West v AGC (Advances) Ltd (1986) 5 NSWLR 610. Younan & Anor v Beneficial Finance Corporation Limited (Court of Appeal, 21 November 1994).
DECISION:	SEE PARAGRAPH 38

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER MALPASS

TUESDAY 27 JULY 1999

13466/1995 THE ESTATE OF THE LATE HARRY DAVIS & ANOR v HEATHER LORRAINE WHEELIHAN

JUDGMENT


1   These proceedings were commenced on 13 September 1995. They came on for hearing on 23 June 1999. On that day, a proposed Amended Statement of Claim was handed up in Court. Leave was given to make certain of the amendments appearing in that document.

2   The parties have relied on affidavit evidence. The principal deponent supporting the plaintiff’s case is Mr Reeve (the solicitor for the plaintiff). The defendant relies on affidavits sworn by herself and her daughter (Fiona). Mr Reeve, the defendant and Fiona have been cross-examined. The parties have tendered documentation.

3   The defendant is the registered proprietor of a residential property at 6 Boundary Street Narrabri (the property). In about April 1994, Fiona became acquainted with James Walton (Walton). At that time, the defendant had a loan with the Westpac Bank and the amount outstanding was about $8,000.00. It was secured by a mortgage. It seems that there had been a Defence Service Loan. She had a personal loan with that Bank and about $19,000.00 was outstanding. She was also paying interest on a loan taken out in Fiona’s name with the ANZ Bank. The loan was for $7,000.00. The purpose of this loan was to fund a business course for Fiona. A relationship developed between Fiona and Walton. The involvement continued thereafter (probably at least until Walton went to prison in about May 1995).

4   In about July 1994, Walton arranged a loan for $20,000.00 (a “Household Continuing Credit Account”) with Household Finance Services (HFS). The loan was taken out in the name of the defendant. Walton had promised her that he would make the payments due under the loan. He had earlier told her that he wanted “to help pay Fiona’s loan back”. Whilst she has said that there is a forged signature on the loan documentation, she participated in the process that saw the loan being granted. In the documentation, Walton is mentioned as “son in law” and the reason for the loan is said to be “Renovations”. HFS lodged a caveat against the title to the property (there may have been an equitable mortgage). The evidence from the defendant is unhelpful as to whether or not Walton made any payments due under this loan.

5   By about September 1994, Walton wanted to re-finance the loan with HFS. He told the defendant that he was going to borrow $40,000.00 to pay off the house loan, the car loan, Fiona’s ANZ loan, and the loan from HFS. Again, the loan was to be in the defendant’s name and Walton said that he would make the payments due under it.

6   Mr Reeve conducts a legal practice at Tewantin in Queensland. It would seem that one part of his practice was to act for mortgagees. One of his clients was the late Mr Harry Davis. On 5 October 1994, he was contacted by Mr Pierce who conducts business under the name of Consumer Mortgage Australia (CMA) as mortgage brokers. It seems that the application documentation had been taken to Mr Pierce by Fiona. An application for a loan in the sum of $40,000.00 secured by mortgage was made on behalf of a client (Heather Wheelihan). The documentation was signed by the defendant. It was forwarded under cover of a letter dated 6 October 1994, which contained the following:-
“Please find enclosed application for finance for Mrs Weelian. Please also note that her son James (who you might remember as Nudge in the TV series Hey Dad) will be making the payment on the loan. My client has agreed to an interest rate of 12%.”

Agreement was reached for such a loan with an interest rate of 12%. Mr Reeve prepared mortgage documents and these were forwarded by letter to the defendant. The mortgage was signed by the defendant and her signature was witnessed by Walton. Thereafter, communication was had with Walton and executed documentation was returned to Mr Reeve. The defendant says that it was sent to him by Walton and Fiona.


7   A settlement took place on 2 November 1994. On the same day, a letter was sent by Mr Reeve to the defendant confirming that settlement had taken place and providing details of the application of the loan moneys. Westpac was paid the sum of $8,726.81 and a discharge of mortgage was obtained from it. A part of the loan was applied to meet costs and commission. In accordance with instructions received from Walton, a cheque for the balance made out to the defendant in the sum of $28,123.19 was sent to the Westpac Bank at Chatswood for deposit in an account styled “H L Wheelihan account number 732 - 090 - 500431”. As this was in fact Walton’s account the Bank deposited the cheque in an account standing in the name of the defendant (an account at Narrabri). Thereafter, the defendant paid all but a part of these moneys (such part being in the sum of $2,123.19) to Walton (rather than apply them in payment of the outstanding loans). Why this was done was left unexplained by her. There is material which throws up conflicting suggestions (Exhibit A). One suggestion is that the loan was obtained to enable Walton to meet his own commitments.

8   It may be said, at the very least, that Mr Reeve has handled the transaction in a manner that was casual. His conduct has been the subject of criticism. However, largely any deficiencies in the conduct of the transaction by him are not material to the matters in issue in this case. One matter does require specific mention.

9   Mr Reeve had overlooked the matter of the caveat lodged by HFS. Some communication took place with Walton (see inter alia paragraph 28 of Mr Reeve’s affidavit sworn on 23 January 1998). This did not lead to Walton paying out HFS. Thereafter arrangements were made by Mr Reeve with HFS to have the caveat withdrawn. This was effected in June 1995 by Mr Davis paying out the moneys claimed by HFS. The caveat was withdrawn and the mortgage was registered.

10   There has been default under the mortgage. Only two payments have been made (a sum of $400.00 on 18 November 1994 and the sum of $400.00 on 16 December 1994). These payments were made by the defendant.

11   The plaintiff seeks both a monetary judgment and possession of the property. There are two real issues. Firstly, whether or not the defendant is entitled to relief under either the Contracts Review Act 1980 (the Act) or other doctrines. Secondly, whether or not an agreement was made entitling the plaintiff to recover from the defendant the moneys paid to HFS to obtain the withdrawal of the caveat. Save as to her claim for relief, it is not disputed by the defendant that the plaintiff has a prima facie case founded upon default under the mortgage.

12   In the course of the hearing Walton has been referred to as the villain. He has received from the defendant a significant part of the advance moneys. He presented himself to the defendant and Fiona as an actor (the suggestion that he played the role of “Nudge” is apparently false) and a person of wealth who could not presently put his hands on his money (it was said to have been tied up in a trust scheme until he was 25 years of age). He was presented by them as a person who repeatedly assured them that he would pay “everything”. Both the defendant and Fiona say in their respective affidavits that they placed great trust in Walton.

13   In one of her affidavits, the defendant deposed to the following:-
“At all times I believed I was not taking out a mortgage. I only acted in the belief that Jamie Walton was going to service all the loan. I acted as I did because I believed Jamie Walton was honest and trustworthy and was acting for my best interests.”

14   In her oral evidence, the defendant gave the impression that she had been subjected to some pressure by Walton to sign documentation. Whilst the affidavit material tended to convey the impression that the imprisonment of Walton arose out of other activities, there was oral and other material which suggested that his conduct in relation to the loan transactions was at least one of the reasons why he was now in prison. The oral evidence of Fiona revealed that she had visited him in prison (at least “a few times”). However, inexplicably, she was simply unable to remember whether the visits numbered 5 or 50.

15   At the end of the evidence, it could be said that the nature of the relationship had between the Wheelihans and Walton remained somewhat puzzling and the conduct of the defendant and Fiona seemed to be inexplicable. This may be because their evidence was unhelpful in many respects and neither of them gave a full nor frank picture of what really happened. I shall mention a few matters that emerged from the evidence. It appears that Walton and Fiona lived together at some stage (at least about two months). It appears that for some time he stayed with the defendant at Narrabri whilst Fiona was in Sydney. He was said to be burning or tearing up mail that he did not want the defendant to see. Surprisingly, this conduct apparently did not bring about any disturbance of the relationship. One feature of the relationship does seem to be that if his promises to them had been fulfilled, the Wheelihans would have received the benefit of having their many debts paid off by him.

16   Largely, the circumstances of the defendant may be gleaned from her affidavits. I shall merely mention some of the matters that emerge from the evidence. She is a widow. Her husband died in 1992. She receives a pension. She works part-time as a casual housemaid. She was born on 3 August 1946. She has lived in Narrabri all her life. She attended Narrabri High until the 8th grade.

17   I shall now mention some of the matters, appearing from her evidence, which she puts forward as relevant to her case. She says that she did not understand the contract and merely signed what was put in front of her. She says “I did not read the papers which I was asked to sign”. She says that “I received no independent legal or expert advice prior to the execution of the mortgage”. She says that none of the provisions of the mortgage were explained to her as to their legal and practical effect. She said that she had only a limited understanding of the nature of the provisions of the mortgage.

18   I have closely observed the demeanour of the witnesses during the giving of evidence. In assessing credibility, I have had regard both to demeanour and evidence.

19   The credibility of Mr Reeve is not of any real significance in this case. I formed the impression that he did his best to give honest and reliable evidence. Although placed in circumstances of some embarrassment, he gave the impression of being frank and candid. Largely, I accept his evidence.

20   Whilst the Court has great sympathy for the position in which the defendant is placed, it is still necessary to observe that there were aspects of her evidence which were less than impressive. She was often disposed to give unresponsive answers to questions. On some occasions there was no answer and at times she resorted to reading her affidavit before providing any response. In a number of respects, her evidence was less than frank. There were differences in presentation between her affidavit and oral material. Her evidence is at odds with what may be gleaned from other material (such as Exhibit A). I was left with the impression that the case presented by the evidence of the defendant and Fiona did not accord with what in fact was the real position. She has given evidence that I do not accept.

21   I shall specifically refer to one particular matter. I do not accept her evidence that she believed that she was not taking out a mortgage or evidence to the effect that she lacked understanding as to what a mortgage was about. She gave the impression of being keen to stress what she says had been said to her by Walton and to avoid disclosing her actual knowledge. Prior to the granting of the subject mortgage, she had been involved with a prior mortgage. She conceded that she knew what a mortgage was. She conceded that she was aware that if the payments were not maintained she could lose her home. She conceded that she was aware that if Walton did not make the payments she would have to. Despite some less than impressive evidence to the effect that Walton either burnt or tore up (or both) correspondence, she received the mortgage documents from Mr Reeve. She saw that they had “Mortgage” on them prior to signing them. Both in her affidavit and her oral evidence, she speaks of them as “the mortgage papers” (see para. 14 and p. 41). Her expressed concern at not wanting to give a mortgage, reinforces the view that she had an appreciation of what a mortgage involved. In her affidavit Fiona deposes that her mother said “These are the mortgage papers involved with this loan” (see para. 14). She was aware that the prior mortgage would be discharged and replaced by the subject mortgage. She has conceded that the consolidation of the various debts into one loan at least ultimately, had some attraction for her.

22   There was also the evidence of Fiona. In the main, it seems to be non-contentious, that considerable of her evidence lacks relevance. There were discrepancies between her evidence and that of the defendant. To the extent that it may be of significance, I observe that she has given evidence that I do not accept.

23   Counsel have made submissions in writing. These submissions have been supplemented orally. For present purposes, it is not necessary to repeat the detail of the matters raised in the submissions.

24   Firstly, I shall turn to the matter of the relief claimed by the defendant. Apart from seeking relief under the Act, the defendant also looks to the principles of unconscionability and undue influence. Save for what has been referred to as an extension of Garcia v The National Australia Bank (1998) 155 ALR 614, the defendant accepts that her strongest case is that which is propounded under the Act. In the circumstances of this case, I am not satisfied that any case is made out for relief under the principles of unconscionability or undue influence. It was put that this should be seen as a mother and son case and that Garcia should be extended to such a situation. In my view, leaving aside the question of whether or not Garcia can be so extended, Garcia has no application in the circumstances of this case.

25   During submissions, counsel referred the Court to many authorities. Largely, they include the authorities which are usually quoted in cases of this nature (including West v AGC (Advances) Ltd (1986) 5 NSWLR 610 , Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 , Beneficial Finance Corporation v Karavas (1991) 23 NSWLR 256 ). The observation may be made that whilst other cases provide guidance, each case tends to turn on its own particular facts and the considerations of the public interest.

26 Section 7 confers a discretion on the Court to grant any one or more of the heads of relief identified therein where it finds that certain threshold requirements have been satisfied (inter alia, where it finds a contract to have been unjust in the circumstances relating to it at the time it was made). See Nguyen v Taylor (1992) 27 NSWLR 48 at 55-57 and 71-72 and Younan & Anor v Beneficial Finance Corporation Limited (Court of Appeal, 21 November 1994). It may grant relief if it considers it just to do so and for the purpose of avoiding as far as practicable an unjust consequence or result.

27   In my view, the defendant falls well short of satisfying the relevant threshold requirements and/or demonstrating an entitlement to relief. I do not propose to further canvass all of the relevant circumstances. However, I will advert further to some of them.

28   Whilst by at least February 1998 she had retained the services of a solicitor, it appears that she did not seek any expert advice prior to the execution of the mortgage. The defendant’s evidence does not assist as to the reasoning process behind the obtaining of legal assistance at that time. It may have been precipitated by the activities of Walton and directed to obtaining relief against him. In any event it does suggest that she knew advice could be obtained if she had wanted it. Her evidence does not suggest that she in fact wanted any advice in relation to the mortgage prior to its execution. It does not inform as to whether or not any such advice would have dissuaded her from proceeding with the mortgage. Whilst the provisions of the mortgage were not explained to her by the mortgagee, she had an understanding of a mortgage. She was aware that she could lose her home.

29   The lender was approached through a mortgage broker on behalf of the defendant. There was some negotiation as to the interest rate. There was an acceptance of the interest rate required by the lender. There is material which suggests that the lender was led to believe that the loan was required for the purpose of a consolidation of debts. This was not unusual in the case of the type of mortgage transaction handled by Mr Reeve on behalf of his clients. It appears that these were transactions which came into being when a borrower could not get finance elsewhere. The mortgage was given for a short period at a fixed interest rate. The concern for the mortgagee was that there was sufficient security in the event of default. The lender was aware of some urgency. Again, this was not an usual matter. The involvement of the putative “Son” and the material indicating that he would be making the payments was not such in the circumstances of this case as to put the mortgagee on notice.

30   The mortgage documents were sent to the defendant by the mortgagee and were received by her. She executed them. Also, she did what was necessary to bring about the discharge of the existing mortgage, so that the subject mortgage could replace it. She knew that she was giving a mortgage over the property.

31   The advance was in fact made to and received by her. Thereafter, she handed over a significant part of it to Walton. Why this was done and what happened to these moneys was left unexplained by the defendant. There is material which suggests that initially a bank cheque was obtained to pay out the HFS loan and that then there was a change of mind which saw funds being credited to Walton’s account in accordance with directions given by the defendant.

32   Her evidence was calculated to give an impression that differed from what really happened. She sought to convey the impression that the only benefit received was having the existing mortgage paid out and receiving a small part of the advance. Not only did she receive the moneys advanced, as matters presently stand she has had the benefit of the HFS loan being paid out by the mortgagee (who may not be able to recover these moneys from her). What she did not get is the benefit of what had been promised to her by Walton. If this had happened, she would have been debt free with the debts having been paid by Walton.

33   The general policy of the law is that parties should honour their contracts ( Baltic Shipping at p.9). It is unfortunate that part of the loan moneys have been lost to her. But the fact is that the loss was a consequence of her own foolishness. The mortgagee was not aware of the relationship involving the defendant and Walton and I am not satisfied that it is something of which he should have been aware. It is one of those cases, where the plaintiff may be said to fall within the category of an innocent party ( Karavas at P. 277).

34   The mortgage was in standard form. Save as to one matter, it was not said that any of the provisions of the mortgage itself would attract relief. No complaint was made about the interest rate of 12% (which was the subject of negotiation). There was some complaint about the penalty interest rate (which was 15%). I am not satisfied that this complaint is of any substance.

35   I now turn to the question of the agreement alleged by the plaintiff as the basis for the recovery of the amount paid to effect the withdrawal of the caveat. The agreement was alleged to have been made by Walton as agent for the defendant with Mr Reeve. It is said to arise from what is deposed to in paragraph 28 of the affidavit sworn by Mr Reeve on 23 January 1998.

36   In my view, this claim was doomed to failure. I am not satisfied that Walton had authority to enter into any agreement of that nature. I am not satisfied that what is deposed to in the affidavit would in any event give rise to an agreement of the nature as alleged (or an agreement at all). Further, I am not satisfied that there was the requisite consideration to support the alleged agreement.

37   It may be that there is some other basis on which these moneys may be recovered (such as pursuant to the terms of the mortgage or on a common money count). Be that as it may, these matters were not raised in the pleading and were not canvassed during the hearing and I put them aside. The only claim propounded was that founded on the alleged agreement.

38   I order that the Cross-claim be dismissed. I order that the defendant pay the costs of the Cross-claim. I order that the claim founded on the alleged agreement be dismissed. Save as to the making of these orders, there may be a problem at this stage in taking the matter further. There is an entitlement to relief under the mortgage. It may suffice if relief is restricted to a judgment for possession. The proceedings may not be presently properly constituted on the plaintiff’s side of the record. The plaintiff died some time ago and the proceedings presently seem to be maintained in the name of a non-legal entity (the Estate of the late Harry Davis). This is a matter which would seem to require attention before further orders can be made. When this aspect of the matter has been satisfactorily dealt with, counsel for the plaintiff should prepare Short Minutes of Order. It seems to me that the defendant should bear the costs of the plaintiff’s claim, save for that part which was founded on the alleged agreement.
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Last Modified: 07/27/1999