Kenney v Commonwealth Bank of Australia
[2016] WASCA 44
•15 MARCH 2016
KENNEY -v- COMMONWEALTH BANK OF AUSTRALIA [2016] WASCA 44
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASCA 44 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:103/2014 | 15 OCTOBER 2015 | |
| Coram: | BUSS JA NEWNES JA MURPHY JA | 15/03/16 | |
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | GREGORY PETER KENNEY COMMONWEALTH BANK OF AUSTRALIA |
Catchwords: | Sale of land Default by appellant/mortgagor under mortgage Land subject to Transfer of Land Act 1893 (WA) Appellant/mortgagor sought order for foreclosure under Property Law Act 1969 (WA) in lieu of mortgagee's sale Whether court had power to order foreclosure Whether appellant agreed to terms of advances under the mortgage |
Legislation: | Nil |
Case References: | Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Eng Mee Yong v Letchumanan [1980] AC 331 New Beach Apartments Pty Ltd v Epic Hotels Pty Ltd and 12 Ors [2007] NSWSC 474 Sandgate Corporation Pty Ltd (in liq) v Ionnou Nominees Pty Ltd [2000] WASC 91; (2000) 22 WAR 172 SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : KENNEY -v- COMMONWEALTH BANK OF AUSTRALIA [2016] WASCA 44 CORAM : BUSS JA
- NEWNES JA
MURPHY JA
- Appellant
AND
COMMONWEALTH BANK OF AUSTRALIA
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
File No : CIV 1869 of 2013
Catchwords:
Sale of land - Default by appellant/mortgagor under mortgage - Land subject to Transfer of Land Act 1893 (WA) - Appellant/mortgagor sought order for foreclosure under Property Law Act 1969 (WA) in lieu of mortgagee's sale - Whether court had power to order foreclosure - Whether appellant agreed to terms of advances under the mortgage
Legislation:
Nil
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant : In person
Respondent : Mr M J Feutrill
Solicitors:
Appellant : In person
Respondent : Minter Ellison Lawyers
Case(s) referred to in judgment(s):
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Eng Mee Yong v Letchumanan [1980] AC 331
New Beach Apartments Pty Ltd v Epic Hotels Pty Ltd and 12 Ors [2007] NSWSC 474
Sandgate Corporation Pty Ltd (in liq) v Ionnou Nominees Pty Ltd [2000] WASC 91; (2000) 22 WAR 172
SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418
1 JUDGMENT OF THE COURT: This is an appeal from a decision of Master Sanderson who, on the respondent's application for summary judgment, ordered that the appellant pay to the respondent the total sum of $1,756,917.12 and deliver up vacant possession of three properties mortgaged to the respondent.
2 The appellant contends that the master was in error in that, among other things, he should instead have acceded to the appellant's application, in effect, that there should be an order for foreclosure in lieu of the relief sought by the respondent. The appellant has also applied to adduce additional evidence on the appeal.
3 As the appeal notice was served out of time, the appellant requires an extension of time for its service. On 17 October 2015, it was ordered that the appellant's application for an extension of time be referred to the hearing of the appeal.
4 For the reasons which follow, we would refuse to grant an extension of time and would dismiss the appeal.
Background
5 On 18 October 2002, the respondent wrote to the appellant and Nola Michelle Kenney offering to advance to them the sum of $300,000, of which the sum of $100,000 was to be by way of a Better Business Loan and the sum of $200,000 by way of an overdraft account. The loans were to fund farming operations carried out on the appellant's land. Both loans were to be secured by a mortgage over various farming properties owned by the appellant.
6 Under the terms of the Better Business Loan, the appellant and Ms Kenney were required to pay instalments of interest of approximately $550 per month for the first three years and then annual repayments of principal of approximately $5,600, plus monthly instalments of interest, for the following 12 years. The principal repayments were to commence from 1 November 2005. Interest was to be debited monthly.
7 The appellant and Ms Kenney accepted the loans by executing the letter of offer. They subsequently executed the mortgage, dated 14 January 2003, which was registered at Landgate on or about 6 March 2003. (We note in passing that whilst both the appellant and Ms Kenney executed the mortgage, the appellant was the sole registered proprietor of the land.) The funds were duly advanced by the respondent.
8 On or about 31 August 2004, the respondent offered to increase the limit of the overdraft to $565,000 on certain terms and that was accepted by the appellant and Ms Kenney by executing the letter of offer.
9 It appears to be common ground that in 2010 the appellant asked for the overdraft limit to be increased to finance farming operations for the 2010 season. The respondent wrote to the appellant and Ms Kenney offering to further increase the overdraft limit from $565,000 to $860,000 on certain terms. Those terms included that the balance owing and the overdraft limit were to be reduced to $565,000 by 31 December 2010 and that an interest rate of 15.49% per annum would be charged on the funds drawn down. (The letter is said in the respondent's affidavit and statement of claim to be dated 10 July 2010, but the copy attached to the affidavit is dated 22 July 2010. Nothing turns on that discrepancy. We will refer to it as the 'July 2010 letter of offer'.)
10 It was not in issue that a copy of the July 2010 letter of offer was not signed by the appellant or Ms Kenney by way of acceptance. In an affidavit in support of the application for summary judgment, Mr Ficko, an officer of the respondent, says that the offer was accepted by the appellant, on behalf of himself and Ms Kenney, in several telephone conversations between May 2010 and July 2010, and by the advance and utilisation of the funds drawn down by the appellant.
11 Mr Ficko says that, as at 1 January 2011, the appellant and Ms Kenney were in default under the terms of the Better Business Loan and the overdraft, including in failing to reduce the amount owing on the overdraft to the sum of $565,000 by 31 December 2010. On 9 February 2011, the respondent made demand for payment under the overdraft in the sum of $923,163.92 and under the Better Business Loan in the sum of $66,664. On 10 February 2011, the respondent made demand for payment under the mortgage in the sum of $989,827.92. None of those demands were met.
12 On 22 March 2011, the appellant lodged a complaint with the Financial Ombudsman Service in relation to the loan transactions. That complaint was not resolved until 9 April 2013 when the Financial Ombudsman Service issued a determination rejecting the complaint.
13 On 10 May 2013, the respondent served on the appellant notices requiring him to deliver up vacant possession of the mortgaged properties within 10 days. The appellant failed to do so and, on 30 May 2013, the respondent commenced proceedings to recover the money said to be owing and for possession of the mortgaged properties.
14 The appellant filed a memorandum of appearance and a defence. He did so in person, not by a solicitor. In the defence, which was dated 5 March 2014 and signed by the appellant, the appellant pleaded, relevantly, that, on or about 22 July 2010, he received a letter from the respondent outlining the respondent's offer to increase the limit on the overdraft facility from $565,000 to $860,000. The appellant pleaded that he informed an officer of the respondent that he and Ms Kenney would not sign the letter or accept the offer, and that he subsequently returned the unsigned letter to the respondent. He denied that the respondent was entitled to the relief claimed.
15 On 30 April 2014, the respondent made an application for summary judgment supported by Mr Ficko's affidavit, which verified the amount claimed by the respondent.
16 In response, the appellant filed an affidavit, sworn on 28 May 2014, which he said was made 'in support of the Statement of Defence and Counterclaim' (in fact, there was no counterclaim by the appellant). In the affidavit, the appellant said that 'to the best of [his] knowledge' he had never received the July 2010 letter of offer. He said that had he seen the terms of the offer he would not have agreed to them. According to the appellant, the letter did not come to his attention until after the dispute was referred to the Financial Ombudsman Service.
17 The appellant also said that the respondent's delay in granting consent to a mining option agreement he intended to enter into with Spitfire Oil Limited meant that he lost the $18,750 he would have obtained on signing the agreement and sums of $37,500 to be paid twice yearly.
18 Shortly before the hearing of the summary judgment application, the appellant filed an application for a foreclosure order under s 53 of the Property Law Act 1969 (WA) in favour of the respondent. At the hearing, the appellant's primary focus of attention, through a McKenzie friend, who was given leave to speak on his behalf, was on the application for a foreclosure order.
19 The master concluded that the appellant had no arguable defence to the claim and gave judgment for the respondent. He dismissed the application for a foreclosure order.
The master's reasons
20 The master gave very brief ex tempore reasons. He found that the money claimed had been advanced to the appellant and was secured by the mortgage. There had been default by the appellant and the respondent was therefore entitled to judgment.
21 The master considered that the application filed by the appellant for a foreclosure order had no foundation. Under the terms of the mortgage the respondent was entitled to the relief it sought. The master therefore ordered that the appellant pay to the respondent the total sum of $1,756,917.12 and deliver up vacant possession of the mortgaged properties to the respondent.
The grounds of appeal
22 There are four grounds of appeal. They are (omitting the particulars) that the master:
1. erred in law by ruling that he did not have the power to order foreclosure pursuant to s 53 of the Property Law Act 1969 (WA) on the application of the mortgagor.
2. erred in fact and law when refusing the appellant’s application for an order for foreclosure.
3. erred in fact and law when granting judgment for the respondent mortgagee without distinction between the amount secured by mortgage against the land and the unsecured amount.
4. erred in fact and law insofar as the amount granted in judgment against the appellant exceeds the contractual entitlements of the respondent mortgagee and is harsh and unconscionable.
The disposition of the appeal
Grounds 1 and 2
23 These grounds can conveniently be considered together.
24 The appellant submitted that the master had erred in concluding that he had no power to order foreclosure pursuant to s 53 of the Property Law Act on the application of the appellant, as mortgagor. As we understood it, the appellant argued that (1) the master had the power to grant an order for foreclosure under s 53 of the Property Law Act on the application of a mortgagee of land under the Transfer of Land Act 1893 (WA); (2) an application for an order for foreclosure can be made by 'any person interested … in … the right of redemption': s 55(2) of the Property Law Act; and (3) that a mortgagor as the registered proprietor of the land is a 'person interested … in … the right of redemption'.
25 It followed, it was submitted, that the appellant, as the mortgagor, could apply for an order for foreclosure and the master was wrong to conclude that he could not.
26 That submission is misconceived. Section 53 of the Property Law Act does not provide a power to order foreclosure in respect of land under the Transfer of Land Act, or at all. It is as follows:
53. Foreclosure extinguishes right of action for mortgage debt and equity of redemption
(1) On a decree, judgment or order absolute for foreclosure, the mortgagee shall be deemed to have taken the property mentioned in the decree, judgment or order in full satisfaction of the mortgage debt and his right or equity to bring any action or to take other proceedings for the recovery of the mortgage money from the debtor, surety or other person is extinguished and the right or equity of the mortgagor to redeem the property is also extinguished.
(2) In the case of mortgages of land under the Transfer of Land Act 1893order absolute includes an order for foreclosure under the hand of the registrar when entered in the Register within the meaning of that Act.
27 It is clear that s 53 is concerned, not with the power of the court to make a decree, judgment or order absolute for foreclosure, but with the effect of such a decree, judgment or order absolute - which is, in substance, that the mortgagee is deemed to have taken the property in full satisfaction of the mortgage debt and is precluded from bringing other proceedings to recover the mortgage money.
28 The Property Law Act does not in fact contain any specific provision empowering the court to make an order for foreclosure. It is not necessary that it does. Where land is not subject to the Transfer of Land Act but is what is commonly described as 'old title land' or 'general law land', the process of foreclosure is a natural incident of the mortgage relationship and needs neither statute nor express power for its existence - see E I Sykes and S Walker, The Law of Securities, 5th edition, The Law Book Company Limited, at 130. In respect of mortgages of land under the Transfer of Land Act, the process of foreclosure is dealt with in s 121 and s 122 of that Act and is an administrative process commenced by an application in writing to the Commissioner of Titles, not a process that is initiated by legal proceedings or is the subject of a decree or judgment. An application for foreclosure under s 121 may only be made by the mortgagee or its transferee.
29 Nor was s 55(2) of the Property Law Act enlivened in the present case. That provision has its origins in s 48 of the Chancery Procedure Act 1852 (15 & 16 Vict c 86) (Imp) which, as a remedial measure, gave a statutory jurisdiction to the courts to order the sale of mortgaged land instead of foreclosure: see the discussion in Sandgate Corporation Pty Ltd (in liq) v Ionnou Nominees Pty Ltd [2000] WASC 91; (2000) 22 WAR 172 [39] - [42]; New Beach Apartments Pty Ltd v Epic Hotels Pty Ltd and 12 Ors [2007] NSWSC 474 [15] - [18]. That was subsequently extended to actions for redemption and other actions.
30 Section 55(2) provides:
55. Sale of mortgaged property in action for redemption or foreclosure
…
(2) In an action, whether for foreclosure, or for redemption, or for sale, or for the raising and payment in any manner of mortgage money, the Court, on the request of the mortgagee, or of any person interested either in the mortgage money or in the right of redemption, and, notwithstanding that —
(a) any other person dissents; or
(b) the mortgagee or any person so interested does not appear in the action, and without allowing any time for redemption or for payment of any mortgage money, may, if it thinks fit, direct a sale of the mortgaged property, on such terms, subject to subsection (3), as it thinks fit, including the deposit in Court of a reasonable sum fixed by the Court to meet the expenses of sale and to secure performance of the terms.
32 Considerable reliance was placed by the appellant in his written submissions on Sandgate Corporation. That, however, was a very different case to the present case. There a vineyard was liable to fall into disrepair unless the land on which it was located was sold promptly. The liquidator of the mortgagor of the land therefore applied for an order for sale of the land under s 55(2) of the Property Law Act, notwithstanding the objections of mortgagees who held mortgages registered under the Transfer of Land Act. The mortgagees argued that s 55(2) had no application to land under the Transfer of Land Act. That was rejected. It was held that s 55(2) is capable of operating in respect of land under the Transfer of Land Act in an 'action for sale' by the mortgagor, so long as the court is satisfied that there is no prospect the mortgagee will thereby lose the right it might otherwise have exercised to obtain an order for foreclosure under the Transfer of Land Act [81]. That does not assist the appellant.
33 These grounds have no merit and should be dismissed.
Ground 3
34 This ground was not the subject of either written or oral submissions by the appellant and it is not apparent what debt is alleged to be unsecured.
35 The mortgage provided that in consideration of certain advances and accommodation granted or to be granted at the request of the appellant to the appellant and Ms Kenney, the appellant 'for the purpose of securing to the [respondent] the payment of the Secured Moneys … hereby mortgages to the [respondent]' the appellant's farming properties.
36 The 'Secured Moneys' was defined to mean, among other things:
'all moneys … now or in the future to become owing or payable to the [respondent] by [Ms Kenney] and [the appellant] or either of them, either alone or on joint or partnership account or on any other account whatsoever whether as principal or surety.'
37 That is, the mortgage was what is commonly known as an 'all moneys mortgage'; it secured the whole of the mortgagor's indebtedness to the mortgagee.
38 There is nothing to suggest that any of the advances made by the respondent to the appellant and Ms Kenney fell outside the ambit of the mortgage. This ground must be dismissed.
Ground 4
39 As we understand it, there are two contentions by the appellant contained in this ground:
(1) that the amount of the judgment exceeded the amount to which the respondent was entitled as he had not agreed to the terms of the advance; and
(2) that if an agreement was made in terms of the July 2010 letter of offer, the respondent had engaged in unconscionable conduct in that it knew the appellant was under a special disability and had unconscientiously taken advantage of that by charging an excessive interest rate of 15.49% per annum on the funds advanced to the appellant. Reference was made to Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, 474.
40 We will deal with them in order. Before doing so, it is appropriate to set out briefly the principles that the master was required to apply on the application for summary judgment. They are well-established.
41 The plaintiff on an application for summary judgment bears the onus of establishing that the defendant has no defence to the claim and that judgment should be entered for the plaintiff. The power to order summary judgment will be exercised with great care and it is only in the clearest of cases, when there is a high degree of certainty about the ultimate outcome of the proceedings if it went to trial, that summary judgment ought properly be granted: SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 [20]. That does not mean, however, that the court must accept uncritically every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself: Eng Mee Yong v Letchumanan [1980] AC 331, 341.
42 The appellant did not dispute that he had received the additional funds referred to in the July 2010 letter of offer, or at least the bulk of them, but denied that he had agreed to pay interest on that money at the rate of 15.49% per annum or that the amount owing and the overdraft limit would be reduced to $565,000 by 31 December 2010, as stipulated in the letter. It is implicit that the master did not accept that denial.
43 There was an obvious difficulty for the appellant in advancing that contention in circumstances where he had given two very different versions of events concerning the July 2010 letter of offer.
44 In par 5 of the statement of claim the respondent pleaded that, on or about 10 July 2010 [sic, 22 July 2010], by a letter to the appellant and Ms Kenney, the respondent had offered to increase the overdraft limit from $565,000 to $860,000 on the terms set out in the letter and the appellant, on his own and Ms Kenney's behalf, had accepted that offer 'verbally …. during several telephone conversations with [the respondent] between May 2010 and July 2010', and by the advance and utilisation of the funds drawn down by the appellant.
45 In his defence to that plea, the appellant pleaded as follows:
As to paragraph 5 of the Statement of Claim, the Defendant:
(a) says that on or about 22 July 2010 the Defendant received from the Plaintiff a letter (Letter) outlining the Plaintiff's offer to the Defendant and [Ms Kenney] to increase the facility limit of the Overdraft Loan from $565,000 to $860,000 (July Offer);
(b) says that the Defendant had several telephone conversations with Craig Matthews of the Plaintiff about the July Offer between May 2010 and July 2010;
(c) says that during their telephone conversations, Craig Matthews stated words to the effect that the Plaintiff would make the July Offer to the Plaintiff [sic, Defendant] on the terms that:
(i) the plaintiff would increase the interest rate on the loan;
(ii) the Better Business Loan and the Overdraft Loan would end on 31 December 2010;
(iii) if the Defendant was unable to either pay out the Better Business Loan and the Overdraft Loan or refinance the loan with another financial institution by 31 December 2010, the Plaintiff would demand vacant possession of the land secured by the Mortgage;
(d) says that in or about July 2010, the Defendant and Craig Matthews had a telephone discussion about the Letter and the July Offer, whereby:
(i) the Defendant informed Craig Matthews that he and [Ms Kenney] would not sign the Letter or accept the July Offer; and
(ii) Craig Matthews informed the Defendant to return the unsigned Letter to the Plaintiff;
(e) says that in or about July 2010, the Defendant returned, by mail, the Letter to the Plaintiff; and
the Defendant otherwise denies the allegations contained therein.
46 In his subsequent affidavit in opposition to the summary judgment application (an affidavit that the appellant said in it was made in support of the defence) the appellant's version of events was quite different. There he said, relevantly:
15. To the best of my knowledge I did not see the letter of offer tendered by the [respondent] dated 10 July 2010. Had I seen the terms of the offer I would never have agreed.
16. Although the document required my signature to be witnessed and dated, it was never signed and did not come to my attention until our dispute was referred to the office of the Financial Ombudsman.
47 As mentioned earlier, the dispute was referred to the Financial Ombudsman Service on 22 March 2011 when the appellant lodged a complaint.
48 In his oral submissions on the appeal, the appellant reiterated that it was 'in the correspondence with the Financial Ombudsman Service in around 2011' that he first became aware of the terms of the loan facility in the letter, in particular the interest rate and the requirement to reduce the amount owing to $565,000 by 31 December 2010 (ts 8).
49 We should also note in passing that in an unsworn affidavit the appellant forwarded to the master's associate shortly before the hearing, the appellant put the time frame a little differently. There he said that he and Ms Kenney 'neither saw nor signed the letter' and that it only came to their attention in 2013 when they obtained copies of the respondent's correspondence.
50 When the inconsistency between his defence and the contention in his affidavits that he had never received the July 2010 letter of offer was pointed out to the appellant by the court on the hearing of the appeal, the appellant adhered to the version in his affidavits but offered no explanation for the entirely inconsistent assertions set out in his defence.
51 As we have said, the appellant did not deny that the additional funds referred to in the July 2010 letter of offer were advanced to and utilised by him. It is inherently improbable that the respondent would have advanced the funds if, as pleaded in the defence, the appellant had expressly rejected the terms of the advance and declined the offer of the funds. In the absence of a satisfactory explanation for the inconsistency between the defence and the sworn affidavit, the only reasonable inference is that the later contention that the appellant did not receive the letter was a subsequent invention born of the realisation of that improbability. In the circumstances, the inescapable conclusion is that the appellant received the letter and utilised the funds advanced by the respondent in the knowledge of the terms on which they were advanced. Indeed, even if, as alleged in the defence, he had refused the funds, the appellant was on notice of the terms on which the respondent was prepared to make the funds available and in choosing to utilise them must be taken to have accepted those terms.
52 In the circumstances, the master was entitled to reject, as he implicitly did, the appellant's contention that he had not agreed to the terms of the advance.
53 The issue of unconscionable conduct can be dealt with very briefly. There are two difficulties with it. First, it was not a matter raised before the master and it is clearly a matter upon which the respondent could have adduced evidence which could possibly have defeated the point. It is therefore too late to raise it on appeal: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, 438. Secondly, there was simply no evidence that was arguably capable of making out a case of unconscionable conduct on the part of the respondent. In particular, there was no evidence that the appellant was under a special disability in the relevant sense. There was also no evidence that the rate of interest charged by the respondent was any greater than the rate charged by other commercial lenders for lending of that nature.
54 We should mention that it is not clear whether the alleged delay by the respondent in granting consent to the mining option agreement with Spitfire Oil Limited is relied upon in support of this ground. In any event, suffice it to say that it does not assist the appellant on this, or any other, ground.
55 This ground should be dismissed.
The additional evidence
56 The additional evidence upon which the appellant sought to rely on the appeal consisted of attachments to the affidavit he had relied on below, those attachments having been omitted from the original affidavit. The attachments were said to be relevant to the appellant's application for an order for foreclosure. In addition, the appellant sought to rely upon a further affidavit also said to be relevant to that application. As the application for foreclosure was misconceived, we would refuse leave to admit the additional evidence.
The application for an adjournment
57 There is one final matter. At the outset of the hearing of the appeal, the appellant sought an adjournment of the hearing. He did so, in substance, on the basis that he intended to issue proceedings for damages against the respondent and that any damages he recovered would very substantially reduce the sum of some $1 million that he conceded he had received from the respondent. We dismissed the application and said we would provide reasons for that decision later.
58 We refused the application because the appeal involved matters quite distinct from those that would be raised by the appellant's proposed action. Whether or not the action for damages was successful would not bear upon any relief to which the respondent might be entitled in its claim against the appellant under the loan agreement and the mortgage. Any damages recovered by the appellant in the action would be a separate amount recoverable by the appellant from the respondent. There was therefore no proper basis for adjourning the appeal.
Conclusion
59 We would:
(1) refuse leave to admit the additional evidence;
(2) refuse leave to appeal; and
(3) dismiss the appeal.
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