Mavaddat v HSBC Bank Australia Ltd [No 2]
[2016] WASCA 94
•9/06/16
MAVADDAT -v- HSBC BANK AUSTRALIA LTD [No 2] [2016] WASCA 94
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASCA 94 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:105/2015 | 14 APRIL 2016 | |
| Coram: | McLURE P NEWNES JA MITCHELL J | 9/06/16 | |
| 30 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | FARIBA MAVADDAT HSBC BANK AUSTRALIA LTD MICHAEL MOOJAN MAVADDAT |
Catchwords: | Banking and finance Appeal against summary judgment Unconscionable conduct Loan to husband and wife used to secure mortgaged property Principle in Yerkey v Jones Whether appellant was arguably a volunteer Whether it is otherwise arguably unconscionable for the lender to enforce the mortgage where the loan has not been repaid |
Legislation: | Trades Practices Act 1974 (Cth), s 51AB Australian Consumer Law, s 21 |
Case References: | Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51 Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132 Bank of New South Wales v Rogers (1941) 65 CLR 42 Begbie v State Bank of New South Wales Ltd (1994) ATPR 41-288 Blomley v Ryan (1956) 99 CLR 362 Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457 Bylander International Consortium (Aust) Pty Ltd v Multilink Investents Pty Ltd [2001] NSWCA 53 Cal No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 390 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395 HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153 Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 Jenyns v Public Curator (Qld) (1953) 90 CLR 113 Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113 Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392 Kowalczuc v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205 Lois Nominees Pty Ltd v QBE Insurance (Australia) Ltd [2011] WASC 208; (2011) 42 WAR 75 Louth v Diprose (1992) 175 CLR 621 Maguire v Makronis (1997) 188 CLR 449 Mavaddat v HSBC Bank Australia Ltd [2015] WASCA 205 Narain v Euroasia (Pacific) Pty Ltd [2009] VSCA 290; (2009) 26 VR 387 Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 Powell v Powell [2002] WASC 105 Satchithanantham v National Australia Bank Ltd [2009] NSWCA 268 Schultz v Bank of Queensland Ltd [2015] QCA 208 Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 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 [No 2] [2016] WASCA 94 CORAM : McLURE P
- NEWNES JA
MITCHELL J
- 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:
Banking and finance - Appeal against summary judgment - Unconscionable conduct - Loan to husband and wife used to secure mortgaged property - Principle in Yerkey v Jones - Whether appellant was arguably a volunteer - Whether it is otherwise arguably unconscionable for the lender to enforce the mortgage where the loan has not been repaid
Legislation:
Trades Practices Act 1974 (Cth), s 51AB
Australian Consumer Law, s 21
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant : Mr C S Williams
First Respondent : Mr J Garas
Second Respondent : No appearance
Solicitors:
Appellant : Solomon Brothers
First Respondent : Ashurst Australia
Second Respondent : No appearance
Case(s) referred to in judgment(s):
Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51
Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132
Bank of New South Wales v Rogers (1941) 65 CLR 42
Begbie v State Bank of New South Wales Ltd (1994) ATPR 41-288
Blomley v Ryan (1956) 99 CLR 362
Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457
Bylander International Consortium (Aust) Pty Ltd v Multilink Investents Pty Ltd [2001] NSWCA 53
Cal No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 390
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395
HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153
Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161
Jenyns v Public Curator (Qld) (1953) 90 CLR 113
Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113
Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392
Kowalczuc v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205
Lois Nominees Pty Ltd v QBE Insurance (Australia) Ltd [2011] WASC 208; (2011) 42 WAR 75
Louth v Diprose (1992) 175 CLR 621
Maguire v Makronis (1997) 188 CLR 449
Mavaddat v HSBC Bank Australia Ltd [2015] WASCA 205
Narain v Euroasia (Pacific) Pty Ltd [2009] VSCA 290; (2009) 26 VR 387
Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353
Powell v Powell [2002] WASC 105
Satchithanantham v National Australia Bank Ltd [2009] NSWCA 268
Schultz v Bank of Queensland Ltd [2015] QCA 208
Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118
Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649
1 McLURE P: I agree with Mitchell J that the appeal should be dismissed. I also agree with his reasons on grounds 6, 7, 8 and 9. I propose to state my own reasons on grounds 1 to 4 on the subject of undue influence and the principle in Yerkey v Jones (1939) 63 CLR 649, as explained in Garcia v National Australia Bank Ltd (1998) 194 CLR 395.
2 Some confusion is occasioned by the fact that Dixon J in Yerkey v Jones, and then the majority in Garcia, confine their consideration to two kinds of case: the first in which there is actual undue influence by a husband over a wife and the second 'in which there is no undue influence but there is a failure to explain adequately and accurately the … transaction which the husband seeks to have the wife enter for the immediate economic benefit not of the wife but of the husband, or the circumstances in which her liability may arise' [23]. The second kind of case is the subject of the Yerkey v Jones principle which is directed at when a third party is 'tainted' by the conduct of the husband.
3 The acting master confined his consideration to actual undue influence and the principle in Yerkey v Jones. The acting master did not consider whether there was, in fact, a relationship of influence between the appellant and her husband of such a nature as to enliven the presumption of undue influence.
4 There are two categories of undue influence which are distinguished by who bears the burden of proof. The first category is actual undue influence. In that category, the burden is on the claimant to set aside the impugned transaction on the ground that it was the outcome of such an exercise of influence over the mind of the claimant that it is not considered a free act: Johnson v Buttress (1936) 56 CLR 113, 134.
5 The second category is presumed undue influence, which applies when there is a 'special relationship' between the relevant parties. The special relationship may be one of trust and confidence and/or power and authority. Either way, one person in the relationship must be in a position to exercise dominion over the other. There are two subcategories of presumed undue influence. The first subcategory is where the relationship is of a kind to automatically raise a presumption of undue influence (including parent and child; doctor and patient; solicitor and client). The second subcategory requires that the claimant prove that he or she had a special relationship of a nature that enlivens the presumption of undue influence.
6 The relationship of husband and wife is not in the first subcategory; it does not automatically raise a presumption of undue influence. The appellant contends it is arguable on the evidence that her relationship with her husband was in fact of such a nature that it enlivened the presumption of undue influence. I will assume that the High Court in Garcia did not intend to exclude any possibility of the second subcategory of presumed undue influence applying in a husband and wife relationship. However, it would not be sufficient to rely on the usual features that typify the relationship between a married couple. Trust, confidence and influence are at the core of such a relationship, as is the conferral of benefits. Something extra, in nature or degree, will be required to prove that a particular marriage gives rise to a special relationship that enlivens the presumption of undue influence.
7 If a presumption of undue influences arises, the onus is on the dominant party to show that the other party made an independent and informed judgment in entering into the impugned transaction. That is, the dominant party has to establish that the formation of the intention of the other party was free from his (or her) influence.
8 The acting master said that in order to establish actual undue influence, the appellant had to be a volunteer. That is incorrect. It is not an element of the cause of action in undue influence (actual or presumptive) that the claimant be a volunteer. In particular, there does not have to be an absence or inadequacy of consideration for the impugned transaction. However, it has yet to be authoritatively determined whether the impugned transaction must be otherwise improvident, unreasonable or unjust from the claimant's perspective (substantive unconscionability) to enliven the presumption of undue influence. In the unlikely event it is not required, the absence of substantive unconscionability would be a weighty factor in rebutting any presumption.
9 To come within the Yerkey v Jones principle, the wife must prove that: (a) she did not, in fact, understand the purport and effect of the transaction; (b) the transaction was voluntary (in the sense that the wife obtained no gain from the contract the performance of which was guaranteed); (c) the lender is to be taken to have understood that, as a wife, the claimant may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and (d) the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her: Garcia [31].
10 The bar in element (c) is set very low. It is below what would otherwise be required for a financier to be tainted by the husband's actual or presumptive undue influence. However, on proof of its elements the Yerkey v Jones principle may also be available to a wife where there was actual or presumptive undue influence by her husband but no proof of a financier's knowledge (actual or constructive) thereof, or other circumstances (the husband acting as the financier's agent) that would prevent the financier from enforcing its security or other rights.
11 The evidence establishes the following facts. By an agreement in writing dated 8 December 2004 between HSBC, as lender, and the appellant and her husband, as borrowers, (the loan agreement) HSBC agreed to lend $1.16 million to the borrowers for the purchase of 8 Bateman Road, Mount Pleasant (the property). It was a condition of the loan that the borrowers provide a first registered mortgage of the property. The appellant and her husband signed the loan agreement.
12 The loan agreement was preceded by a written contract for the purchase of the property for $1.45 million (the purchase contract). The appellant and her husband signed the purchase contract. The sellers were required to acknowledge that the appellant and her husband were licensed real estate agents. HSBC had a copy of the purchase contract.
13 The appellant and her husband also signed a HSBC home loan application form, clearly described as such on the front page, in which they advise that the solicitor acting for the appellant and her husband on the purchase of the property was Mr S Penglis of Freehills. Internal HSBC documents show that the appellant and her husband also owned the property at 28 Simpson Street, Applecross; that property was mortgaged; it was their place of residence until they moved into the property, following which it was to be rented out. Internal HSBC documents also show that at the time of the home loan application the property was valued at $1.8 million.
14 On 22 December 2004 the appellant and her husband signed a mortgage of the property to secure the loan the subject of the loan agreement (the first mortgage). The appellant's signature was witnessed by an HSBC officer.
15 By an agreement in writing dated 24 May 2005, the parties varied the loan agreement by changing the security for the loan to reflect the fact that the appellant was to be the sole registered proprietor of the property (the loan variation agreement). The appellant and her husband signed the loan variation agreement. The appellant signed a new mortgage on 7 June 2005 (the replacement mortgage) in the presence of an HSBC officer.
16 The impugned transactions in this case are the loan agreement as varied and the replacement mortgage. It is a nonsense to suggest the replacement mortgage is irrelevant.
17 There is no claim or evidence of substantive unconscionability in the terms and conditions of the impugned transactions, which are in standard terms. In fact, the evidence discloses that, at the time of entry into the impugned transactions and thereafter, they were to the significant financial benefit of the appellant and her husband. In any event, the property is and has been, their matrimonial home since the beginning of 2005.
18 The appellant's evidence in the summary judgment application was at a very high level of generality. She was born in Iran in 1957; came to Australia as a refugee in 1986; had studied in Italy and knew some Italian but spoke very little English. From 1989 to 1997, she intermittently attended TAFE to study English, attended a course in child care and did a real estate person's course for about two weeks. Although her English had improved her preferred and spoken language was Farsi, which she spoke most of the time. She said that at the time of the impugned transactions, she could speak a little English and read a little English and had particular difficulty in understanding complicated or legal documents. The appellant did not recall ever meeting any lawyer or obtaining legal advice. She recalled meeting with HSBC representatives, but only in the presence of her husband.
19 The appellant was aged 47 when she entered into the loan agreement and had been in Australia for 18 years. As to the impugned transactions, she swears that when she was asked by her husband to sign documents, she did so without question and recalled that:
[W]hen the property at 8 Bateman Road was bought, I understood that Michael was borrowing the money to pay for the property and was giving a mortgage as he had the income. I recall that Michael told me this. Michael told me that the property was being bought in both of our names. Michael took care of all business arrangements regarding the purchase of that property, including dealing with all banking matters. Michael arranged all of our financial affairs, and I left this to him.
20 This evidence has to be reconciled with the unchallenged objective evidence. Apart from signing the purchase contract, the home loan application, the loan agreement, the first mortgage, the loan agreement variation and the replacement mortgage, the appellant had no other involvement in the 'business arrangements' relating to the purchase, and funding the purchase, of the property. However, the broad nature and purpose of each document is evident from its descriptive title. The detail of the documents is irrelevant in the absence of any substantive unconscionability. Further, the appellant accepts that she knew she was to co-own the property with her husband. This evidence as a whole undermines the credibility of the appellant's claim that she understood from her husband that he would be the sole borrower and mortgagor. In any event, the fact that the appellant left the 'business' aspects of the transactions to her husband, who had relevant knowledge and experience in the area, and signed the transaction documents at his request falls well short of providing an evidentiary foundation for a claim of actual or presumed undue influence.
21 Thus, even accepting the appellant's evidence at face value for the purpose of the summary judgment application, it does not give rise to an arguable claim that: (1) the appellant's husband used actual undue influence to secure the appellant's decision to enter into the impugned transactions; (2) the relationship between the appellant and her husband was of a kind that enlivened the presumption of undue influence; (3) HSBC knew or ought reasonably to have known of the fact or possibility of the use of undue influence or of any special relationship of influence between the appellant and her husband.
22 The only remaining issue is whether the appellant has an arguable claim of a breach of the Yerkey v Jones principle. She does not. It is unnecessary for the purpose of this appeal to determine the outer limits of the meaning of 'voluntary' for the purpose of the Yerkey v Jones principle. On any view, there is no arguable basis for a claim that the impugned transactions were voluntary in the relevant sense. The appellant received and applied the loan funds, jointly and severally with her husband, to become a co-owner and subsequently sole owner, of the matrimonial home. Grounds 1 to 4 must be dismissed.
23 NEWNES JA: I agree with Mitchell J, for the reasons his Honour gives, that the appeal should be dismissed.
24 MITCHELL J:
Summary
25 In August 2004, Mr and Mrs Mavaddat agreed to purchase a house and land in Mt Pleasant (Property), in which they intended to live, for $1,450,000. They applied to HSBC Bank Australia Ltd for a home loan of $1,160,000 to assist them with that purchase. The home loan was advanced on an agreement signed by both Mr and Mrs Mavaddat, and used for the purchase of the Property on 22 December 2004. Mr and Mrs Mavaddat were registered on the title of the Property as joint tenants. The home loan was secured by a mortgage over the Property which was signed by both Mr and Mrs Mavaddat and registered on 22 December 2004. HSBC assessed Mr Mavaddat, who was the breadwinner of the couple, to have the capacity to service the loan.
26 On 10 June 2005, Mr Mavaddat's interest in the Property was transferred to Mrs Mavaddat, who became the sole registered proprietor of the Property. HSBC had previously agreed to vary the terms of the home loan to provide that the loan was to be secured by a first mortgage of the Property granted by Mrs Mavaddat alone. Mrs Mavaddat signed a new mortgage of the Property, which was registered on 10 June 2005 (Mortgage). There was no evidence that Mrs Mavaddat paid money to Mr Mavaddat in consideration for that transfer. Mr and Mrs Mavaddat remained jointly and severally liable for repayment of the home loan.
27 The Property has been Mr and Mrs Mavaddat's home since its purchase.
28 Mr and Mrs Mavaddat defaulted on their home loan repayments. Under the terms of the home loan and Mortgage, HSBC was entitled to demand repayment of the entire loan and, when there was a default in that payment, to obtain possession of the Property. In November 2013, HSBC exercised its right to demand repayment of the outstanding balance of the home loan. Mr and Mrs Mavaddat did not repay the outstanding balance.
29 HSBC then commenced proceedings in this court against Mr and Mrs Mavaddat. HSBC sought judgment for the outstanding balance of the home loan and two other subsequent loans which the Mortgage also secured. HSBC also sought an order that Mrs Mavaddat deliver vacant possession of the Property. HSBC applied for summary judgment against Mr and Mrs Mavaddat in those terms.
30 The acting master granted summary judgment against Mrs Mavaddat in relation to claims arising from the home loan agreement.1 He ordered Mrs Mavaddat to pay $1,189,689.91 owing under the home loan plus interest and costs on an indemnity basis. The acting master also ordered Mrs Mavaddat to deliver up vacant possession of the Property to HSBC. He dismissed the summary judgment application against Mrs Mavaddat in relation to claims under two other later loan facilities. Summary judgment was granted against Mr Mavaddat for the balance of all loan funds, being $2,630,314.33, plus interest and costs on an indemnity basis.
31 Mrs Mavaddat now appeals against the decision to enter summary judgment against her in relation to HSBC's claim under the home loan. She argues that the acting master erred in rejecting as unarguable her defences based on the principles in Yerkey v Jones2 and Commercial Bank of Australia Ltd v Amadio.3 She also argues that the acting master erred in rejecting a statutory defence of unconscionable conduct under s 51AB of the Trade Practices Act 1974 (Cth) (TPA) and s 21 of the Australian Consumer Law (ACL). She does not challenge the acting master's conclusion that evidence adduced by HSBC established its claim subject to those possible defences. Mrs Mavaddat further argues that the acting master erred in finding that there was no other good reason why summary judgment should not be entered against her in respect of the Mortgage and home loan agreement.
32 For the following reasons, none of the matters which Mrs Mavaddat raised in opposition to HSBC's summary judgment application provided her with an arguable defence to HSBC's claim under the home loan agreement. Nor do they provide some other a basis for refusing that application. The appeal must therefore be dismissed.
How Mrs Mavaddat entered into the transaction
33 Mrs Mavaddat swore two affidavits in opposition to the summary judgment application. The acting master's reasons detail what is said in those affidavits.4 It is unnecessary to repeat that detail here. The substance of Mrs Mavaddat's evidence was as follows.
34 Mrs Mavaddat was born in Iran in 1957 and came to Australia as a non-English speaking refugee in 1986. From about 1989 to 1997 she intermittently attended TAFE to study English and attended a course in childcare. She also attended a real estate sales course for about two weeks.
35 At the time the home loan was granted, Mrs Mavaddat could speak and read a little English but had particular difficulty in understanding complicated or legal documents. Mr Mavaddat arranged the couple's financial affairs, and she left this to him. Mrs Mavaddat was asked by Mr Mavaddat to sign documents, which she did without question. Mrs Mavaddat appreciated that the Property was being purchased in both their names and understood that Mr Mavaddat was borrowing money and giving a mortgage for that purpose. She did not appreciate that she was borrowing money from, or would have to repay money to, HSBC. She recalled seeing a lawyer when the Property was being transferred into her name, but did not otherwise obtain legal or financial advice in relation to the transactions.
36 Mrs Mavaddat deposed to never having told anyone at HSBC or otherwise that she was a licensed real estate agent. However, she did not deny signing the contract to purchase the Property which stated:
The seller acknowledges that the purchasers are licensed real estate agents.
37 The acting master correctly held that he should determine the summary judgment application on the basis that the version of facts put forward by Mrs Mavaddat would ultimately be accepted at a trial of the action.5 The acting master correctly recognised that summary judgment should only be entered if there is no real uncertainty as to HSBC's right to judgment and Mr and Mrs Mavaddat had no arguable defence.6
Principle in Yerkey
38 The principles stated by Dixon J in Yerkey were adopted and applied by the plurality in Garcia v National Australia Bank Ltd.7Each case concerned a guarantee given by a wife to a husband's creditor, without recompense, secured by a mortgage of her property. In each case the wife sought relief in equity on the ground that it would be unconscionable for the creditor to take the benefit of the transaction.
39 These decisions identify two circumstances in which it will be unconscionable for the creditor to enforce such a guarantee and security.
40 The first circumstance is where the husband exercises actual undue influence over his wife who, without recompense and lacking economic or other power, guarantees her husband's debts other than by the exercise of free will.8
41 The second circumstance is where the wife misunderstands or does not appreciate the effect of the document or the nature of the transaction, from which she obtains no gain. In such a case it will be unconscionable for the creditor to enforce the transaction against the wife when it has not explained the transaction to her and does not know that a third party has done so.9
42 In Yerkey, the wife's claim failed. Although the husband placed some pressure on his wife, her will was not overborne. Further, the creditor reasonably believed that she understood the substantial effect in all material respects of the obligations she was undertaking.10 In Garcia, the wife's claim succeeded where she guaranteed debts of her husband's business without understanding the effect of the transaction, not explained to her by a bank which knew of no independent legal advice to her about it.11
Grounds 1 and 3: was Mrs Mavaddat arguably a volunteer?
43 Before the acting master, Mrs Mavaddat argued that both limbs of the principle in Yerkey applied in this case. She contended that she entered into the home loan and Mortgage under the actual undue influence of Mr Mavaddat and that she did not understand the nature or effect of the transaction.
44 The acting master held that Mrs Mavaddat was not arguably a volunteer in relation to the home loan agreement. On that basis, he was satisfied that neither limb of the principle in Yerkey applied in relation to the home loan or the Mortgage to the extent that it secured that loan.12
45 Grounds 1 and 3 allege that the acting master erred in holding that the receipt by Mrs Mavaddat of any benefit under the home loan agreement had the consequence that she was not a volunteer. Those grounds assert that the acting master should have found that the obtaining of a benefit by Mrs Mavaddat did not necessarily preclude her being a volunteer. They contend that whether or not the home loan agreement was voluntary so far as she was concerned had to be determined as a matter of substance.
The principle in Yerkey only applies to a volunteer
46 Mrs Mavaddat accepts that the principle in Yerkey could only applied if she is a volunteer. So much follows from the statement of the plurality in Garcia that:
Yerkey v Jones begins with the recognition that the surety is a volunteer: a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee. It holds, in what we have called the first kind of case, that to enforce that voluntary transaction against her when in fact she did not bring a free will to its execution would be unconscionable. It holds further, in the second kind of case, that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger [31].
47 The status of the appellant as a volunteer is to be determined as a matter of substance.13
Does the principle in Yerkey apply other than to guarantees by a volunteer wife?
48 Yerkey and Garcia identify two circumstances in which equity will regard the enforcement of a transaction as unconscionable. However, those cases do not purport to exhaustively and prescriptively state the circumstances in which equity will regard conduct as unconscionable.14 In Yerkey, Dixon J thought it:
almost needless to say that the equitable grounds for setting aside a voluntary disposition, while well understood, recognize the indefinite variation of form which unconscientious conduct may assume (684).
- Dixon J said it was unclear how the first limb of the principle applied where a wife was induced to become surety through the husband's misrepresentation of fact not going to the nature or effect of the transaction.15 He also referred to cases where pressure not amounting to undue influence combined with or caused a misunderstanding or failure to understand the transaction.16 In Garcia the plurality identified the possibility that the principles identified in Yerkey might find application to relationships other than a wife guaranteeing her husband's debt.17
49 Mrs Mavaddat submits that the principle identified in Yerkey can apply to the home loan agreement and Mortgage notwithstanding that she was a principal debtor and received some benefit from the transaction.
50 As I have noted above, both Yerkey and Garcia involved a wife guaranteeing her husband's debts for no financial benefit. Can the principle apply to transactions other than guarantees? Can it apply to a person who is 'partially' a volunteer?
51 In Garcia, the plurality referred to a volunteer for these purposes as a person who received 'no financial benefit from the transaction'. They also referred to a transaction being voluntary 'in the sense that the surety obtained no gain from the contract the performance of which was guaranteed'.18 The concept of a 'partial volunteer' is inconsistent with those statements.
52 In Elkofairi v Permanent Trustee Co Ltd,19 the wife and husband gave a mortgage over their jointly owned home to secure a loan of approximately $750,000. Approximately $470,000 of the loan funds was used to discharge an existing mortgage over their home, with the balance being used by the husband for his own unknown purposes. The wife submitted that the loan transaction was voluntary in part, because she did not receive any benefit of the sum borrowed over and above the amount necessary to repay the loan secured by the existing mortgage.
53 Beazley JA did not resolve the question of whether the principle applied to a person who was 'partially' a volunteer. Beazley JA rejected the Yerkey claim on that basis that the creditor did not have express notice or any other information to put it on notice that the appellant was partially a volunteer.20
54 Santow JA resorted to a 'wider doctrine of unconscionability' and said that the fact that the wife was only a volunteer as to a portion of the loan did not provide an insuperable obstacle to relief.21 However, he expressed the view that it is not for an intermediate appellate court to anticipate what the High Court might or might not do in:
extending the doctrine of Yerkey v Jonesto cases outside the conventional guarantee by a wholly volunteer wife [96].
55 Campbell AJA agreed with both Beazley JA and Santow JA.
56 In Narain v Euroasia (Pacific) Pty Ltd,22 Nettle JA, with whom Bongiorno JA and Byrne AJA agreed, said:
Were it not for Elkofairi, I should have thought that it was open to this court to construe Yerkeyas capable of application to instruments apart from suretyship which operate to a wife's husband's advantage or confer a voluntary benefit on him [43].
- However, his view of Elkofairi led Nettle JA to say:
As I understand the High Court's most recent edict on stare decisis,23 however, this court does not have power to change the common law of this country, only to apply it, and we are not to depart from another state appellate court's interpretation of the common law of this country unless we think it is plainly wrong. Strictly speaking, Santow and Campbell JJA's remarks in Elkofairiwere obiter, but I take them to be 'seriously considered'24 obiter and, with respect, I am not persuaded that they are plainly wrong.
It follows that I reject the contention that Yerkey is capable of application to instruments apart from suretyship which operate to a wife's husband's advantage or confer a voluntary benefit on him [44] - [45].
58 The decisions in Elkofairi and Narain support the proposition that the current state of the law is that the principle in Yerkey only applies to 'conventional guarantee by a wholly volunteer wife'. The need for the wife to be 'wholly' a volunteer is consistent with what was said in Garcia. The benefit obtained must be substantive and substantial, so that 'incidental benefits' of the kind referred to in Bylander may not deprive a wife of the status of 'volunteer'. However, subject to that qualification, the current state of authority supports the proposition that the principle in Yerkey does not apply unless the wife has received no benefit from the impugned transaction.
Approach to possible developments of the law on a summary judgment application
59 Neither Elkofairi nor Narain were concerned with summary judgment applications. In considering the disposition of a summary judgment application it is particularly important to recognise that the limits of conduct which equity will regard as unconscionable are not settled or fixed. It is important not to risk stifling the development of the law by summarily disposing of actions where there is a reasonable possibility that, as the law develops, it will be found that a cause of action and remedy lies.26 Summary judgment must be granted only in the clearest of cases where the court makes a certain and concluded determination that a proceeding would necessarily fail.27
60 A summary judgment application cannot be dismissed by reference to the view that an intermediate appellate court should not extend the principle in Yerkey beyond guarantees by a wholly volunteer wife. On a summary judgment application it is necessary to take account of the reasonable possibility that the High Court will extend the principle beyond those limits. A defendant who may seek to convince the High Court that the principle should be extended should not be deprived of a trial at which the facts the High Court will need to consider in detail28 have been found. Therefore, the mere fact that the transaction is a loan rather than a guarantee does not require the rejection of Mrs Mavaddat's submission based on Yerkey at the summary judgment stage. On the other hand, there is no suggestion that the principle might be applied to situations where the wife was not a volunteer in any sense.
The acting master's alleged error
61 The acting master did say that a volunteer, for present purposes, is someone who has obtained 'no financial benefit from the transaction'.29 He said:
The wife must be a complete volunteer in the sense of having obtained no financial benefit; being a partial volunteer is not sufficient [38].
62 The acting master cited Elkofairi as authority for this proposition. As noted above, the proposition is supported by the dicta of Santow JA with whom Campbell JA agreed, in that case. It is also supported by the manner in which the plurality expressed itself in Garcia, and the decision of the Victorian Court of Appeal in Narain. The acting master's statement of the law is consistent with those decisions.
63 Notwithstanding that conclusion, for reasons I have explained, the question of whether the receipt of any financial benefit excludes the principle in Yerkey is not appropriately resolved on a summary judgment application. There is a reasonable possibility that the High Court will extend the application of the principle to transactions other than a guarantee by a 'wholly volunteer' wife. The decision in Bylander supports the proposition that the receipt of some kind of benefit does not exclude the availability of relief. The correctness of the acting master's statement that the wife must be a 'complete volunteer in the sense of having obtained no financial benefit' is not properly resolved on a summary judgment application. Had the acting master determined the summary judgment application on that basis he would have been in error.
Mrs Mavaddat was not arguably a volunteer
64 However, on the facts found by the acting master it was not arguable that Mrs Mavaddat was a volunteer, either in whole or part. All of the funds disbursed on the home loan were used for the purchase of the Property. The Property was used by Mrs Mavaddat for her residence. Mr and Mrs Mavaddat acquired legal title to the Property as joint tenants. Mrs Mavaddat received substantial financial benefit from all of the disbursed home loan funds. This was not a case, such as Elkofairi, where part of the loaned funds was used by the husband for his own purposes not involving any financial benefit for the wife. Mrs Mavaddat was not arguably a volunteer in relation to any part of the funds advanced under the home loan.
65 This conclusion is consistent with that reached by the New South Wales Court of Appeal in Satchithanantham v National Australia Bank Ltd,30 in circumstances very similar to the present case. In that case a wife sought to set aside a loan agreement relating to, and a mortgage securing, funds used to refinance the purchase of her residence, to which she held the legal title. The case did not concern a summary judgment application. However, Young JA, with whom Giles and Hodgson JJA agreed, described as 'undeniably correct' the primary judge's ruling that Yerkey was inapplicable given the benefit which the wife had received from the transaction.31
66 Mrs Mavaddat argues that whether the acquisition of a property subject to a loan secured by a mortgage is a benefit depends on a range of circumstances. Those circumstances include the value of the property, the value of the loan and the acquirer's capacity to repay the loan. I do not accept that submission. While the matters referred to may affect the providence of a transaction, they do not arguably affect Mrs Mavaddat's lack of status as a volunteer. In any event, the evidence does not suggest that purchasing the Property was, at the time of entry into the home loan agreement, an improvident transaction from Mrs Mavaddat's perspective.
67 Mrs Mavaddat argued that her status as a volunteer could be deduced from the fact that a portion of the purchase price of the Property and the money used for transaction costs were met from sources other than HSBC. However, Mrs Mavaddat's lack of status as a volunteer derives from the use of all of the loaned money to purchase the Property. That status is not gained because the balance of the purchase price was funded from other unexplained sources.
68 For these reasons the acting master was correct in his ultimate conclusion that Mrs Mavaddat was not, on the facts most favourable to her, even arguably a volunteer in relation to the home loan. The principles in Yerkey were not arguably engaged in relation to the home loan or the Mortgage so far as it secured that loan. Grounds 1 and 3 must be dismissed.
Ground 2: transfer of the Property into Mrs Mavaddat's name
69 Ground 2 asserts that the acting master erred in having regard to Mr Mavaddat's interest in the Property being transferred to Mrs Mavaddat in 2005, on the basis that this transfer constituted a 'discrete transaction'. I do not accept this submission. In considering whether, as a matter of substance, Mrs Mavaddat financially benefited from the transaction it is relevant to note that the loan funds were used to purchase property for which Mrs Mavaddat ultimately obtained sole legal title. In any event, even if the subsequent transfer is ignored, it remains the case that all of the disbursed funds were used in a way that benefited Mrs Mavaddat. The funds were used to purchase the Property of which Mrs Mavaddat was joint registered proprietor, which she intended to use and used as her residence. There is no merit in ground 2.
Grounds 4 - 5: other Yerkey issues
70 The dismissal of grounds 1 - 3 makes it unnecessary to determine grounds 4 and 5, which assert other errors in relation to the acting master's conclusion that Mrs Mavaddat did not have an arguable Yerkey defence. As Mrs Mavaddat was clearly not a volunteer, the defence is not arguably available even if all other elements of the defence were established. Success on grounds 4 or 5 could not result in the appeal being allowed. I will, however, briefly deal with those grounds.
Ground 4: undue influence
71 Ground 4 alleges that the acting master erred in failing to find that Mrs Mavaddat's evidence did not raise a triable question as to whether Mr Mavaddat exercised undue influence over her.
72 Mrs Mavaddat accepts that, to establish actual undue influence, she must show that the transaction was the outcome of such an actual influence over her mind that it could not considered her free act.32 She submits that undue influence is established by the fact that she reposed complete trust and confidence in Mr Mavaddat, signing documents without question whenever he asked her to do so.
73 The mere fact that Mrs Mavaddat reposed complete trust and confidence in Mr Mavaddat cannot arguably justify a conclusion that he exercised the actual undue influence required for the first limb of Yerkey. Her signing of documents requested by Mr Mavaddat without further inquiry was an exercise of her free choice, and not the result of an overborne will. She was not arguably deluded, coerced or overborne.33 Her approach to the married couple's financial affairs merely reflects the not uncommon practice of one married partner leaving financial decisions to the other. Such a practice, and the trust and confidence between married partners which it reflects, provides a rationale for the principles in Yerkey but does not suffice to establish actual undue influence.34
74 Mrs Mavaddat's counsel also submitted that the first limb of Yerkey could apply where presumed undue influence was demonstrated. I do not accept that submission. Both Yerkey and Garcia distinguish the principle they apply from the equitable jurisdiction to set aside a transaction where there is an absence or inadequacy of consideration and a special relationship exists between the parties to the transaction.35 For the first limb of Yerkey to apply, actual undue influence is required.36
75 In any event, there is no evidence in the present case which could arguably support setting aside the present transaction on grounds of presumed undue influence. A husband is not presumed to exercise undue influence over his wife.37 Even if the circumstances of the particular relationship gave rise to a presumption of undue influence, there was no gift or other benefit received by Mr Mavaddat which equity might arguably set aside. He simply purchased a family home together with his wife and obtained a loan, which he anticipated repaying, to allow the purchase to occur. Nor could any equitable fraud found in any presumed undue influence of Mr Mavaddat be sheeted home to HSBC as there is no evidence that HSBC knew of circumstances from which the court would infer undue influence.38
76 I would dismiss ground 4.
Ground 5: notice of undue influence
77 Ground 5 complains of the acting master's third reason for concluding that Mrs Mavaddat had no arguable defence under the first limb of Yerkey. The acting master's third reason was that, if there was any undue influence, there was no evidence that HSBC was aware of any facts said to give rise to the undue influence or of facts which might have put it on notice of such impropriety.39 This would be an answer to a claim based on presumed undue influence. However, it is at least arguably sufficient for a claim of actual undue influence under the first limb of Yerkey that HSBC knew at the time of the transaction that Mr and Mrs Mavaddat were married.40 While the acting master erred in rejecting the existence of an arguable defence for this third reason, the error did not affect his ultimate conclusion. Nor did it affect the acting master's other reasons for rejecting the Yerkey defence as unarguable. While ground 5 is made out, it does not justify allowing the appeal.
Principle in Amadio
78 A different kind of case in which equity will set aside or refuse to enforce a transaction was considered by the High Court in Amadio. In that case elderly Italian migrants with limited command of English guaranteed the payment of debts owed by their son's company, mistakenly thinking that the guarantee was limited in the amount of $50,000 for a period of 6 months. The bank manager was present when the guarantee was signed. He was aware that the son's company was insolvent, of Mr and Mrs Amadios' age and limited English and had no reason to think that they received guidance from anyone other than their son.
79 Mason, Wilson and Deane JJ recognised that a court exercising equitable jurisdiction may set aside a transaction where a party makes unfair use of its superior position or bargaining power to the detriment of the other party, who suffers from some special disability or is placed in some special situation of disadvantage.41 For this purpose a special disability or disadvantage is one which seriously affects the ability of the innocent party to make a judgment as to his or her best interests.42 The first party will be held to take unfair use of the other's disability or disadvantage if it knows that the other party cannot make a judgment as to what is in his or her best interests, is aware that there is a possibility that such a situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person.43 The latter examples involve wilful ignorance rather than constructive knowledge.44 Equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind.45
80 The circumstances of Amadioillustrate but do not confine the broader principle, which has been applied in a range of other circumstances.46 As Mason J noted, it is impossible to describe definitively all of the situations in which relief will be granted on the ground of unconscionable conduct. In essence the principle applies where some special disability or disadvantage impacts on a party's ability to judge his or her own best interests. It operates to prevent the other party from taking advantage of the opportunity when it knew or ought to have known of that circumstance.47 The concern which engages the principle is to prevent victimisation of the weaker party by the stronger, and to ensure that it is fair, just and reasonable for the stronger party to retain the benefit of the impugned transaction.48
81 Although Mr and Mrs Amadio were volunteers who obtained no advantage from the guarantee, the principle does not only operate where the disabled or disadvantaged party is a volunteer. Even inadequacy of consideration is not essential, although the existence of an improvident transaction will ordinarily be significant.49 Once the party seeking to enforce the transaction is fixed with the requisite degree of knowledge, the onus is on that party to show that the transaction was fair, just and reasonable.50 However, where the disabled or disadvantaged party obtained a substantive benefit from the transaction, an order setting aside the transaction may be conditional upon the party obtaining relief doing equity.51
Grounds 6 and 7: unconscionably taking advantage of a special disability
82 Grounds 6 and 7 contend that the acting master erred in failing to find that Mrs Mavaddat's evidence raised a triable issue as to whether she was labouring under a 'special disability', and as to whether HSBC was sufficiently aware of that circumstance and unconscionably took advantage of it. The submission in support of those grounds is merely an assertion that the acting master's conclusion was in error.
83 Before the acting master, Mrs Mavaddat argued that she suffered under a special disability by reason of her reliance on her husband and her limited command of English. She contended that there was no evidence that HSBC was unaware of these 'disabilities', and that the Amadioprinciple was engaged.
84 The acting master did not consider this defence of unconscionable conduct to be arguable in relation to the home loan agreement. He noted that the mere fact that Mrs Mavaddat was married, or even that she may have been a 'mere housewife', was not sufficient, of itself, to give rise to a special disability. There was no evidence that HSBC knew that Mrs Mavaddat was unduly reliant on her husband or had a limited command of English, or that HSBC knew of facts which may have given rise to this possibility. There was no basis for saying that the loan agreement was unfair, unreasonable or unjust from Mrs Mavaddat's point of view. There was no evidence that she was misled as to the nature of the transaction. The acting master concluded that it was not arguable that HSBC had taken unfair or unconscientious advantage of Mrs Mavaddat in any way.52
85 The acting master's conclusions were correct, for the reasons he gave.
86 The loan transaction which Mrs Mavaddat seeks to impugn was entirely unremarkable. A husband and wife agree to purchase a house and land which they intend to use as their matrimonial home. They obtain a home loan, secured by a mortgage, from a bank on its usual commercial terms, which are not suggested to be unreasonable. All of the loan funds are used for the purchase of the house and land. The husband and wife are registered as joint owners. They anticipate that husband, who is the breadwinner, will make the loan repayments.53 The bank's assessment was that he had the capacity to service the home loan.54 The husband and wife live in the matrimonial home. Subsequently, the whole legal title is given to the wife, and the bank's security is maintained by the grant of a mortgage by the wife alone. The husband remains jointly liable for repayment of the home loan. The wife seeks to remain living in the family home. HSBC insists on repayment of the home loan in accordance with the agreed terms as a condition of Mrs Mavaddat continuing to enjoy the benefit of the Property given as security for the loan. It is not arguably unconscionable, in those circumstances, for HSBC to require repayment of the home loan as a condition of Mrs Mavaddat retaining the benefit she obtained from the use of the loan funds.
87 That conclusion is not altered by the circumstance that Mrs Mavaddat relied on her husband to arrange the home loan and mortgage, and signed legal documents at his request without inquiring as to their contents. A position of disadvantage which engages the Amadio principle may stem from a strong emotional dependence or attachment.55 Strong emotional dependence and attachment are common features of a marriage relationship. However, Mr Mavaddat did not arguably exploit or victimise his wife when they jointly borrowed money to jointly purchase their family home, anticipating that Mr Mavaddat would make the loan repayments.
88 Nor is it arguable that HSBC exploited Mrs Mavaddat's dependence and attachment by agreeing to loan the couple part of the purchase price on security of a mortgage over the Property. Even if the conduct of Mr Mavaddat was in some way unconscionable, it was for Mrs Mavaddat to adduce evidence identifying some basis for fixing the bank with knowledge or wilful ignorance of her 'disability'. As the acting master noted, no such evidence was adduced. Such evidence as there was indicated that HSBC understood, no doubt by reference to the contract signed by Mrs Mavaddat, that she was a licensed real estate agent.56
89 The relief that equity would grant Mrs Mavaddat if she did make out her defence shows that the bank's conduct is not arguably unconscionable. As the acting master noted, before equity would set aside the loan agreement and mortgage it would require her to repay the outstanding balance of the home loan. She would not be able to secure the setting aside of the home loan and Mortgage while retaining the Property which represents the fruit of the impugned transaction.57 The equitable relief which Mrs Mavaddat might obtain, if successful, would not substantively alter her position. She would still need to repay the outstanding balance of the loan as a condition of retaining ownership and possession of the Property. In circumstances where equity would require repayment as a condition of allowing Mrs Mavaddat to retain the Property it is not arguably unconscionable for HSBC to take the same approach.
90 Grounds 6 and 7 must be dismissed.
Ground 8: statutory unconscionable conduct
91 Ground 8 asserts that the primary court erred in failing to find that the appellant's evidence raised a triable issue as to whether HSBC engaged in conduct that was, in all the circumstances, unconscionable. The written submissions do not advance the ground beyond asserting error.
92 Mrs Mavaddat sought to establish this defence under s 21 of the ACL or s 51AB of the TPA. Those provisions are in materially the same terms, and it is unnecessary to decide which applies in the current case. The sections provide that a person must not, in trade or commerce, in connection with the supply of services (which includes a bank loan) engage in conduct that is, in all the circumstances, unconscionable.
93 Although the written submissions refer to s 51AC of the TPA, counsel for the appellant accepted that s 51AC could not apply in the present circumstances. By s 51AC(7) of the TPA, a reference to the supply of services in those sections is to the supply of services to a person whose acquisition of those services would be for the purpose of trade or commerce.58 If unconscionability were established, the relevant provision would be s 51AB of the TPA, on the basis that a loan for purchase of a family residence was a service of a kind ordinarily acquired for personal, domestic or household use.59
94 These statutory provisions are not to be read down by reference to general law conceptions of unconscionable conduct, on which the provisions were intended to build. The phrase 'unconscionable conduct' in the statutory provisions bears its ordinary and natural meaning of doing what should not be done in good conscience.60
95 Mrs Mavaddat contended that HSBC's conduct in entering into the home loan agreement and Mortgage with her was unconscionable given her reliance and dependence on her husband, her limited command of English and its failure to explain the documents or give her an opportunity to obtain independent advice in relation to them.
96 The acting master held that no arguable defence is established in the following circumstances:61
(a) there is no evidence before me that HSBC was aware of any English language difficulties which Mrs Mavaddat may have laboured under;
(b) there is no evidence before me that Mr Mavaddat mislead Mrs Mavaddat as to the nature of the transaction;
(c) Mrs Mavaddat knew she was entering into a home loan;
(d) she knew that Mr Mavaddat was borrowing the money to pay for the Property and was giving a mortgage, and that it was his income which would be used to was being used [sic] to service [the loan];
(e) the loan was for the purchase of a residential property, which Mr and Mrs Mavaddat were going to own and occupy;
(f) the loan to valuation ratio was less than 80%;
(g) the loan was a standard 30 year residential mortgage on a discounted interest rate as the Mavaddats were entitled to the HSBC Premier Package;
(h) the loan fell within HSBC's serviceability guidelines based on Mr Mavaddat's income, and was not an asset lending transaction; and
(i) notwithstanding th[at] Mr Mavaddat's income was being used to service the loan, Mrs Mavaddat was initially a joint tenant and later became the sole registered proprietor of the Property.
(references to evidence omitted)
97 In relation to the particular matters identified in s 51AB(2) of the TPA and s 22 of the ACL:
1. There is no evidence that HSBC was in a significantly stronger bargaining position than Mrs Mavaddat, who could have sought finance from competitors of HSBC at the time of entry into the home loan transaction.
2. There is no evidence that HSBC imposed conditions not reasonably necessary for the protection of its legitimate interests, being the need to secure the loan which it advanced to Mr and Mrs Mavaddat.
3. While Mrs Mavaddat did not fully understand the home loan agreement and Mortgage, there is no evidence suggesting HSBC were aware or should have been aware of this circumstance. Mrs Mavaddat chose not to attempt to understand the documents but left matters to Mr Mavaddat.
4. There is no evidence to suggest any undue influence being exerted on, or unfair tactics being used against, Mrs Mavaddat by HSBC or anyone acting on its behalf.
5. There is no evidence that Mrs Mavaddat could have acquired a home loan on substantially better terms than HSBC provided.
98 Given the facts referred to at [96] above, and the considerations referred to at [86] - [89] above, the acting master correctly concluded that HSBC's conduct is not arguably unconscionable within the ordinary and natural meaning of that term. Ground 8 must be dismissed.
Ground 9: other reasons for refusing summary judgment
99 By ground 9, Mrs Mavaddat asserts that the acting master erred in finding that there was no other reason for there to be a trial of HSBC's claim under the home loan agreement.
100 Order 14 r 3(1) of the Rules of the Supreme Court 1971 (WA) (Rules) contemplates the dismissal of a summary judgment application where:
1. the plaintiff has not established that the defendant has no defence to a claim included in a writ or part thereof;62
2. the defendant satisfies the court with respect to the claim, or the part of the claim, to which the application relates that there is an issue or question in dispute which ought to be tried; or
3. the defendant satisfies the court that there ought for some other reason to be a trial of that claim or part.
101 Mrs Mavaddat's argument proceeds from the fact that the Mortgage secures the other loans in respect of which summary judgment was refused. If Mrs Mavaddat ultimately succeeds in defending HSBC's claims in relation to those loans, she would be entitled to have the Mortgage discharged on payment of the outstanding balance of the home loan.
102 Mrs Mavaddat argues that it is unjust to enter judgment when the claims relating to the later loans remain unresolved. She says that, even if she paid all money due under the home loan agreement, HSBC would not discharge the Mortgage while money due under the later loan agreements remained unpaid. This impedes her ability to raise funds necessary to repay all money due under the home loan agreement. Her ability to do so is impeded because she cannot grant a first-ranking mortgage as security for borrowing the funds necessary to pay out her liability to HSBC under the home loan agreement. She says that this crystallises the adverse outcome of a mortgagee sale, even though she may successfully defend HSBC's claims under the later loan agreements and be able to pay out her liability under the home loan agreement if she were able to grant a first registered mortgage over the Property.
103 The relevant part of O 14 requires that there be some other reason for there to be a trial of the claim or part thereof. It does not merely require that there be some other reason why judgment should not be immediately entered or enforced. In circumstances where HSBC's claim with respect to the home loan agreement must clearly succeed, the prospect of a successful defence to other claims does not provide a reason for there to be a trial of the home loan claim. It would be a waste of the resources of the parties and the court to require the trial of a claim which is certain to succeed.
104 Under ground 9, Mrs Mavaddat also argues, in the alternative, that the acting master erred by making orders entering judgment in favour of HSBC on the home loan and ordering her to give up possession of the Property immediately. She says that the terms of any judgment entered should not have entitled HSBC to enforce its rights under the Mortgage unless it was prepared to discharge the mortgage on the payment of amounts due under the home loan agreement.
105 HSBC has established that it entitled to immediate possession of the Property under the Mortgage irrespective of whether it succeeds or fails in its claims relating to later loan agreements also secured by the Mortgage. The judgment which the acting master entered appropriately reflected the rights which HSBC had established.
106 If it were considered appropriate to delay the Bank taking possession of the Property until the resolution of other claims, the proper course would be to seek a stay of the execution of the judgment. An order could be sought under O 14 r 3(2) of the Rules 'until after the trial of any counterclaim made or raised by the defendant in the action'. A stay of execution might also be sought under s 15 of the Civil Judgments Enforcement Act 2004(WA), on the ground that there were 'special circumstances that justify' the making of a suspension order under that section.
107 Such an application would face substantial hurdles. HSBC refers to the following general rule identified by the High Court in Inglis v Commonwealth Trading Bank of Australia:63
A general rule has long been established, in relation to applications to restrain the exercise by a mortgagee of powers given by a mortgage and in particular the exercise of a power of sale, that such an injunction will not be granted unless the amount of the mortgage debt, if this be not in dispute, be paid or unless, if the amount be disputed, the amount claimed by the mortgagee be paid into court.
108 HSBC says that, by analogy, it should not be deprived of its established rights under the mortgage unless the balance of the home loan agreement is paid or the balance of all loan agreements is paid into court. There is considerable force to that argument.
109 No application for a stay was made to the acting master. Nor was there any evidence adduced before the acting master indicating that Mrs Mavaddat had the capacity to obtain finance on a first mortgage of the Property, or about the opportunity which HSBC gave her to arrange refinancing. Some evidence about these matters appears to have been adduced on the application for a stay of execution of judgment pending the determination of this appeal.64 However, that evidence was not before the acting master or this court for the purposes of the appeal. Those matters would have been relevant to the exercise of the acting master's discretion on a stay application. It is difficult to see how a stay of execution could properly be granted by reference to the matters Mrs Mavaddat asserts without reliable evidence demonstrating that she could actually obtain a new loan for the outstanding balance of the home loan if she could offer a first mortgage of the Property as security.
110 The issues which may arise on a stay application are not appropriately resolved by this court on appeal. HSBC may wish to test any evidence Mrs Mavaddat seeks to adduce. Questions may arise as to the conditions on which any stay might be granted. The dismissal of this appeal will not prevent Mrs Mavaddat subsequently seeking a stay of execution of the judgment which HSBC has obtained. Nothing in these reasons should be construed as either foreclosing or encouraging such an application. The point is that any remedy which Mrs Mavaddat may have lies elsewhere, and the acting master did not err on the evidence before him.
111 Therefore this ground should be dismissed.
Orders
112 For the above reasons, the appeal must be dismissed.
1HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153.
2Yerkey v Jones (1939) 63 CLR 649.
3Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.
4HSBC Bank Australia Ltd v Mavaddat [28] - [32].
5HSBC Bank Australia Ltd v Mavaddat [33].
6HSBC Bank Australia Ltd v Mavaddat [26] - [27].
7Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395.
8Yerkey (675 - 676),(684); Garcia [12], [23], [31].
9Yerkey (684 - 685), Garcia [31] - [33], [37].
10Yerkey (686), (689 - 690).
11Garcia [43] - [44].
12HSBC Bank Australia Ltd v Mavaddat [40], [55].
13Yerkey (685); Garcia [43].
14 See Jenyns v Public Curator (Qld) (1953) 90 CLR 113, 118 - 119, affirmed in Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392 [122] - [123].
15Yerkey (684).
16Yerkey (686).
17Garcia [22].
18Garcia [31].
19Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413.
20Elkofairi [49].
21Elkofairi [96].
22Narain v Euroasia (Pacific) Pty Ltd [2009] VSCA 290; (2009) 26 VR 387.
23Cal No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 390, 411 [48] - [51].
24Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, 150 [134].
25Bylander International Consortium (Aust) Pty Ltd v Multilink Investments Pty Ltd [2001] NSWCA 53.
26Lois Nominees Pty Ltd v QBE Insurance (Australia) Ltd [2011] WASC 208; (2011) 42 WAR 75 [35] and cases there cited.
27Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 [53] - [55].
28Kakavas [14],[18], [122] - [124].
29HSBC Bank Australia Ltd v Mavaddat [38].
30Satchithanantham v National Australia Bank Ltd [2009] NSWCA 268.
31Satchithanantham [44] - [46].
32 Citing Powell v Powell [2002] WASC 105 [121] and Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 [167] - [168].
33Yerkey (687).
34 See Garcia [21].
35Yerkey (677 - 678);Garcia [33].
36Yerkey (686 - 687); Garcia [23].
37Garcia [33].
38Bank of New South Wales v Rogers (1941) 65 CLR 42, 51 - 52, 85; Garcia [30].
39HSBC Bank Australia Ltd v Mavaddat [57].
40Garcia [31], [40]; Schultz v Bank of Queensland Ltd [2015] QCA 208 [31].
41Amadio (461), (467), (474 - 475).
42Amadio (462), Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51 [13] - [15], [55] - [56], [185].
43Amadio (467), (479).
44Kakavas [151] - [159].
45Kakavas[161].
46 See Blomley v Ryan (1956) 99 CLR 362; Louth v Diprose (1992) 175 CLR 621; Bridgewater v Leahy [1998] HCA 66;(1998) 194 CLR 457.
47Amadio (461 - 462).
48Kakavas [117] - [118], [161].
49Blomley (405); Amadio (475); Kakavas [118].
50Amadio (479).
51Amadio (480 - 481).
52HSBC Bank Australia Ltd v Mavaddat [62] - [68].
53HSBC Bank Australia Ltd v Mavaddat [74](d). See the loan application which describes Mr Mavaddat as holding relevant property and earning the couple's income (attachment AJW 15 to the affidavit of Anthony James Woods sworn 17 March 2015); affidavit of Mrs Mavaddat sworn 12 February 2015, par 13.
54HSBC Bank Australia Ltd v Mavaddat [74](h). See the assessment at attachment AJW 16 to the affidavit of Anthony James Woods sworn 17 March 2015, page 28.
55Bridgewater [115], citing Louth (626), (629 - 630), (637 - 638), (643).
56 Page 31 of the affidavit of Anthony James Woods sworn 17 March 2015.
57Maguire v Makronis (1997) 188 CLR 449, 475 - 478, applied in Elkofairi [80] - [85], [98] - [102] and Permanent Mortgages [391] - [395].
58 See Kowalczuc v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205[182] - [189].
59 Section 51AC(5) of the TPA: see Begbie v State Bank of New South Wales Ltd (1994) ATPR 41-288, 41-898.
60Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132 [30] - [33]; Permanent Mortgages [356] - [362].
61HSBC Bank Australia Ltd v Mavaddat [74].
62 See O 14 r 1(1) of the Rules.
63Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161, 164.
64Mavaddat v HSBC Bank Australia Ltd [2015] WASCA 205.
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