Mavaddat v HSBC Bank Australia Ltd
[2015] WASCA 205
•9 OCTOBER 2015
MAVADDAT -v- HSBC BANK AUSTRALIA LTD [2015] WASCA 205
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASCA 205 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:105/2015 | 2 OCTOBER 2015 | |
| Coram: | MURPHY JA | 9/10/15 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Application granted | ||
| B | |||
| PDF Version |
| Parties: | FARIBA MAVADDAT HSBC BANK AUSTRALIA LTD MICHAEL MOOJAN MAVADDAT |
Catchwords: | Practice and procedure Application for a stay Turns on own facts |
Legislation: | Civil Judgments Enforcement Act 2004 (WA), s 15 |
Case References: | Fletcher v Ould Pty Ltd [2000] WASC 322 Harvey v McWatters (1948) 49 SR (NSW) 173 HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153 Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; (1972) 126 CLR 161 Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168 Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : MAVADDAT -v- HSBC BANK AUSTRALIA LTD [2015] WASCA 205 CORAM : MURPHY JA HEARD : 2 OCTOBER 2015 DELIVERED : 9 OCTOBER 2015 FILE NO/S : CACV 105 of 2015 BETWEEN : FARIBA MAVADDAT
- Appellant
AND
HSBC BANK AUSTRALIA LTD
First Respondent
MICHAEL MOOJAN MAVADDAT
Second Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : ACTING MASTER GETHING
Citation : HSBC BANK AUSTRALIA LTD -v- MAVADDAT [2015] WASC 153
File No : CIV 1674 of 2014
Catchwords:
Practice and procedure - Application for a stay - Turns on own facts
Legislation:
Civil Judgments Enforcement Act 2004 (WA), s 15
Result:
Application granted
Category: B
Representation:
Counsel:
Appellant : Mr C S Williams
First Respondent : Mr G S Tinsley
Second Respondent : No appearance
Solicitors:
Appellant : Solomon Brothers
First Respondent : Ashurst Australia
Second Respondent : No appearance
Case(s) referred to in judgment(s):
Fletcher v Ould Pty Ltd [2000] WASC 322
Harvey v McWatters (1948) 49 SR (NSW) 173
HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153
Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; (1972) 126 CLR 161
Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168
Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649
- MURPHY JA:
Introduction
1 This is an application under s 15 of the Civil Judgments Enforcement Act 2004 (WA) (the Act) for an order suspending the enforcement of a judgment of Acting Master Gething dated 22 June 2015.
2 Acting Master Gething granted summary judgment against the appellant in relation to monies advanced under a loan described in the acting master's reasons as the 'first loan agreement': HSBC Bank Australia Ltd v Mavaddat.1
Background
3 The appellant and her husband entered into three loan agreements with the respondent (bank) in the period 2004 - 2006. The borrowing was secured over the family home. Defaults occurred under the loan agreements and the bank applied for summary judgment.
4 The first loan agreement was to enable the appellant and her husband to purchase the family home. It was originally purchased in joint ownership in late 2004. In 2005 the appellant became the sole registered proprietor.
5 Acting Master Gething accepted, for the purposes of the summary judgment application, that the purpose of the second loan was to refinance the husband's business loan with ANZ Bank, and that the purpose of the third agreement was to create a business overdraft facility which, on its face, conferred no benefit on the appellant.
6 The acting master accepted that the appellant had an arguable defence based on Yerkey v Jones2 in relation to the second and third loan agreements. He dismissed the bank's claim for summary judgment in those respects and granted leave to defend with respect to the second and third loan agreements.
7 In relation to the first loan agreement, the acting master found, in effect, that there was no arguable case that the appellant was a volunteer. The loan was used by the appellant to purchase a joint interest in the property and, in 2005, whilst the first loan subsisted, she became the sole registered proprietor and the bank accepted her mortgage in replacement of the original mortgage given by the appellant and her husband as joint proprietors.
8 The acting master also found, in effect, inter alia, that there was no sufficient evidentiary foundation in the material before him to suggest that the appellant had arguable claims with respect to equitable or statutory3 unconscionable conduct in relation to the first loan agreement.
9 The acting master also rejected the appellant's contention that there was 'some other reason' within the meaning of O 14 of the Rules of the Supreme Court 1971 (WA) to decline the application for the summary judgment, in relation to the first loan.
10 Acting Master Gething accordingly entered summary judgment against the appellant in respect of the first loan agreement. He, in effect, ordered her to repay the sum of approximately $1.2 million, and ordered repossession of the property. The acting master also made a further order, presumably in contemplation that the property would thereupon be sold by the bank in exercising its rights under the mortgage with respect to the first loan agreement. The acting master ordered, in effect, that the balance of the proceeds of the sale of the property, after deducting the costs of sale and the amount payable under the first loan agreement (ie, approximately $1.2 million) should be paid into court pending the determination of the action, or otherwise secured with the agreement of the parties.
The appeal to this court
11 The appellant filed an appeal notice on 10 July 2015. The appellant's case was filed on 14 August 2015. The bank's answer was filed on 22 September 2015. The appeal index is due to be settled on 13 October 2015.
12 By her grounds of appeal, the appellant contends, in substance, that:
(a) the primary court should have found that there was a triable issue as to whether the appellant was a volunteer (grounds 1 - 3);
(b) the primary court erred in failing to find that there was a triable issue as to whether the appellant's husband exercised undue influence over the appellant (ground 4);
(c) the primary court should have found that in order for the first limb of the Yerkey v Jones principle to apply,4 the only fact, notice of which it was necessary to prove, was the fact of the relationship of husband and wife (ground 5);
(d) the primary court erred in failing to find that the appellant's evidence raised a triable issue as to whether the appellant was labouring under a special disability when dealing with the bank under the first loan agreement, and in failing to find that there was a triable issue as to whether the bank was sufficiently aware of her special disability and unconscionably took advantage of it (grounds 6 and 7);
(e) the primary court erred in failing to find that there was a triable issue as to whether, in all the circumstances, the bank had engaged in unconscionable conduct in contravention of s 51AC of the Trade Practices Act (ground 8); and
(f) the primary court erred in entering summary judgment in circumstances where the bank was not required to discharge its mortgage over the property upon payment of the amount due under the first loan agreement, thereby preventing the appellant from being able to discharge the mortgage upon payment due under the first loan agreement, even in the event that her defences under the second and third loan agreements were successful.
13 Insofar as grounds 1 to 5 involve the proposition that the appellant was a volunteer, the appellant in the appellant's case submits that the primary court did not examine the substance of the matter. It is alleged that the primary court did not undertake any analysis as to whether the application of the monies lent under the first loan agreement to purchase the home in the joint names of the appellant and her husband was sufficient to preclude the appellant being a volunteer. It is also alleged that the primary court had failed to analyse 'the nature of the benefits received, and the circumstances of the benefits received, in order to assess whether or not [the appellant] was to be considered a volunteer'.5
The suspension application
14 The suspension application was filed on 14 August 2015. In support of the application, the appellant gave evidence as to her personal and financial circumstances. The appellant in her affidavit gave evidence to the effect that she had placed the home on the market for sale at an asking price of $3.5 million, and had instructed real estate agents to bring about a sale. She also gave evidence that she instructed valuers to value the home. The appellant's evidence was to the effect that the family home had been valued at $3.05 million. She also deposed that she had been able to obtain approval from a private financier for a loan of $1.8 million which was sufficient to discharge the sum found to be payable under the first loan agreement. However, any loan would only be made on the basis of the provision of a first registered mortgage over the home, and that was not possible whilst the bank maintained that the mortgage covered the liability under the second and third loan agreements.
15 The effect of the evidence is that the family home is her only asset; she lives at the family home with her husband and her daughter; she is unemployed; and if the bank were to repossess the property and sell it, she and her family would be at risk of becoming homeless. There was also evidence to the effect that the appellant's daughter is in Year 12 and that any mortgagee sale of the family home would cause disruption in relation to her Year 12 studies.
16 The bank adduced evidence to the effect that there had been a long history leading up to the proceedings commenced by the bank, including earlier attempts by the Mavaddats to sell the family home to reduce bank debt; that the last payment to the bank in respect of the first loan agreement was on 20 November 2012, and the last payment under the second and third loan agreements was on 29 October 2012; that the amounts outstanding now totalled approximately $2.7 million under the three loan agreements; and that as time continued to pass, the value of the security was being eroded. The bank also led evidence to the effect that the appellant had lodged certain complaints in relation to the loans with the Financial Ombudsman Service, and that the bank had given the Mavaddats until the end of 2012 to sell the property. The bank's evidence was also to the effect that there was a further complaint to the Financial Ombudsman Service in 2013, and that the bank commenced proceedings in about March 2014.
17 The bank contends that the main concern of the appellant is to avoid a mortgagee sale. It submits that this is not a sufficient basis to prevent a mortgagee exercising its power of sale, and that the appellant should not be entitled to 'hold out' until she receives an offer acceptable to her, given that she has had ample time to sell the property and has failed to do so to date.
18 The bank also contends that the Mavaddats had not let the house and had thereby foregone the opportunity to earn rental income from the property.
19 The bank further contends in the alternative that if a stay were granted, it should be on terms that the debt owing under the first loan agreement be paid into court. Reference was made to Inglis v Commonwealth Trading Bank of Australia.6 Alternatively, it was submitted that even if the principle outlined in Inglis did not strictly apply to these circumstances, the court should nevertheless 'mould an order' and condition the exercise of any stay on the basis that the appellant at least pay into court all unpaid interest on the three loans.
Disposition
20 The relevant principles in relation to the application were not in dispute. In Tradesman Technologies Pty Ltd v Ameduri,7 Pullin JA said:
Both under s 15 [of the Act] and in an application for a stay, the principles are as follows:
(a) The successful litigant is ordinarily entitled to enforce a judgment pending the determination of any appeal.
(b) It is for the applicant for a stay to move the court to a favourable exercise of its discretion. Under s 15(3) this court may only make a suspension order if there are 'special circumstances' that justify doing so and in an application for a stay under the rules this is also a usual requirement.
(c) The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation or whether a refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. This may shortly be described as requiring the court to consider whether the right of appeal will be rendered nugatory if a stay is not granted.
(d) If it can be demonstrated that the right of appeal will be rendered nugatory if a stay is not granted, the stay will generally still be refused unless it can be established that the appeal has ultimately reasonable prospects of success.
(e) Finally, the stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted: Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308.
21 For present purposes, the subject matter of the litigation is, in essence, the alleged defence to the bank's claim under the first loan agreement which is secured by the appellant's mortgage of the family home. If a stay were not granted, the bank would be entitled to sell the home without a determination of that defence on the merits. If this court were ultimately on appeal to allow the appeal, the effect of the court's decision would be to find that the bank did not have an entitlement to sell the home without the appellant first having a determination of her alleged defences on the merits. Accordingly, in my opinion, the grant of a stay would preserve the subject matter or integrity of the litigation. The contention raised by the bank to the effect that a stay is unnecessary because the appellant is herself intending to sell the home goes more, in my view, in the particular circumstances of this case, to the question of the balance of convenience, rather than to whether a stay is necessary to preserve the subject matter or integrity of the litigation - which concerns the bank's entitlement to sell the home. As to the balance of convenience in this regard, see in particular [26] below.
22 On the question of whether the appeal has ultimately reasonable prospects of success, my preliminary impression is that the grounds of appeal are not strong. In relation to the volunteer point, there does not appear to be any suggestion that the first loan agreement was in terms or in substance in the nature of a guarantee given by the appellant to guarantee her husband's borrowings or some third party borrowings, including the borrowings of some family company controlled by her husband. Nor was it made clear to me in the current application what evidence there was before the primary court which provided some foothold for the proposition that there was a triable issue that the appellant was otherwise in substance a volunteer under the first loan agreement. Whilst in oral submissions, the appellant's counsel observed that the appellant had not had the benefit of discovery and the like, it would appear on a preliminary view that if the primary court's error was in not considering the nature and circumstances of the benefits received, it was presumably within the appellant's power to adduce some evidence which raised a triable issue in that regard.
23 In relation to the other defences raised in the grounds of appeal, it was not clear to me that the appellant challenged the conclusion that the first loan agreement was made for the purpose of allowing her to acquire a joint interest in a substantial residential property. If that were not challenged, and if the appeal in relation to her being a volunteer did not succeed, it was not clear on what basis it may be said that the lending arguably constituted unconscionable conduct in the equitable or statutory sense including, in relation to at least the former, that the bank had the requisite notice of the equity.
24 Notwithstanding these preliminary observations, I could not conclude, as the bank in effect asserts, that the appeal demonstrably has no prospect of succeeding.
25 In relation to the balance of convenience, the bank relied on its evidence referred to earlier. In particular, it pointed to the delays that occurred in 2011 - 2013 whilst the appellant made applications to the financial ombudsmen (which I infer were unsuccessful) and the bank gave time for the property to be sold. The bank also contends that insofar as the appellant merely wishes to sell the property at a time and in circumstances convenient to her, that could provide no proper ground for the grant of a stay. These matters all have considerable force. The bank also contends that as the property is on the market, the property cannot have any special significance beyond its realisable value as an asset.
26 On the other hand, the inference is open that the property is only on the market in response to the demands of the bank and that the sale of the family home would not otherwise have been in contemplation but for the claims by the bank. The primary court has determined that the appellant should be given leave to defend the bank's claim in respect of the second and third loan agreements, but the appellant cannot use the property to pay out the bank specifically under the first loan agreement pending determination of this appeal. Also, the fact that it is a family home remains of significance and I accept the potential for disruption to Year 12 studies if the home were sold at least before late November 2015. I also take into account that the appeal has been prosecuted expeditiously. It would likely be listed for hearing in the first few months of next year. Also, on the evidence there is ample equity in the home to cover the amount due under the first loan agreement and, further, the value of the home exceeds the amounts claimed under the first, second and third loan agreements in total.
27 Taking everything into account, on balance I am inclined to order a stay on an undertaking by the appellant that she do everything necessary and reasonable to prosecute the appeal expeditiously.
28 I would not order that the whole amount due under the first loan agreement, or the interest outstanding under all three loan agreements, be paid into court as a condition of the stay. As to the former, the appellant is, in substance, challenging the very existence of the power to sell the property in respect of the amounts due under the first loan agreement, and is not merely disputing the amount payable.8 As to the latter, the considerations referred to in [26] above, together with consideration that such a condition could not, on the evidence, be complied with and would thereby undermine the grant of any stay, combine to indicate that such a condition should not be imposed.
29 I will hear the parties as to the precise terms of orders in accordance with these reasons.
1HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153 [14].
2Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649.
3 Section 21 of the Australian Consumer Law.
4 That is, actual undue influence by a husband over a volunteer/guarantor wife.
5 Appellant's submissions, pars 19 - 20.
6Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; (1972) 126 CLR 161.
7Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168 [22].
8 Cf Harvey v McWatters (1948) 49 SR (NSW) 173, 177 - 178; Fletcher v Ould Pty Ltd [2000] WASC 322 [12] - [13].
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