National Australia Bank Ltd v Catlin
[2002] WASC 103
NATIONAL AUSTRALIA BANK LTD -v- CATLIN & ANOR [2002] WASC 103
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 103 | |
| Case No: | CIV:1933/2001 | 15 MARCH 2002 | |
| Coram: | MASTER BREDMEYER | 3/05/02 | |
| 21 | Judgment Part: | 1 of 1 | |
| Result: | Summary judgment ordered Stay of proceedings refused | ||
| B | |||
| PDF Version |
| Parties: | NATIONAL AUSTRALIA BANK LTD (ACN 004 044 937) ADRIENNE MARIE CATLIN CHARLES STEPHEN CATLIN |
Catchwords: | Summary judgment Mortgage action Defendants' application for a stay of proceedings based on pending criminal charges against them |
Legislation: | Nil |
Case References: | Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Commonwealth Development Bank of Australia Ltd v Nertec Pty Ltd [1999] WASCA 311 Garcia v National Australia Bank Ltd (1998) 151 CLR 447 Inglis & Anor v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 Tranchita v Retravisikon (WA) Pty Ltd [WASCA- 265 Wilton v Farnworth (1948) 76 CLR 646 Cunningham v National Australia Bank Ltd (1987) 77 ALR 632 Westpac Banking Corporation v Paterson [2001] FCA 1630 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ADRIENNE MARIE CATLIN
CHARLES STEPHEN CATLIN
Defendants
Catchwords:
Summary judgment - Mortgage action - Defendants' application for a stay of proceedings based on pending criminal charges against them
Legislation:
Nil
Result:
Summary judgment ordered
Stay of proceedings refused
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Ms J E Bartlett
Defendants : In person
Solicitors:
Plaintiff : Jackson McDonald
Defendants : In person
Case(s) referred to in judgment(s):
Commercial Bank of Australia v Amadio (1983) 151 CLR 447
Commonwealth Development Bank of Australia Ltd v Nertec Pty Ltd [1999] WASCA 311
Garcia v National Australia Bank Ltd (1998) 194 CLR 395
Inglis & Anor v Commonwealth Trading Bank of Australia (1972) 126 CLR 161
Tranchita v Retravisikon (WA) Pty Ltd [WASCA] 265
Wilton v Farnworth (1948) 76 CLR 646
Case(s) also cited:
Cunningham v National Australia Bank Ltd (1987) 77 ALR 632
Westpac Banking Corporation v Paterson [2001] FCA 1630
(Page 3)
1 MASTER BREDMEYER: I have before me the plaintiff's application of 23 August 2001 for summary judgment against the defendants. I also have before me an application by the defendants dated 5 November 2001 for a stay of the proceedings. I can deal with the two applications together.
2 The plaintiff in its application for summary judgment seeks an order for possession of the defendants' residence at 13 Shadwick Drive, Karratha, being the whole of the land comprised in certificate of title vol 1642 folio 259, and for costs. The statement of claim refers to three loan facilities granted by the plaintiff to the defendants as follows:
(a) Account number 10-333-0889 (formerly 65-893-1901), being a Home Loan account for $150,000 approved on 19 December 1995.
(b) Account number 63-506-0648, being a FlexiPlus Mortgage facility approved on 19 December 1997. The maximum amount under this facility was $79,000.
(c) Account number 69-658-5165, being an Instalment Loan facility in the name of ANA Enterprises Pty Ltd as trustee for the Catlin and Van der Broek Family Trust, trading as Adrienne's Cafe, approved on 19 December 1997. Mr and Mrs Catlin guaranteed this company loan to the extent of $50,000.
- (I note, in passing, that the defendants had other accounts with the bank which are not the subject of this action. One was the ANA Display & Promotions account No 61-688-3905.)
3 The home loan was secured by mortgage granted by the defendants over their home at 13 Shadwick Drive, Karratha. The mortgage was signed on 19 December 1997 and registered against the title, upon the registration of the transfer to Mr and Mrs Catlin on 8 January 1996. The mortgage in its terms provides that the mortgagors:
"The Mortgagor … in consideration of loans, advances or banking accommodation provided or to be provided by the mortgagee hereinbefore described ('the Bank') … hereby mortgages to the Bank all the estate and interest of the Mortgagor in the land hereinbefore described … " (Emphasis mine.)
(Page 4)
- Thus, the mortgage secures the two 1997 accounts mentioned above as well as the 1995 home loan. The mortgage has been upstamped to secure those additional amounts.
4 The statement of claim recites that a written notice of demand (the first notice) dated 14 November 2000 was served on the defendants in accordance with s 80 of the Consumer Credit Code and demanded that they remedy the default within 31 days. That notice of demand, which is annexed to Mr Todorov's affidavit of 19 September 2001 recited the default of the defendants of $33,454.20 under the instalment loan facility. It was said that the defendants were in breach of their guarantee and indemnity under the loan granted to the company in respect of Adrienne's Cafe. They were required to repay that amount within 31 days, failing which that would create a default under the FlexiPlus mortgage contract, which would also become payable. The sum due under that, together with interest and costs, totalled $81,923.96. The defendants did not remedy that default within the 31-day period. However, on 25 January 2001, the plaintiff received $52,330.68 in reduction of the amount due by the defendants, which was applied as follows: $34,334.29 went to the third account, number 69-658-5165, the instalment loan facility, and $17,986.39 went to account number 61-749-9099, which was another account which I have not hitherto mentioned, which was the cafe's trading account.
5 A second notice of demand dated 7 June 2001 was served on the defendants which called up the whole of the moneys owing and secured by the mortgage under three accounts as follows:
The home loan account No 10-333-0889, $123,655.30,
The FlexiPlus mortgage facility No 63-506-0648 for $87,919.19
The account No 61-794-9099 for $50,000.
6 The total of these sums plus interest and bank charges came to $269,132.78. The bank demanded repayment of that by 4 pm on 14 June. Payment was not made and on 18 June 2001 the plaintiff served upon the defendants a notice to quit possession of the property within 10 days which was not obeyed.
7 The bank's documents are in order and prove its case in a prima facie way. I now turn to the defendants' affidavits to see if any defences are offered. The affidavits concerned are that of Mr Catlin sworn 2 November 2001, Mrs Catlin sworn 2 November 2001, Mr Catlin sworn 14 March 2002, and Mrs Catlin sworn 14 March 2002. The first defence
(Page 5)
- raised, which is also the principal basis for the defendants' stay application, is that the defendants were charged in October 2001 with criminal charges arising out of their operation of the National Bank accounts and are awaiting trial on those charges. The application is that the hearing of this application will violate their right to remain silent in the criminal case. They intend to defend the criminal charges. They say that this civil case should await the outcome of the criminal charges. A preliminary hearing of those charges has been scheduled for 21 May 2002 in Karratha.
8 The criminal charges are annexed to Mr Catlin's affidavit of 2 November 2001. The details of those charges, as set out in the statement of material facts, are as follows:
"ACCUSED: Adrian Charles Steven CATLIN
26/11/1958 42 years.
Adrienne Maria CATLIN
06/08/195843 years
The accused in these matters are husband and wife. They previously jointly owned and operated businesses in the Karratha area, namely Adrienne's Cafe, Adrienne's on Tour and ANA Promotions and Displays.
They also operated three National Australia Bank accounts numbered; 61 794-9099, styled Adrienne's Cafe; 61 688-3905, styled ANA Promotions and Displays and 63 506-0648, styled Adrian Charles CATLIN & Adrienne Maria CATLIN. It will be alleged that the accused used these accounts to effect two separate cheque kiting schemes.
Cheque kiting is a systematic pattern of depositing insufficient fund cheques between usually two or more bank accounts, resulting in the bank records showing account balances that are inflated by the amounts of the sufficient fund cheques. This is because there is a delay between when a cheque is deposited to an account and when that cheque is returned to the originating bank for debiting to the originating cheque account. The inflated account balances lead the complainant bank to honour the cheques, as they are not aware that there are insufficient funds.
This, in itself, does not deprive the banks of funds because a cheque debited into one account is matched by a deposit
(Page 6)
- credited into another, and the transaction can usually be reversed by the banks if the nature of the transaction is discovered. However, when cheques, withdrawals, interest and transaction fees and taxes are paid out of the inflated balances, without being financed sufficiently from deposits, then funds are removed from the cycle of cheques, resulting in true bank balances being overdrawn, or in excess of approved overdraft limits. It is at this point that the banks are deprived of funds while being lead to believe that the accounts contain sufficient funds.
When the cycle of cheques eventually stops, no further deposits of insufficient fund cheques are made to the accounts, yet insufficient fund cheques deposited previously are presented to be cleared, at which time the fund deficiency is discovered.
Counts 1-84
he first cycle of kiting took place between 30 October 1997 and 8 January 1998 and resulted in the combined balance of the three accounts being falsely inflated by up to $31,000.00. This false inflation occurred on 22 and 23 December 1997. (SEE ATTACHED - APPENDIX A for details of cheques written.)
This series did not result in a permanent loss to the complainant because the accused made net deposits over a period of time, which effectively reversed the drawings made by the accused on the falsely inflated balances and repaid these drawings.
Count 85-1513
The second and most protracted cycle commenced on 30 January 1998 and continued until 23 November 1999. This resulted in the combined balance of the three accounts being falsely inflated by $600,025.00 on 18 November 1999. The accumulated effect of this series was that the total debit balance of the three accounts was $669,415.21 as at 27 November 1999. (SEE ATTACHED - APPENDIX B for details of cheques written.)
The accused wrote out a total of 1,513 cheques on the three accounts, knowing that there were insufficient funds to honour them, to effect the two kite flying cycles.
(Page 7)
- ACCUSED: Adrian Charles Steven CATLIN
26/11/1958 42 years.
Adrienne Maria CATLIN
06/08/1958 43 years
The total face value of the above cheques was $121,232,283.00 and the complainant incurred a pecuniary loss of $589,415.2 1.
The complainant became aware of the scheme and instituted an audit of the accused's accounts. This audit resulted in the matter being referred to Police for investigation.
The accused declined to participate in an interview with Police.
It will be requested that an order for 5589,415.21 reparation be paid to the complainant."
9 It is true that one of the accounts mentioned there, 61-794-9099, styled Adrienne's Cafe, is one of the accounts the subject of this action. It is the third account mentioned. However, the $50,000 instalment loan facility sought to be recovered by an order for possession of their property under this summary judgment application is not part of the $589,415.21 sought to be recovered by the plaintiff by an order of reparation as part of the criminal case. As I understand it, the defendants do not dispute that the $50,000 was loaned to the company for the cafe, or that they signed the guarantee documents. The defendants have not contended that any of the 1,513 cheques listed in the criminal charges have the effect of making this $50,000 not payable, or has the effect of reducing the amount. In any event, even if the defendants did assert that, that would not destroy totally the efficacy of the notices of demand. They would still be good for the two other loans.
10 Moreover, I do not see how the defendants' undoubted right to silence in the face of criminal charges is a defence to this action. The two jurisdictions are separate. If, for example, the defendants said that they did not owe the loans to the bank, or that they had repaid those loans in whole or in part, that would not prejudice their defence in the criminal proceedings. Also, to repeat my earlier point, there is no evidence in this case that the sums of money claimed by the bank from the defendants in this case are the same sums as claimed by the bank in the criminal charges. I adjourned this case on 14 November 2001 and ordered the bank to provide bank statements to the defendants on the three accounts the subject of this case. Those bank statements were provided, but the
(Page 8)
- new affidavit of Mr Catlin of 14 March 2002 setting out the defendants' defences does not assert that any particular cheque listed in the criminal charges has the effect of setting up a defence to this civil action.
11 The second defence advanced by the defendants to the bank's summary judgment application concerns the bank's disposal and sale of the defendants' business, Adrienne's Cafe. Mr Catlin, at par 26 of his affidavit of 14 March states:
"We challenge the plaintiff's entitlement to possession of our house because it sold, an asset of our company, Adrienne's Cafe way under value, or alternatively sold it recklessly and without regard to its proper value."
12 The cafe was run by the defendants' company, ANA Enterprises Pty Ltd. The bank appointed a chartered accountant, Mr Indiran Rajadurai, as receiver and manager of that company on 22 May 2000 under a deed of debenture. He continued to trade on in the business from that until 13 October 2000 when the business was sold for $110,000 plus stock. According to Mr Rajadurai's affidavit of 6 December 2000, the effective sale price was $140,275, comprising:
|
| Nil |
|
1994 Ford Econovan) | $110,000.00 |
|
equipment on lease paid by purchaser | $26,858.00 _____________ |
| $136,858.00 | |
|
| $3,417.00 ____________ |
| $140,275.00" |
(Page 9)
- was not advertised in the local region. He failed to advertise it in the local weekly paper "The North West Telegraph". It was only advertised once in "The West Australian" on 3 June 2000. It was advertised as a "well established cafe business located n the North West of Western Australia". Expressions of interest were invited. Whilst the receiver was operating the business, there was no sign in the window that it was up for sale. The defendants also have grave suspicions about the purchaser, Mr Koste Suleski, who was, and is, a real estate representative employed by L J Hooker, Karratha, which firm was engaged by the receiver to sell the property. They say that on 31 October 2000 the receiver paid $5,500 to L J Hooker as commission or brokerage on the sale in two cheques. It was advertised for sale by the new owner at $265,000 on 11 November 2000. He could not sell it immediately, but it was eventually sold.
14 The plaintiff's counsel tendered a letter from the defendants to the bank dated 7 December 1999 which I have annexed as AC11A to Mr Catlin's affidavit of 14 March. In that letter, the defendants calculate that their total liability to the bank is in excess of $800,000, including the mortgage to the house and the debt incurred on the business. They also state in that letter that they estimate that in a fire sale the business would be sold for somewhere in the region of $200,000 to $250,000. They also say that the house is worth, "perhaps $200,000".
15 The receiver had the business valued by independent valuer, J R Thomspon, who said that its value as at 7 June 2000 was as follows:
"Plant & Equipment 75,500
Stock 6,500
Goodwill 21,000 to 26,000
$103,000 to 108,000"
- I add that Mr Thomspon gained a Bachelor of Agriculture Science with Honours in 1972 and an MBA in 1984. I do not know when he acquired his valuer's qualifications, but he states that he has valued for vendors, banks and purchasers over 1,200 businesses since September 1989 and over 1,700 small businesses since 1987. He states that since January 1989 he has published the Business Values Newsletter which covers the sale of businesses in WA. This newsletter is published every two months and covers in detail various businesses and issues associated with valuation theory and practice. He is also the co-author, with a South Australian business-valuing firm, of a quarterly publication called Business
(Page 10)
- Valuations Digest Newsletter, which deals entirely with business valuation theory and practice in Australia.
16 The receiver also had the firm of J P Gregson, auctioneers, value the plant and vehicles as at 26 May 2000 and their valuation was as follows:
"Existing Use Values | Auction Realisation Values | |
|
|
|
| $69,850.00 | $24,705.00 |
| $12,650.00 __________ $82,500.00 __________ | $4,400.00 ___________ $29,105.00 ___________ |
Existing Use Values | Auction Realisation Values | |
| ||
| $12,000.00 | $5,000.00 |
| $69,000.00 | $50,000.00 |
| $163,500.00 | $84,105.00" |
"13. Annexed hereto and marked with the letters 'IR-3' is a true copy of J P Gregson's valuation.
14. The leased plant with Existing Use Values of $12,650.00 and Pay-out Values of $26,858.00 were paid out by the purchaser.
15. The freehold motor vehicle was sold separately at auction and realised net auction proceeds of $6,071.00 compared with an auction valuation of $5,000.00.
(Page 11)
- 16. The leased motor vehicles with Auction Values of $55,000.00 and Payout Values of $81,091.00 had negative equity and were disclaimed by me.
17. During my period as Receiver and Manager and as a result of negotiations with the managing agents of the Karratha City Shopping Centre I secured a reduction in the monthly rental and variable outgoings from $9,786.00 to $7,957.00. I believe that this reduction ultimately facilitated the sale."
18 The receiver at par 20 of his affidavit states that he did not at any time receive from the defendants a valuation of the business.
19 The receiver states at par 25 of the affidavit that he advertised the property for sale and received numerous expressions of interest. Of these, only three were reduced to writing in the form of formal offers to purchase. Those offers were:
|
|
|
|
| $20,000 plus stock at valuation |
|
| $110,000 walk-in/walk-out |
|
| $85,000 walk-in/walk-out |
21 The courts will not grant an injunction or a stay preventing a mortgagee exercising its powers of sale unless the full sum claimed is paid into court. The sale is to go ahead and if the mortgagee does not act
(Page 12)
- in good faith and does not conduct the sale properly, then the defendants have a right of action against the mortgagee. This was so held by the High Court in Inglis & Anor v Commonwealth Trading Bank of Australia (1972) 126 CLR 161. I quote from the headnote:
"As a general rule an injunction will not be granted restraining a mortgagee from exercising powers conferred by a mortgage and, in particular, a power of sale unless the amount of the mortgage debt, if this is not in dispute, is paid or unless, if the amount is disputed, the amount claimed by the mortgagee is paid into court; and this rule will not be departed from merely because the mortgagor claims to be entitled to set off the amount of damages claimed against the mortgagee."
This decision has been affirmed by our Full Court in Commonwealth Development Bank of Australia Ltd v Nertec Pty Ltd [1999] WASCA 311. In the light of those two cases, the defendants' claim against the bank arising out of the receiver's sale of the business (without the payment of the sum claimed by the bank into court) does not amount to an arguable defence, or a reason for a stay of the proceedings until the defendants' claim is determined by a court.
22 The third possible defence raised by Mr Catlin in his affidavit of 14 March 2000 is at par 54 onwards under the hearing "Agreement with the Plaintiff to settle the debt". He there refers to various proposals made by the defendants to settle the debt. One of those proposals is contained in a letter from Arns & Associates, solicitors, who were then acting for the defendants, dated 30 June 2000. This letter was sent during the period of the receivership, the receiver having been appointed on 23 May. In that letter, Mr Arns, on behalf of the defendants, said that his clients had been given tentative finance approval by Shelf Lease & Finance Services subject to adequate security being provided in the sum of $500,000. The writer asked if the bank was willing to accept that $500,000 in full and final settlement of all debts and enter into a deed of release and discharge. Mr Catlin's affidavit does not annexe a letter from the bank accepting that offer, but he says on 19 June 2000 his wife telephoned Mark Murrell of the bank's office in Perth and he "is informed by her and verily believe that Mark Murrell agreed to a settlement of $500,000". That was prior to this particular offer being put in writing and is not an acceptance of the written offer. The affidavit goes on to state how the defendants attempted to arrange the finance of $500,000 and I quote from pars 63 to 65 of the affidavit:
(Page 13)
- "63. We firstly arranged through Liberty Finance a first mortgage loan of $210,000. This was approved subject to our company coming out of receivership.
64. Finance using the business as security was difficult because of the receivership, but we had tremendous local and family support.
65. By October 2000 we had in place (or promised) the following finance:
65.1 Liberty Finance: $210K
65.2 Clough Engineering: $150K (Subject to due
diligence)
65.3 Business Community: $70K
65.4 My brother Chris Catlin: $30K
65.5 Olwyn Snellen: $20K
65.6 Sharon Johnson: $20K"
24 I am unable to see that all of that amounts to an arguable defence. The proposal for a $500,000 settlement in complete satisfaction of the defendants' debts to the bank was never agreed in writing by the bank.
(Page 14)
- The time given by the receiver in his letter of 13 October to provide written confirmation of the financial approval from the non-bank financial institution, and written confirmation of Clough Engineering's intention to inject $109,000, was ridiculously short. The receiver demanded confirmation by 5.30 pm on that day. However, seen in the context of Mr Arns' offer letter of 30 June 3000, as at 13 October 2000 the defendants had had three-and-a-half months to show confirmation of the finance available to satisfy the bank that the offer was genuine. Also, it was a compromise offer. The bank's debt exceeded $500,000. The bank did not have to accept a compromise offer. There is no letter of acceptance annexed to Mr Catlin's affidavit, neither is there any verbal acceptance from any bank officer post-30 June.
25 A fourth possible defence is raised in par 74 of Mr Catlin's affidavit of 14 March which reads:
"The loans subject of the mortgage pleaded in the statement of claim were up to date as at 13th October 2000."
- As previously stated, there were at least three loans secured by the mortgage and default under three loans has been pleaded in the statement of claim.
26 The first loan, account No 10-333-0889 (formerly 65-893-1901) was the home loan account for $150,000. According to the bank statements, which are annexed to Mr Todorov's affidavit of 1 February 2002, as at mid-2000 fortnightly instalments of $750 were credited to this account. As at 31 May 2000, the account balance was $117,251.45 DR. So, each fortnight instalments of $750 were credited to this account. Those instalments came from the second account, the FlexiPlus mortgage account. They were not paid in by cheque. As at 17 July onwards, every such instalment credited was dishonoured by the bank. According to the bank statements, no fortnightly instalments effectively had been paid since June 2000. Based on the bank statements, the two notices of default in relation to this account were correct.
27 The second account mentioned in the statement of claim is the FlexiPlus mortgage facility initially of $79,000, account No 63-506-0648. The bank statements for that are also found in Mr Todorov's affidavit of 1 February 2002. The fortnightly repayments of $750 under the home loan already mentioned came out of this account and, consistently with what I said in relation to that account, the bank statements show from July 2000 onwards that all these fortnightly loan payments into the home loan account were dishonoured. As at 31 July 2000, the debit balance was
(Page 15)
- $79,971.13. As at 1 November 2000, the debit balance in this FlexiPlus mortgage account was $81,543.75. In each case, the debit balance was over the limit of $79,000. This facility was not an instalment loan. It was more akin to an overdraft account. Clause 5 of the terms and conditions entitled the bank to cancel the facility at any time, whether or not the defendants were in breach of the agreement. The clause provides that, where the facility is cancelled the bank, will give notice of that cancellation as soon as possible and the facility limit will be reduced to zero, and the customer must repay any unpaid balance in the account and any other money owing under the agreement, immediately. The first notice of demand of 14 November 2000 threatened that the bank would demand repayment of the FlexiPlus mortgage contract. That notice of demand pointed to a default in the repayment of the third account of $33,454.20 and said that, unless that was remedied within 31 days, the bank would require payment of the sum due under the FlexiPlus mortgage contract stated to be $81,633.75. The second notice of demand of 7 June 2001 demands all the principal, interest, bank fees, costs, charges, etcetera, owing, inter alia, under the FlexiPlus account there stated to be $87,919.19.
28 The third account was the instalment loan facility offered to ANA Enterprises Pty Ltd and the defendants were guarantors of that account, limited to $50,000. The bank statements for that account, No 61-794-9099, are annexed to Mr Todorov's affidavit of 1 February. That account was known as "Adrienne's Cafe". The statements show that in May 2000 that account was closed, I assume on the appointment of the receiver. As at the time of closure, the account had 30 cents in credit, but that result was only achieved by writing off a debt of $322,654.05. That is an internal bank write-off and that the defendants cannot get the benefit of that. Apart from that write-off, the debit balance of that account, say, as at 29 February 2000 was $327,799.95. Under the terms of the guarantee, the bank is entitled to call upon the guarantors for their $50,000 guarantee. That was done in the first notice of demand and that was repeated in the second notice of demand. Because the loans were collateralised the default in paying that $50,000 also amounted to a default under the other mortgages. I consider the defendants have no arguable defence in saying that the three loans the subject of the mortgage were not in default when the notices of demand were issued.
29 The fifth possible defence raised by the defendants related to Mrs Adrienne Catlin only. In her affidavit of 14 March 2002, she refers to the affidavit of Ms June Bartlett sworn 7 December 2001 on behalf of the plaintiff. She states:
(Page 16)
- "2. I deny that the guarantee was ever explained to me as to its effect on my home.
3. My husband made all the financial decisions concerning the business loan in 1997.
4. After he had obtained approval, the plaintiff's staff called on me on the telephone to come in and signed the documents. I simply trusted the bank and signed.
5. The declarations made on pages 55 and 56 of 'JEB3' are untrue. Nothing was explained to me and no legal advice was offered to me."
30 Ms Bartlett's affidavit at par 2(c) annexes the instalment loan facility in the name of ANA Enterprises Pty Ltd, which is the third loan referred to in the statement of claim, and the guarantee and indemnity of that loan signed by the defendants. Mrs Catlin's affidavit refers to pages 55 and 56 of "JEB3". They are the last two pages of that document. Page 55 is a "Certificate and Acknowledgment from the Guarantor" which states:
"Annexure to Guarantee and Indemnity/Consumer Guarantee
Amount Amount in words
$50,000 FIFTY THOUSAND DOLLARS………..
On account of
ANA ENTERPRISES PTY LTD ACN 009 233 434 AS TRUSTEE FOR THE CATLIN AND VAN DER BROEK FAMILY TRUST CARRING [sic] ON BUSINESS UNDER THE NAME OF ADRIENNE'S CAFE
The Bank has drawn my/our attention to the warning printed on the cover of this guarantee and indemnity/consumer guarantee, and in particular the recommendation that legal and financial advice should be obtained before signing it.
I/We am/are satisfied that I/we am/are fully award of the nature of the document and of the risks associated with signing it.
I/We do not regard the obtaining of legal or financial advice as necessary and I/we prefer to proceed without it.
(Page 17)
- I/We declare that I/we am/are executing this guarantee and indemnity/consumer guarantee voluntarily."
- The document is signed by both Mr and Mrs Catlin as guarantors and in each case the witness is Brad Smith, Bank Manager of Karratha.
31 Page 56 is a document headed "Acknowledgment from Guarantor/s", also signed by Mr and Mrs Catlin, acknowledging in relation to this guarantee of $50,000 on account of ANA Enterprises that they have received two documents; (1), a guarantee indemnity, and (2), a document "What is a Guarantee". The text of the acknowledgment is in these terms:
"Acknowledgment - One set of Documents
I/We acknowledge:
- receipt of one only set of documents listed above; and
- each of us individually has access to the set of documents listed above; and
- that we do not require multiple, individual set of the documents listed; above; and
- that each of us is entitled to receive an individual set of the documents listed above upon request to the Bank."
- It is then signed by Mr and Mrs Catlin.
32 The loan document is in the form of a letter addressed to Mr and Mrs Catlin which commences at page 28 of Ms Bartlett's affidavit and commences:
"Dear Mr and Mrs Catlin,
Referring to your company's application for a loan we are pleased to advise the current willingness of the Bank named in item 1 of the Schedule ('the Bank') but without obligation on the bank until the loan is actually made to make available to your company a loan of the amount set out in Item I of the Schedule on the following conditions … "
- Then follow 28 conditions spread over three pages. Those conditions make frequent reference to the "Schedule". The schedule is then annexed which sets out in summary form the terms of the loan. Item 6 of the
(Page 18)
- Schedule is entitled "Securities" and states "Refer Annexure A". Annexed to that schedule is Annexure A, which is in these terms:
"This Annexure 'A' refers to the Loan Conditions - Companies Letter of Offer
Customer: ANA Enterprises Pty Ltd A.C.N. 009 233 434 as Trustee for the Catlin and Van Der Broek Family Trust Trading as Adrienne's Cafe
Date: 22nd December 1997
Page: 6 (Securities).
Item: 7
1. Registered Mortgage Debenture over the whole of the assets and undertakings of ANA Enterprises Pty Ltd A.C.N. 009 233 434 as trustee for the Catlin and Van Der Broek Family Trust, including called but unpaid capital and uncalled capital, if any.
2. Guarantee and Indemnity for $50,000.00 given by:
- ANA Enterprises Pty Ltd A.C.N. 009 233 434 in its own right
- Adrienne Maria Catlin
- Adrian Charles Catlin
supported by;
3. Registered Mortgage given by Adrienne Maria Catlin and Adrian Charles Catlin over property located at 13 Shadwick Drive, Karratha as described in Certificate of Title Volume 1642 Folio 259."
Immediately under the reference to that mortgage appear the initials of Mr and Mrs Catlin.
33 Immediately after the loan document which concludes with annexure A which I have quoted above, appears the guarantee and indemnity at page 35 of the affidavit. On the first page of that document headed "Guarantee and Indemnity" appears the following:
"Warning
(Page 19)
- This is an important document.
By signing it you become personally responsible instead of, or as well as, the customer up to the amounts which the customer owes the Bank, even if you have given the Bank separate security. They include amounts which the customer owes the Bank with any other person. They may also include amounts which can increase, for example if the customer has borrowed in a foreign currency or seeks to repay a fixed rate loan early.
In addition you can become responsible for additional amounts up to the maximum liability.
It is likely that the Bank will be able to resort to any mortgage or other security which the Bank holds or which you give the Bank in relation to your own affairs as security for the amounts covered by this document. If you are an individual this would include any mortgage over your family home.
You should:
• seek independent legal advice before signing this document; and
• consider seeking, and if you think fit, obtain independent financial advice before signing this document; and
• make, and continue to make, your own inquiries about the creditworthiness, financial position and honesty of the customer."
34 I accept for the purposes of this application that Mrs Catlin did not have the guarantee explained to her as to its effect on her home and that she did not have the warning just quoted specifically drawn to her attention and that she did not have the other statements on page 55 drawn to her attention. I accept that after approval had been obtained, she was called in to sign the documents and simply trusted the bank and signed. I note too that on page 53 of Ms Bartlett's affidavit, which is one of the pages of the guarantee, there is a heading "Certificate from Guarantor's Solicitor" with room for the solicitor who explained the guarantee to the guarantor to sign. This was left blank, so, clearly, no explanation was given from a solicitor.
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35 I do not consider that these matters raised amount to an arguable defence. The law does not provide that a guarantee document must be preceded by a written warning that the guarantor can become liable for the amounts owing in addition to the principal debtor, nor that the bank might be able to resort to any mortgage or other security in addition to the guarantee. The law does not provide that a guarantor must be told of his right to seek independent legal advice, or independent financial advice, or to make his own inquiries about the creditworthiness and financial position and honesty of the principal debtor. These provisions are put in the mortgage to protect the bank. They are not essential legally. It does not matter legally that Mrs Catlin failed to have her attention drawn to these documents. The normal, standard position is that a person who signs a legal document is bound by it, whether he or she reads it or not. The signature alone indicates a consent to be bound by the document. In this regard, I refer to the dicta of Latham CJ in Wilton v Farnworth (1948) 76 CLR 646 at 649:
"Where a man signs a document knowing that it is a legal document relating to an interest which he has in property, he is in general bound by the act of signature… He may not trouble to inform himself of the contents of the document, but that fact does not deprive the party with whom he deals of the rights which the document gives to him. In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions."
36 That dicta was recently affirmed by our Full Court in Tranchita v Retravisikon (WA) Pty Ltd [WASCA] 265 at [68].
37 In her recent affidavit at par 3, Mrs Catlin stated:
"My husband made all the financial decisions concerning the business loan in 1997."
38 I do not accept that brief statement as amounting to an arguable defence of undue influence or unconscionable conduct, as set out in
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- Commercial Bank of Australia v Amadio (1983) 151 CLR 447 and in Garcia v National Australia Bank Ltd (1998) 194 CLR 395. As explained by Mason J at 461 of that former case, to get relief on the ground of unconscionable conduct, a party must take unconscientious use of his superior position or bargaining power to the detriment of a party, such as Mrs Catlin in this case, who suffers from some special disability, or is placed in some special situation of disadvantage. He also stated that relief on this ground will be granted when unconscientious advantage is taken of an innocent party whose will is so overborne so as not to be independent and voluntary, so that that person is unable to make a worthwhile judgment as to his or her best interest.
39 As I see it, this was not such a case. Mrs Catlin was not a wife with no active interest in her husband's business. On the contrary, she was a director of the company. The business being run by the company and being financed by the loan to the company was called Adrienne's Cafe. It was named after her. She was actively engaged with her husband in working in the cafe. Indeed, she worked long hours in the cafe trying to make it a success. I note that most of the correspondence I have seen on the affidavits is addressed to both Mr and Mrs Catlin and some of the correspondence on the file sent by them is also signed in their joint names. Mrs Catlin and her husband, who represented themselves before me, both addressed the Court. Mrs Catlin had a good knowledge of their business affairs and their case. I note that 13 October 2000 was a very traumatic time in their life. That was when they were evicted from the cafe premises and it was sold to Mr Suleski. Mrs Catlin made detailed diary notes of the events on that day and also of important conversations made about the business on 10 October. Those notes are annexed to Mr Catlin's affidavit of 14 March. Mrs Catlin's brief statement in par 3 is too bare of detail and is contrary to the important facts which I have mentioned, to amount, in my view, to any arguable defence.
40 I am aware that the power to order summary judgment is one which should be exercised with great care and should never be exercised unless it is clear that there is no real question of law or fact to be tried. I consider that the defendants have not raised any real question of law or fact which needs to be tried, nor have they raised any other reason why summary judgment should be withheld. I am aware, too, that the bank's debt may well exceed the value of the house and that the notices of demand were given long ago. I propose to enter summary judgment for the plaintiff.
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