Gerblich v Perpetual Trustees Victoria Limited - [2016] SASC 14

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
GERBLICH v PERPETUAL TRUSTEES VICTORIA LIMITED
[2016] SASC 14
Judgment of The Honourable Justice S Doyle
11 March 2016
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH DISCRETION OF COURT BELOW - IN GENERAL
MORTGAGES - MORTGAGEE'S REMEDIES - INJUNCTION TO RESTRAIN EXERCISE OF MORTGAGEE'S POWERS
The appellant borrowed approximately $408,000 from the respondent. The loan was secured by way of a registered mortgage over a property owned by the appellant. The respondent brought possession proceedings against the appellant after he fell significantly into default on the loan. Following the dismissal of the respondent’s claim for summary determination, a Master of this Court ordered that the appellant make certain payments into Court to protect the interests of the respondent pending resolution of the possession proceedings.
The appellant did not contend that no payment terms should have been imposed. However, the appellant appealed against the specific payment conditions imposed by the Master. The appellant appealed on a number of largely factual grounds.
Held (per Doyle J), dismissing the appeal:
1. No error in the exercise of the Master’s discretion has been established.
Commonwealth Bank of Australia v SA Lending Centre [2014] SASC 178, discussed.
Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; Glandore Pty Ltd v Elders Finance & Investment Co Ltd (1984) 4 FCR 130; Andrew Garrett Wine Resorts Pty Ltd v National Australian Bank Ltd (2004) 206 ALR 69; Salerno v Saunders (1993) 173 LSJS 362; House v the King (1936) 55 CLR 499; Bankwest v Mann [2015] WASC 187, considered.

GERBLICH v PERPETUAL TRUSTEES VICTORIA LIMITED
[2016] SASC 14
Magistrates Appeal: Civil
DOYLE J:

The appellant, Mr Benjamin Gerblich, borrowed approximately $408,000 from the respondent. The loan was secured by way of a registered mortgage over a property owned by the appellant at 1 Synnett Ave, Seaview Downs (the property).
The respondent mortgagee brought possession proceedings against the appellant borrower after he fell significantly into default on the loan. Following the dismissal of the respondent’s claim for summary determination, a Master of this Court ordered that the appellant make certain payments into Court so as to protect the interests of the respondent pending resolution of the possession proceedings.
This is an appeal from the Master’s orders. For the reasons which follow, no error has been established in the Master’s reasons or decision. The appeal must be dismissed.
Background
The following is a summary of the facts as alleged by the appellant, taken largely from earlier reasons in this Court, and incorporated by reference in the Master’s reasons. It is based on allegations made in evidence filed by the appellant, but which have not been the subject of findings.
The property was previously owned by the appellant’s parents, Mr Tony Gerblich and Mrs Lyn Gerblich. Tony Gerblich is a disability pensioner, and Lyn Gerblich is also in receipt of Centrelink benefits. The property was, and continues to be, the family home. Prior to the dealings mentioned below it was unencumbered.
The appellant and his brother, Mr Simon Gerblich, were employed as software and electronic engineers for a company, Smart World Enterprises Pty Ltd, which was associated with Mr Portellos and his wife Ms Tomazos. They also worked for a related company, The Smart Company Pty Ltd. In addition to his work responsibilities, the appellant came to be almost a butler for Mr Portellos and Ms Tomazos. He lived with them in a large house in Tranmere. He used his personal credit card to buy supplies for them.
Having met Mr Portellos and Ms Tomazos through the appellant, Tony and Lyn Gerblich also became friends with Mr Portellos and Ms Tomazos. They stayed at their Tranmere home on occasions. They commenced working (without pay) at the Windsor Gardens Shopping Centre that Mr Portellos controlled.
In December 2006, Tony and Lyn Gerblich advanced Mr Portellos and Ms Tomazos $20,000 from a $40,000 line of credit they had established, which was secured against the property. This was repaid. In November 2007, Mr Portellos borrowed a further $20,000 from Tony and Lyn Gerblich, which resulted in their line of credit becoming overdrawn.
In July 2008, Mr Portellos and Ms Tomazos initiated discussions concerning Tony and Lyn Gerblich providing security over the property for a short term loan for $150,000. The appellant was told he would need to be a guarantor because his parents were pensioners. The loan was to be ‘secured’ by a caveat against the property.
The appellant claims that he was paid his salary irregularly and in arrears, and that much of his salary was in part repayment of what was owed to him in respect of his credit card, and indeed was funded by the loan secured against his parents’ property and guaranteed by him.
The appellant’s evidence was that the $150,000 loan was paid out by a further loan for $243,000 from the ANZ bank. That loan was also used to pay out the line of credit, but the appellant said that other than this, the beneficiaries of the $243,000 were Mr Portellos and Ms Tomazos. The $243,000 loan was again secured against the property, and guaranteed by the appellant.
In September 2008, Mr Portellos approached Tony and Lyn Gerblich, together with the appellant, for further urgent financial assistance. According to the appellant, the proposal was that the remaining equity in the property be made available to Mr Portellos. The mechanics were that Tony and Lyn Gerblich would sell the property to the appellant, who would borrow the purchase price from the respondent, secured by the mortgage that the respondent now seeks to rely upon in these proceedings. The appellant’s evidence was that he had no need to, and no means to, purchase his parents’ home.
The transaction proceeded, and involved the appellant borrowing $408,000 from the respondent. The appellant’s evidence was that his parents had to give him the money to pay for the loan application fee and the deposit. Some of the proceeds of settlement were paid to settle outstanding accounts of solicitors who had acted for Mr Portellos, Ms Tomazos, and companies with which they were associated. The appellant’s position is that his family received no benefit from the transaction, and that his parents lost the remaining equity they had in the property.
Tony and Lyn Gerblich, and the appellant, all say that they were effectively forced to enter into each of the transactions referred to above. The appellant says that he could never have serviced the loan, and that his inability to meet the second payment when it was due confirms that. He claims that he was given no opportunity to read the loan application documentation.
In the period from September 2008 to September 2012 the appellant paid $108,924.63 in servicing the $408,000 loan from the respondent. I was told on the appeal that these payments covered interest accrued during this period, save for some occasions when interest was not paid. No payments were made after September 2012, with the result that the amount claimed as owing at the time of the hearing before the Master was $522,659.88. The respondent’s evidence was that it had placed a value on the property of $452,978.
The possession proceedings
The appellant having fallen into default on the loan, the respondent mortgagee issued possession proceedings against the appellant (as the sole proprietor of the property). The respondent sought a summary order for possession of the property.
This application was heard by Judge Roder, who held that there was an arguable defence to the claim. In particular, he held that it was arguable both that Mr Portellos and Ms Tomazos had engaged in undue influence or unconscionable conduct, and that the respondent was on notice of this conduct. Accordingly, his Honour dismissed the application for summary determination of the possession proceedings, and directed that the matter proceed on pleadings. The matter then came before Judge Bochner for determination of the appropriate terms on which the appellant should be entitled to defend the proceedings. In her reasons dated 30 October 2015, Judge Bochner held:
I conclude that the defendant must pay to the plaintiff this sum of $36,450.00 and in addition, monthly payments of $1,083.37. I will hear the parties on the terms of the orders, the time within which to pay the lump sum, and the commencement date of the monthly payments.
The appellant filed an appeal against this outcome. When the appeal first came on for hearing before me I noted that a formal order had not been made. The parties returned to the Master, who on 12 February 2016 made orders requiring payment of the sum of $36,450 plus monthly payments of $1,087.37. Her Honour’s orders required that the sum of $36,450 be paid by way of an initial sum of $13,000 within seven days of the orders, and then $3,908.33 each of the following six months. It is these orders which are under appeal.
The Master’s reasons
As the Master explained, the general rule is that in order to restrain the exercise by a mortgagee of their power of sale, the amount claimed by the mortgagee should be paid into court.[1] This imposition of payment terms is a recognition of the interference and potential prejudice involved in depriving the mortgagee of the immediate benefit of their security.
[1] Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161.
However, later cases have taken a more flexible approach, particularly where the mortgagor seeks to impugn the validity of the mortgage. That approach permits the Court to mould the terms of the order so as to ensure adequate protection to the mortgagee and at the same time do justice between the parties during the period pending the final hearing.[2] A similar approach governs matters such as the present one where the Court declines to summarily determine possession proceedings, but imposes terms or conditions upon which the mortgagor is entitled to defend proceedings in the ordinary course.[3]
[2] Glandore Pty Ltd v Elders Finance & Investment Co Ltd (1984) 4 FCR 130 at 135; Andrew Garrett Wine Resorts Pty Ltd v National Australian Bank Ltd (2004) 206 ALR 69 at [50].
[3] Salerno v Saunders (1993) 173 LSJS 362 at 364; Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank Ltd (2004) 206 ALR 69 at [40].
In moulding orders appropriate to this case the Master essentially adopted the approach contended for by the respondent. This approach took as its starting point not the full amount outstanding, but rather $243,000. The rationale for this figure was that it represented the amount repaid to the ANZ bank from the money advanced by the respondent. Her Honour explained:
I also accept that for three years, the defendant has had the use of the property without paying any interest on the loan whether that be the loan to the ANZ Bank or the plaintiff. I acknowledge that the defendant also disputes his liability to the ANZ Bank, nonetheless, it is the case that had the plaintiff’s loan not taken its place, the loan from the ANZ Bank would still be in force and the defendant would be liable to pay interest under it.
I therefore accept the submissions of the plaintiff that a reasonable basis on which to calculate the payments to be made is the sum of the ANZ Bank loan, at the current interest rate of the loan from the plaintiff. I conclude that the defendant must pay to the plaintiff the sum of $36,450.00 and in addition, monthly payments of $1,083.37. I will hear the parties on the terms of the orders, the time within which to pay the lump sum, and the commencement date of the monthly payments.
The $36,450 represents past interest on the $243,000 using a rate of 5 per cent for three years. The monthly payment of $1,083.37 represents monthly interest payments on $243,000 using the current interest rate of 5.35 per cent (rather than the default rate of 13.02 per cent).
Nature of the appeal
In deciding what terms to impose upon the appellant, the Master was exercising a broad discretion to mould the relief so as to protect the respondent mortgagee and at the same time do justice between the parties. It follows that in order to succeed on this appeal the appellant must establish error of the type described in House v The King.[4]That is, the appellant must establish that the Master acted on a wrong principle, allowed extraneous or irrelevant matters to guide or affect her, mistook the facts or did not take into account some material consideration. Alternatively, the appellant must establish that the result embodied in the orders made is, upon the facts, unreasonable or plainly unjust, such that it can be inferred that there has been a failure to properly exercise the relevant discretion despite the precise nature or source of the error not being identifiable.
[4] House v The King (1936) 55 CLR 499 at 504-505.
Consideration
The appellant does not contend that no payment terms should have been imposed. The appellant’s contention is that her Honour erred in requiring the payment of $36,450 on account of arrears in interest; that her Honour should merely have required monthly payments of $1,000. While the appellant’s grounds of appeal are diffuse, they can be crystallised into the various specific complaints addressed below.
The first complaint made by the appellant is that the Master’s findings were against the weight of the evidence. In support of this ground the appellant referred to a number of affidavits (with large exhibits) which it was suggested the Master had not taken account of. It was also said that in circumstances where a party did not have legal representation (as was the case with the appellant before the Master, and on this appeal), the Court had a duty to look more carefully at the information submitted to the Court. The appellant relied in this respect upon Bankwest v Mann.[5]
[5] Bankwest v Mann [2015] WASC 187 at [6].
I accept that courts need to be astute to ensure that they appreciate the significance of matters advanced by an unrepresented party. But it does not follow that a court is required to sift entirely unguided through whatever information is put before the court. The court is still entitled to be guided to some extent by the matters raised by an unrepresented party as being important to their case. Here, while the Master was required to consider all of the material placed before her, she was nevertheless entitled to focus upon the contentions raised by the parties, including the appellant through his written submissions. The fact that the hearing proceeded on the papers (to the knowledge of, and with the consent of, both parties) does not materially alter the position.
There is nothing in the Master’s reasons that suggests to me that her Honour did not have regard to, and properly understand, all of the material relied upon by the appellant. A significant proportion of that affidavit material related to the appellant’s claims against the mortgagee (by reason of it being on notice of the conduct of Mr Portellos and Ms Tomazos) and against the ANZ bank. Given that the very premise for imposing terms was an acceptance by the Master of Judge Roder’s earlier decision that there was an arguable case against the mortgagee, I do not consider it was necessary for her Honour to analyse that material in her reasons. Similarly, in respect of the claim against the ANZ, it was sufficient that the Master noted the existence of that claim. It was not necessary or appropriate that her Honour analyse, or otherwise form any view as to the prospects of, that claim.
In any event, the merits of this aspect of the appellant’s challenge to the Master’s decision is best assessed by reference to the specific errors asserted in the balance of the appeal grounds. For the reasons which I set out below, I have ultimately come to the view that there is no merit in those more specific complaints.
The second matter relied upon by the appellant was a statement by the Master in her reasons that “various of the Gerblichs, other than the defendant, have provided affidavit evidence of their income and assets”. The appellant was concerned that her Honour may have overlooked the appellant’s affidavit of 8 October 2015 in which he did set out his income, assets and liabilities. In my view, when read in context, the point her Honour was making was that the evidence from the other family members was not relevant (or not as relevant) because the orders as to payment would be made against the defendant (appellant) and not the other family members. I do not think there is any reason to believe that the Master overlooked the appellant’s affidavit. Her Honour referred to it earlier in the same paragraph of her reasons when listing the affidavits which she had considered. The parties’ written submissions both made reference to the appellant’s limited financial resources. The terms contended for by the respondent, which the Master essentially accepted, were predicated upon the limited financial capacity of the appellant. In the circumstances, I am not satisfied that the Master overlooked the evidence of the appellant’s financial position.
A third matter relied upon by the appellant was the Master’s failure to apply the approach taken by this Court in Commonwealth Bank of Australia v SA Lending Centre.[6] Both parties referred to this case in their submissions before the Master. The appellant considered it significant that the defendant in that case, which had a limited financial capacity, was only required to make monthly payments, whereas the Master in this case also required a lump sum payment, or upfront payment. There was no error in her Honour not expressly referring to this authority. It was simply an illustration of the general principle correctly identified and stated by the Master in her reasons. It was factually distinguishable, and in this area the precise terms necessary to adequately protect the respondent and do justice to both parties is very fact sensitive. Further, and in any event, the appellant’s reliance upon this case was to some extent misplaced because upon examination of the orders ultimately made in Commonwealth Bank of Australia v SA Lending Centre it is apparent that the monthly payments required exceeded the interest component otherwise payable and hence included a component by way of repayment of arrears. In other words, while there was not an upfront payment required, the monthly repayments did require payment of amounts in excess of the ongoing interest commitment. Thus, in their ultimate effect, the terms imposed were not dissimilar to the terms imposed here.
[6] Commonwealth Bank of Australia v SA Lending Centre [2014] SASC 178.
Fourthly, the appellant contends that the Master erred in referring to the $40,000 provided by Savings and Loans by way of a line of credit as being an amount which was “not in dispute and which has been of benefit to the Gerblichs”. The appellant complains that he did not intend to concede any benefit from this line of credit; that his submission had been merely that there was no allegation of maladministration in respect of the $40,000. This was to be contrasted with the position in respect of the monies advanced by the ANZ and the defendant, the entirety of which the appellant was challenging as being affected by notice of wrongdoing. The appellant’s position was that as the $40,000 was a line of credit used to lend funds to Mr Portellos and Ms Tomazos, neither the appellant nor his family received any practical benefit from the $40,000. Ultimately, I do not think the dispute as to whether or not the $40,000 was of any benefit to the appellant or his family is of any consequence. The reason for this is that despite referring to the $40,000 as the starting position contended for by the appellant, her Honour rejected this approach, selecting instead the ANZ component of $243,000 as the appropriate starting point. As such it does not seem that her Honour’s reference to the appellant’s position in relation to the $40,000 line of credit was of any material significance to the approach she took.

The fifth matter relied upon by the appellant is a contention that in selecting the ANZ component of $243,000 as an appropriate starting point, the Master ignored the “prima facie case of maladministration against ANZ” that had been deposed to by the appellant. Again, there is no reason to think that the Master did overlook this affidavit material. To the contrary, the Master expressly acknowledged in the penultimate paragraph of her reasons that “the defendant also disputes his liability to the ANZ Bank”.
Further, and in any event, the mere fact that even the ANZ component of the loan was disputed does not mean that it was not appropriate to use it as a starting point for determining the terms to be imposed. The general rule (referred to earlier in these reasons) has traditionally required payment into court of the entire disputed sum. The fact that more recent authority has suggested a flexible approach in situations where the validity of the mortgage is impugned does not mean that it is erroneous to nevertheless require payment into court of some component referable to that disputed sum. For example, in Andrew Garrett Wine Resorts Pty Ltd v National Australian Bank,[7] Besanko J required the payment of interest (both arrears and ongoing) calculated by reference to a sum which included a disputed portion.
[7] Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank Ltd (2004) 206 ALR 69 at [50]-[51].
Here, in calculating the lump sum and monthly payments, the Master has only required payments of interest (not principal) in respect of a portion of the disputed sum. It was in my view something of a concession by the respondent to seek payment terms referable only to the interest payable in respect of the ANZ component of the outstanding sum, rather than the entire outstanding sum. While the concession was probably explained by a recognition of the appellant’s limited financial capacity, it was an entirely appropriate starting point. In my view there was no error in the Master adopting this starting point, or in her reasons for doing so. While the ANZ component is under challenge in a claim by the appellant against the ANZ, it remains relevant in attempting to achieve justice between the appellant and respondent that of the sum advanced by the respondent, $243,000 went in reduction of funds owed by the appellant at the time to the ANZ.
Sixthly, the appellant contends that the Master ignored the $108,924.63 paid by the appellant since the ANZ loan was refinanced.
The first response to this submission is that her Honour referred to this sum in paragraph [9] of her reasons and so did not ignore it in the sense of overlooking it. The submission can thus rise no higher than that her Honour erred in not taking it directly into account, for example, in reducing the starting point by the amount of $108,924.63 to reflect the repayments made. This would have had the effect of almost halving the amount of the repayments to be made.
The appellant’s rationale for reducing the starting point of $243,000 by the $108,924.63 in repayments is that had the respondent never lent him the $408,000 then the subsequent payments of $108,924.63 could have been made by the appellant in reduction of the $243,000 that would have been owed to the ANZ bank.
While there may be some validity to this hypothetical, I do not consider that the Master was required to approach the matter in this way, or that her Honour erred in not doing so. Her Honour was entitled to proceed on a basis that took account of the fact that the respondent did lend the $408,000. In this context her Honour was entitled to treat the $108,924.63 as being payments of interest accrued between 2008 and 2012 and hence not reducing the principal, including the $243,000 which went to pay out the ANZ facility.
The final matter relied upon by the appellant was a contention that in light of the defendant’s limited financial capacity it was unjust to impose the payment terms that her Honour ordered. He asserted that his financial capacity (and that of his family) was limited to a lump sum of about $10,000, and monthly payments thereafter of about $1,000. I note that the amount the appellant conceded he was able to pay by way of a lump sum had increased to about $14,000 by the time the formal orders were made.
The appellant’s financial capacity was clearly a relevant matter. However, it was not the only relevant matter. The Master was not bound to accept the appellant’s assertions (albeit supported by some evidence) as to the precise limits of his financial capacity, and that of his family. Further, whatever their financial capacity might be, this does not operate as a rigid ceiling on the terms that might be imposed. As I have mentioned, the Master was no doubt mindful of the appellant’s limited financial capacity in selecting the ANZ component as the starting point (rather than the full amount outstanding), and even then only requiring payment of three years of interest arrears (and interest going forward) rather than any principal.
In my view, in circumstances where the outstanding amount was $522,659.88 (which was significantly in excess of the value of $452,978 placed on the property by the respondent), it was an appropriate exercise of the Master’s discretion in attempting to protect the respondent and do justice to both parties to impose the payment terms she did. That is particularly so in light of the Master’s ultimate decision to permit the $36,450 in arrears to be paid by way of an initial instalment of $13,000 (which is less than the $14,000 that the appellant acknowledged that he and his family could pay), with the balance to be paid through monthly instalments.
I observe that during the hearing of the appeal the appellant sought to challenge the value the respondent had placed on the property, and asserted a higher value. While the approximate value of the property was of some limited relevance, I do not think the precise value of the property much matters. The Master did not rely upon the respondent’s value for any particular calculation. Its significance was, in my view, confined to a general indication of the extent of the shortfall the respondent might face even if successful in the possession proceedings. In this context, I do not think it matters that a higher valuation might be justified. For this reason, and because the appellant did not challenge the respondent’s assertion as to the value before the Master, I do not think the respondent’s assertion of a higher value in the hearing before me provides a basis for interfering with the Master’s orders.
Conclusion
In my view, no error has been established in the Master’s exercise of her discretion to determine appropriate payment terms pending resolution of these proceedings. Accordingly, the appeal must be dismissed, and I so order.