HSBC Bank Australia Ltd v v

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: HSBC BANK AUSTRALIA LTD -v- V [2014] WASC 359

CORAM: CHANEY J

HEARD: 22 SEPTEMBER 2014

DELIVERED : 30 SEPTEMBER 2014

FILE NO/S: CIV 2046 of 2014

BETWEEN: HSBC BANK AUSTRALIA LTD
Plaintiff
AND
V
First Defendant
REGISTRAR OF TITLES
Second Defendant

FILE NO/S :CIV 2980 of 2012

BETWEEN :HSBC BANK AUSTRALIA LTD
Plaintiff
AND
J
First Defendant
A PTY LTD
Second Defendant

Catchwords:

Caveat - Caveatable interest - Interest in land

Joinder - Whether plaintiff had obligation to join a party

Cross-vesting - Completed proceedings

Legislation:

Family Law Act 1975 (Cth)
Jurisdiction of Courts (Cross-vesting) Act 1987 (WA)
Rules of the Supreme Court 1971 (WA)
Transfer of Land Act 1893 (WA)

Result:

Caveat the subject of CIV 2046 of 2014 be removed
Application for both actions to be transferred to the Family Court refused
Application by interested party in CIV 2980 of 2012 to be joined as defendant and to set aside judgment refused

Category: B

Representation:

CIV 2046 of 2014

Counsel:

Plaintiff:     Mr D P Butler
First Defendant              :     Mr W Vogt
Second Defendant         :     No appearance

Solicitors:

Plaintiff:     Lavan Legal
First Defendant              :     Vogt Graham Lawyers
Second Defendant         :     No appearance

CIV 2980 of 2012

Counsel:

Plaintiff:     Mr D P Butler
First Defendant              :     No appearance
Second Defendant         :     No appearance
Interested Party             :     Mr W Vogt

Solicitors:

Plaintiff:     Lavan Legal
First Defendant              :     No appearance
Second Defendant         :     No appearance
Interested Party             :     Vogt Graham Lawyers

Cases referred to in judgment:

Nil

CHANEY J: The issues for determination in these proceedings arise in the context of the application made in CIV 2046/2014 (Caveat Action) by HSBC Bank Australia Ltd (HSBC) for an order that a caveat lodged over two properties by the first defendant, V, be removed. Because it is necessary for the purposes of these reasons to refer to proceedings under the Family Law Act 1975 (Cth), I have anonymised these reasons in light of the provisions of s 121 of the Family Law Act.
HSBC held mortgages over the two properties concerned, which I will refer to as the Helena property and the East Perth property. On 23 May 2013, it obtained judgment in this Court in proceedings CIV 2980/2012 (Possession Action). The judgment was granted pursuant to O 62A of the Rules of the Supreme Court 1971 (WA), and required delivery up of possession of the East Perth and Helena properties, and two other properties the subject of mortgages granted by the first and second defendants in the Possession Action, whom I will refer to as J and A Pty Ltd, respectively. J is the former husband of V.
HSBC subsequently entered into contract for the sale of the East Perth property and the Helena property. Settlement of those sales has been delayed because of a caveat lodged by V on the titles to each of those properties. HSBC seeks removal of the caveats to enable settlement to proceed.
V opposes the application for removal of the caveats. She claims to have a caveatable interest in the properties by reason of orders of the Family Court made in 2008 and 2010 in proceedings between herself and J. In answer to HSBC's application for removal of the caveats, V filed a chamber summons in the Caveat Action seeking an order that her caveat be extended until further order, and that the proceedings be transferred to the Family Court of Western Australia pursuant to s 5(4)(b)(i) and s 5(4)(b)(iii) of the Jurisdiction of Courts (Cross‑vesting) Act 1987 (WA). She also filed a chambers summons in the Possession Action seeking an order that she be joined as a third defendant to that action, and seeking orders setting aside the judgment and the orders for possession made on 23 May 2013.

The background facts

V commenced proceedings in the Family Court against J in 2007. On 7 August 2008, consent orders (August 2008 orders) were made in the Magistrates Court in the following terms:
1.Within 60 days the respondent pay to the applicant the sum of $700,000 by way of interim property settlement.
2.Contemporaneously with the payment in order 1 the applicant by way of interim property settlement:
(a)transfer to the respondent absolutely her right, title and interest in:
(i) [Property 1 and 2] and the applicant withdraw her caveat over [Property 1 and 2];
(ii) [The Helena Property];
(iii)[The East Perth Property];
(iv) all the applicant's shares in [A Pty Ltd];
(v) sign and deliver to the respondent all necessary letters, resolutions and forms prepared by the respondent to effect her resignation as a Director of [A Pty Ltd] and the transfer of her shares in the said company.
3.Upon the transfer of the properties in 2(a), (i)(ii) and (iii):
(a)the applicant be at liberty to lodge a caveat against the titles to all the said properties; and
(b)the respondent be restrained by injunction until further order from further encumbering the said properties or transferring his interest in the said properties.
4.Orders 1, 2 and 3 of the Minute of Agreed Orders made 28 September 2007 be suspended until further order.
5. The respondent or his agent be at liberty to collect [an item of personal property] from the applicant's solicitor's office on 7 August 2008 before 5.00 pm.
6.The applicant allow the respondent and/or his agents to inspect the [Helena] property on giving 48 hours' notice in writing to [a nominated facsimile number] to the applicant for the purpose of preparing an inventory, including taking photographs.
7.Until further order or the written agreement of the parties the applicant continue to reside on the [Helena] property and the respondent meet all mortgage payments, insurance, rates and taxes on the said property and necessary repairs to the said property.
8.Until the applicant receives the sum of $700,000 in order 1 the respondent pay to the applicant the sum of $650 per week including child support from 8 August 2008 and upon the payment of the $700,000 the sum be reduced to $350 per week with such payments to be regarded as payment of child support pending the parties signing a binding child support agreement in which the respondent will pay child support at the rate of $350 per week to be increased each year in line with the child support agency inflation factor.
9.Both parties do all things necessary to comply with order 12 of the consent orders made 28 September 2007.
10.All interim applications be adjourned generally with liberty to relist on urgent notice.
Very little evidence is given by V in her affidavits filed in relation to these applications as to the circumstances surrounding the making of these orders, or indeed leading to subsequent orders, which provide context to these proceedings. What is apparent, however, is that, when the negotiations leading to the August 2008 order occurred, some form of refinancing of an existing debt owed to the National Australia Bank (NAB) secured by mortgages on the four properties the subject of the August 2008 orders was contemplated. That can be inferred from a facsimile produced by V from HSBC to J's solicitors confirming finance approval for an amount of $2,598,000 on conditions which included a condition which read: 'Copy of finalised Court Order of the Divorce Settlement. This application to be in accordance with that agreement. Court Order to confirm that [A Pty Ltd] will be transferred to [J's] sole ownership.'[1]
[1] Affidavit of V, affirmed 10 September 2014, CFV 4.
Similarly, correspondence from J's solicitors to the Family Court, which was copied to V's solicitors, and correspondence between those solicitors[2] made it clear that refinancing of the debt was contemplated in the context of implementation of the consent orders.
[2] Affidavit of V, affirmed 10 September 2014, CFV 5 and CFV 6.
A letter dated 23 October 2008 from NAB to J and V confirms that NAB had received $2,174,733.71 from HSBC in discharge of the debt to it from their new financier.
In her affidavit, V said that J did not comply with the August 2008 orders 'by paying to me $700,000'. It is not explained why, given that the orders contemplated that transfer of the four properties by V would be contemporaneous with the payment of $700,000, she proceeded, as she apparently did, to transfer the properties without receiving that payment. Counsel for V, in his written submissions, relied upon V's evidence that no payment of $700,000 was made by J. However, at the hearing, he withdrew that submission and advised the Court that he was instructed that, in fact, V received $300,000 from J some time in 2008, although his instructions did not clarify when, or in what context, the payment was made. It might reasonably be inferred that the payment came from the funds advanced by HSBC to the extent that they exceeded the amount necessary to pay out the existing debts to NAB. It is not, however, necessary to make any finding on that question.
On 17 November 2008, V lodged a caveat on the title of each of the four properties subject of the August 2008 orders.
On 1 December 2010, the Family Court made orders by consent (December 2010 orders) in the proceedings between V and J in terms of a minute of consent orders dated 23 November 2010. Those orders read as follows:
The following orders are made by consent:
1.Within 7 days of the making of these orders the respondent pay the applicant the sum of $60,000;
2.Within 12 months the respondent pays to the applicant one half of any income tax liability due and owing by her limited to the sum of $ 50,000 in any event;
3.Within 12 months of making of these orders the respondent pay the applicant the sum of $600,000;
4.Until payment referred to in paragraph 3 hereof has actually been paid to applicant, the applicant has the right to exclusively occupy [Helena Property];
5.Within 30 days of the making of these orders the respondent transfers all rights and interests in [a nominated] motor vehicle to the applicant;
6.Any right or interest the respondent has in the contents of [Helena Property], the business known as "[X]" and any other property in the applicants name or possession vest in [sic] applicant absolutely;
7.The respondent do all things necessary discharge [sic] any guarantee that the applicant may have given for any borrowings by any company associated with the respondent or from any joint borrowings between the parties;
8.Any interest the applicant has in:
a.[The Helena Property];
b.[The East Perth Property];
c.[Properties 1 and 2];
d.[B Pty Ltd];
e.[A Pty Ltd];
f.[C Pty Ltd];
g.[D Pty Ltd];
h.Any chattel property in your possession;
i.Any bank account;
vest in respondent absolutely; and
9.Any monies due and owing to the applicant pursuant to Order 1 of the Minute of Agreed Orders attached to Orders made [sic] discharged.
10.Each party be responsible for their own costs;
11.The applications otherwise be dismissed.
It can be noted that, unlike the August 2008 orders, the order of December 2010 orders are not expressed to be an interim order. V's affidavit does not give any detail as to the circumstances in which the December 2010 orders came to be made, but it would appear that the December 2010 orders were the substantive final orders in the proceedings between V and J.
In her affidavit, V said that J did not comply with the December 2010 orders.
On 14 March 2012, further orders were made (March 2012 orders) which, although peculiarly expressed, in substance appointed V as 'sole trustee for the sale' of the four real estate properties which had been the subject of the earlier orders. Reference in the March 2012 orders is made to other orders of the Court in November 2011, and to 'the current applications before the Court' which were otherwise adjourned generally. No information as to the details of other orders, or of the applications before the Court, or of the circumstances which led to the March 2012 orders being made, is contained in V's affidavit.

Does V have a caveatable interest in the properties?

In order to resist HSBC's application for removal of the caveats, it is first necessary that V demonstrate that she has an interest in the land the subject of the caveats. In order to support her claim to an interest in the land, V relies upon the August 2008 orders.
Order 3 of the August 2008 orders granted V liberty to lodge a caveat against the title of the four properties, and restrained J by injunction 'until further order, from further encumbering the properties'. Presumably, that order was made because orders 1 and 2 were said to be 'by way of interim property settlement', so that some further alteration of property interests might occur in the context of the final determination in the proceedings of the parties' ultimate property entitlements. The caveat was presumably designed to protect that potential claim or possibly the interest in the operation of the injunction restraining any further encumbrance or transfer of J's interest in the properties.
The final orders made in December 2010 specified that any interest in the four properties was to vest in J absolutely. Those orders finally resolved the parties' dispute in respect of claims to the properties. The vesting of the property was not expressed to be conditional upon, or contemporaneous with, the payments provided for in paragraphs 1, 2 or 3 of the December 2010 orders. The only interest which V had in the properties thereafter was the right to occupy the Helena property pending payment of the sum provided for in order 3, but that must necessarily be construed as a right as against J, who was a party to the proceedings, and not a right as against a mortgagee following default under the mortgage. In any event, it is not a right upon which V now relies, or at any time relied, to support her caveat.
In my view, whatever interest V may have had to support a caveat following the making of the August 2008 orders, that interest did not survive the making of the December 2010 orders. What V had following the making of the December 2010 orders was a right to payment by J of the amounts specified in the orders. I suspect from comments made by V in earlier proceedings, that she may consider that a caveat, of itself, is, or creates, an interest in land. That is, of course, a fundamental misconception. A caveat merely protects some interest in land which much exist independently of the caveat.
It follows that the primary basis upon which V opposes the removal of the caveat is not established. HSBC is entitled to an order that the caveats be removed.
It follows that V's application for the operation of the caveat to be extended until further order must be dismissed, and there is no basis upon which these proceedings should be transferred to the Family Court.

The application in the Possession Action

The Possession Action was commenced on 6 December 2012 by writ of summons naming J and A Pty Ltd as first and second defendant, respectively. The statement of claim pleaded the existence of a loan agreement between HSBC and J for the advance to him of $2,598,000 on security of a first registered mortgage over four properties, including the Helena property and the East Perth property. It pleaded a guarantee by the second defendant of the first defendant's obligations under the mortgage. It pleaded that the loan had been advanced to the first defendant on 22 October 2008, and that the first defendant was in default of repayments under the loan agreement. It pleaded the notice of default and sought an order for the delivery of possession of the four properties and payment of the principal sum. As against the second defendant, it sought payment of the principal sum under the guarantee.
On 23 May 2013, no appearance having been entered by the defendants to the writ, leave to enter judgment was granted by a registrar who ordered that possession of the four properties be delivered up to HSBC within 28 days of service of the judgment, and payment by the defendants of the sum of $2,683,172.64 being the principal and interest due under the mortgage as at 23 May 2013.
Prior to applying for default judgment in the Possession Action, HSBC's solicitors wrote to each of the defendants and to V, on 2 April 2013 advising that they had been instructed to apply for default judgment and seeking clarification as to who is in possession of the secured properties. In an affidavit filed in the Possession Action, a law clerk employed by HSBC, Ms Wells, deposed to the fact that she had a telephone conversation with V on 17 April 2013 concerning occupation of the various properties, including the Helena property and the East Perth property. According to Mr Michael Lockey, an employee of HSBC, HSBC's solicitors engaged in without prejudice to discussions with both J and V in relation to the sale of the properties for months before judgment was sought, but those discussions were unsuccessful.
V says in her affidavit that, after HSBC sent a default notice to the Helena property addressed to J, which she opened, she telephoned Mr Lockey and told him that J had not complied with the December 2010 orders to pay her $710,000 and that she would file an application to the Family Court seeking to be at liberty to sell the four properties. Mr Lockey deposed that he has no recollection of that telephone conversation. It is not necessary to resolve that issue because it is clear that HSBC, through its solicitors, was, by the time of applying for judgment, aware of the March 2012 order because the order was attached to an affidavit of Ms Wells filed in the Possession Action in support of the application for default judgment.
V contends that, had HSBC's solicitors provided her with a copy of the writ of summons or the statement of claim, or adequate notice of the hearing of the application for default judgment, she would have applied to be joined in those proceedings. She does not explain why she did not take that action in light of the advice to her in HSBC's solicitors' letter of 2 April 2013 that they were instructed to apply for summary judgment. She said that the only formal documentation she received regarding the possession action was on 20 August 2013 when she received a letter from HSBC's solicitors attaching a copy of the judgment granted on 23 May 2013. That evidence is difficult to reconcile with an affidavit sworn by V on 5 June 2013 in the Family Court which referred to the Supreme Court order to vacate the properties, and attached a copy of a letter to J and A Pty Ltd from HSBC's solicitors dated 30 May 2013 which enclosed a copy of the judgment of 23 May 2013.[3] It is also difficult to reconcile with a letter written to her by HSBS's solicitors dated 11 July 2013 advising that a solicitor will attend the Family Court hearing on 15 July 2013 on behalf of HSBC and indicating that HSBC would forebear on enforcing the judgment for possession in relation to the Helena property on the basis it would provide an additional 28 days' notice if it required vacant possession.
[3] Affidavit of V, affirmed 10 September 2014, CFV 20.
V did not attach to her affidavit in this application a copy of her application to the Family Court that was heard on 15 July 2013, but only the affidavit in support. The precise orders she was seeking are not, therefore, disclosed. Nor do they emerge clearly from the transcript of proceedings before acting Magistrate Kaeser when the matter came on for hearing on 15 July 2013. The transcript reveals that there was discussion of the possibility of cross‑vesting the Possession Action to the Family Court, but the Magistrate took the view that, those proceedings having been completed by a final judgment, and V's attempts to appeal the decisions having been unsuccessful, nothing remained to be cross‑vested. He dismissed her application noting that he would leave to V 'to negotiate the terms of your withdrawal of caveats with the bank'.

V also attached to her affidavit a transcript of proceedings before the Master in this Court on 20 June 2013. The transcript apparently relates to an application by V for an extension of time to appeal against the Registrar's judgment of 23 May 2013. In dismissing her application, the Master concluded that there was no basis upon which V could be joined as an intervenor, but even if she were, he did not consider that an appeal by her would have any prospect of success.
As I understand V's submissions, they are that:
i.HSBC was obliged to join her as a defendant in the Possession Action because of her interest under the Family Court orders;
ii.She was not given notice of the actual hearing of the application for judgment in the Possession Action on 23 May 2013;
iii.Had she been given notice of the proceedings, she would have applied to be joined as a party and would have brought to the Court's attention the fact of the Family Court orders, J's non‑compliance with them and his claim that the bank had knowledge of the August 2008 orders when it made the advance to J;
iv.Had either the Magistrate in the Family Court, or Master Sanderson, been told of the true position in relation to the bank's knowledge of the Family Court orders, their decisions might have been different;
v.She should now be given the opportunity to bring proceedings in the Family Court pursuant to s 90AF of the Family Law Act, which enables the Family Court to make orders and grant injunctions against third parties in relation to the property of a party to a marriage, and to alter rights, liabilities and proper interests of a third party in relation to the marriage. She also suggests that a claim may be available under s 106B of the Family Law Act to set aside the mortgages.
I do not accept the first of those propositions. HSBC's claim to possession was based upon its entitlements under its mortgage and loan agreement following default by the borrower under the loan agreement. V was not party to those agreements. HSBC had no obligation to join V as a defendant. Even if it is accepted that HSBC was aware of the existence of the August 2008 and December 2010 orders, for reasons explained above, V held no interest in the properties after the final orders were made in December 2010. Even if she did, that was a matter which would necessarily have to be dealt with following sale of the properties by the mortgagee, in the same way that any other registered interests must be dealt with in order to enable settlement of any sale of the properties to be effected. The existence of other registered interests did not impose an obligation on HSBC to join the holders of those registered interests in its action for possession against the mortgagor. It would have been open to V to apply to be joined, or at least to be heard, on the application for possession, but she did not do so. That she may have had a right to be joined had she applied does not mean that HSBC was obliged to join her. Even if, notwithstanding the apparent discussions and negotiations which had gone on between HSBC and V over some considerable period prior to 23 May 2013, she had not been given a copy of the writ and chamber summons, or specifically advised of the hearing on 23 May 2014, there is no evidence to suggest that she ever advised HSBC or its solicitors that she wished to be joined in any enforcement proceedings that were on foot. She was clearly aware from the 2 April 2013 letter that an application for default judgment was to be made.
Inherent in V's application for an extension of time to appeal was the proposition that she should be joined in the Possession Action for the purposes of instituting the appeal. That possibility was specifically rejected by the Master. There was no appeal against the Master's decision. I note in this context that, notwithstanding that O 18 r 10 of the Rules of the Supreme Court 1971 (WA) provides a discretion to the Court, in action for possession of land, to join a person who is not a party to an action but who is in possession of land, O 18 r 6 provides that no cause or matter shall be defeated by reason of the misjoinder or non‑joinder of any party.
It must be borne in mind that the making of the order for possession did not, of itself, affect the interests which V claims supported her caveat, namely an interest in the proceeds of sale of the properties arising from the August 2008 orders.
For the same reasons, it was not necessary that HSBC gave notice to V of the hearing date for the application for judgment. The Court was advised, by an affidavit of Ms Wells sworn on 19 April 2013, of who was in possession of the four properties, and, in particular, that V was in possession of the Helena Property. Notwithstanding that evidence, the Court did not, of its own motion, seek to add V as a defendant, and, as already noted, HSBC was not obliged to make that application itself. V's second and third propositions, therefore, do not provide a basis upon which the orders of 23 May 2013 should be set aside, even if that course were now open to me.
V's fourth contention is that the outcome of her application to the Family Court and to the Master might have been different if she had brought to the Court's attention information as to HSBC's knowledge of the prior Family Court orders, and J's non‑compliance with them. I take this argument to be advanced in order to contend that V should not be taken to have exhausted all of her remedies in relation to 23 May 2013 orders. No reason is advanced as to why those matters were not brought to the attention of the judicial officers concerned when the matters were before them. It is not now open to V to argue that those failed applications should be treated as of no consequence because she did not advance an argument which she now wishes to make. Clearly, the appropriate course, if the orders of 23 May 2013 were to be challenged, was by way of appeal. That course was attempted and failed. It is now not open to V to seek to have the orders simply set aside, over 12 months after they were made, by way of an application by chamber summons in an action that has been finalised.
As to the opportunity to commence proceedings in the Family Court under s 90AF or s 106B of the Family Law Act, a number of obvious difficulties arise. One is that the remedy under s 90AF is subject to the qualification found in s 90AF(3)(b) which prevents an order being made concerning a debt of a party to a marriage if the effect of the order would result in the debt not being paid in full. In relation to a claim under s 106B, the foreshadowed action seeking to set aside the loan agreement and mortgage between J and HSBC faces the difficulty that the rights under those documents have now merged in a judgment. There is at least a serious doubt that it would now be open under s 106B to set aside the mortgage and loan agreement, or alter interests arising as a result of those agreements.
To the extent that the course proposed by V involves the exercise of discretion, it is relevant that claims of this nature have only been foreshadowed, for the first time, in the context of the present applications notwithstanding that the loan agreement and mortgage were transacted in 2008, there appears to have been substantial dialogue and negotiations between HSBC and V at least over the last couple of years, the judgment in the Possession Action was granted over 15 months ago and there is no suggestion in the materials before me that there is any sale at under value. Furthermore, there is no issue that around $2,174,000 of the funds advanced by HSBC under the loan agreement were applied to discharge a liability which V and J had to NAB. V thus received a benefit from that payment. Her complaint appears to be that the total indebtedness secured against the four properties was increased in circumstances where, to HSBC's knowledge, J was restrained by injunction from further encumbering the properties. If such a claim could be made out, it would sound in damages as against HSBC. HSBC is a bank and there is no suggestion that it could not meet any claim for damages. There is no necessity to effectively restrain the sale of the properties, thus prejudicing not only HSBC but also the innocent third party purchasers while V pursues whatever rights she may have.
For those reasons, there is no foundation upon which the application to set aside the orders made on 23 May 2013 or to remit the now completed action to the Family Court under the Cross-vesting Act could possibly be made. The application should be dismissed.

Conclusion

There should be an order in CIV 2046/2014 that caveat K775041 lodged by the first defendant over the Helena property and the East Perth property be removed pursuant to s 138(2) of the Transfer of Land Act 1893 (WA). The first defendant's chamber summons dated 10 September 2014 should be dismissed.
In CIV 2980/2012, the summons issued by V dated 10 September 2014 should be dismissed.

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Citations

HSBC Bank Australia Ltd v v [2014] WASC 359

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[2014] WASC 359

30 September 2014