Kellas-Sharpe v PSAL Limited - [2012] QCA 135

[2012] QCA 135

COURT OF APPEAL

FRASER JA

Appeal No 2828 of 2012
SC No 3700 of 2011

WENDY KELLAS-SHARPE and
GOLDIWAY PTY LTD and
OPM HOLDINGS QLD PTY LTD Applicants/Appellants

PSAL LIMITED Respondent

BRISBANE

DATE 23/05/2012

JUDGMENT

FRASER JA: On 16 April 2012, I refused an application by the appellants for a stay of orders made in the Trial Division on 8 March 2012 that the respondent may enter into possession of and recover land mortgaged to it if, as occurred, the appellants failed to pay the respondent $1,366,330.95 on or before 4 pm, 28 March 2012. On 4 May 2012, the appellants filed a further application for a stay of the same order.

In the appeal, the appellants seek to challenge the trial judge's decision that a clause in the loan agreement and guarantee between the appellants and respondent was not void as a penalty. The clause provides for a "standard rate of 7.50 per cent per month” and that “whilst the borrower is not in default under the facility the lender will accept interest at the concessional rate of 4.00 per cent per month".

On the last occasion, my decision to refuse a stay was based, in part, upon the following conclusions:

(a)The best that could be said about the appellants' prospects of successfully challenging that provision was that the appeal was arguable in the High Court and perhaps also in the Court of Appeal.

(b)As to the disadvantage to the appellants of not ordering a stay, the respondent would exercise its powers as mortgagee in order to sell all of the land owned by the appellants, including a farm which has been in the first appellant's family’s hands for generations, the appellants probably would become insolvent. And there was a prospect that it would become impracticable for the appeal to be pursued.

(i)On the figures produced by the appellants, the only equity available to the respondent to recover its debt was $250,000 as equity in Lot 2, 396 Lake Cooroibah Road, over which the respondent has a mortgage. A stay would erode the respondent's likely recovery by the amount of its own interest expense of 25 per cent per annum compounding annually applied to the estimated shortfall of $250,000.
(ii)The appellants' evidence suggested that there might be equity also in 545 Ainsworth Road, Leeville, over which the respondent has an equitable mortgage. According to a schedule produced by the first appellant, its value was $1,550,000 and a first mortgage to a bank secured debt of $1,300,000. However, a subsequent affidavit sworn by the first appellant deposed that $700,000 was secured over the same property to Mr Mulhern, a family accountant and friend. The evidence left it unclear whether there was in fact further equity in that property which stood as security for the respondent's debt.

(iii)The appellants' net equity positions might be eroded by the accrual of further interest owing to mortgagees…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] QCA 135
Decision Date: 23/05/2012

CaseChat Overview and Summary

In the Court of Appeal, the applicants sought to challenge the decision of the trial judge that a penalty clause in the loan agreement and guarantee between them and the respondent was not void. The applicants had failed to repay the loan and the respondent sought to exercise its rights under the security, including taking possession of the property. The applicants applied for a stay of the orders made by the trial judge, which were subsequently refused by the Court of Appeal. The applicants sought to appeal the decision, arguing that there had been a significant change in circumstances since the first application for a stay was made.
The court considered whether the new evidence presented by the applicants was significant enough to warrant a reconsideration of the earlier decision. The applicants argued that the respondent had accepted the proceeds of a sale of a motor vehicle, that the debts secured by equitable mortgages exceeded the value of the properties, and that there was a contract of sale for one of the properties. The court found that these matters were not significant changes in circumstances as they could have been adduced at the first hearing. The court also considered the disadvantage to the respondent if a stay were granted, and found that it would erode the respondent's likely recovery by the amount of its own interest expense. The court concluded that the applicants had not shown that there had been a significant change in circumstances, or that they had become aware of facts which they could not reasonably have known or found out in time for the first encounter.
The Court of Appeal dismissed the appeal and ordered the applicants to pay the respondent's costs of the application on the ordinary basis. The court held that the trial judge's decision that the penalty clause was not void was correct, and that the applicants had not shown that there were any significant changes in circumstances since the first application for a stay was made. The court also noted that the applicants had not provided any security to protect the respondent against the erosion of the amount it would have been able to recover if the stay were granted. The court found that the applicants had not shown that there were any significant changes in circumstances since the first application for a stay was made, and that the trial judge's decision should be upheld.

Orders