National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 4)

[2019] NSWSC 1477

Supreme Court

New South Wales

Medium Neutral Citation:

National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 4) [2019] NSWSC 1477

Hearing dates:

24 November 2017; 14-16 March, 24 April, 4 June, 26 June and 3 September 2018; 2 and 22 October 2018 (written submissions)

Date of orders:

29 October 2019

Decision date:

29 October 2019

Jurisdiction:

Common Law

Before:

Walton J

Decision:

The Court makes the following directions:

 

(1) NAB should file and serve short minutes of order reflecting this judgment within 14 days of its publication together with a submission in support of the orders proposed in the event of any dispute as to the proposed orders.

 

(2) In the event as to any dispute as to the short minutes of order reflecting the terms of this judgment, Ms Charlton and Mr O’Brien shall file and serve submissions as to that issue within 14 days of the receipt of NAB’s short minutes of order and submissions in support thereof.

 (3) The Court will make orders administratively in Chambers upon the receipt of consent short minutes of order or, in the event of any dispute as to the form of the orders, after consideration of the submissions advanced by the parties.

Catchwords:

REAL PROPERTY – farm debt – possession of land –default under farm mortgage – Farm Debt Mediation Act – MEDIATION – whether s 11 certificate valid – whether satisfactory mediation – construction of s 4(1A) – was mediation in good faith – did mediator provide summary of mediation at end of mediation – was notice provided by bank that it had agreed to a mediation – was bank required to mediate with farmer in personal capacity and in capacity as trustee – whether subsequent mediation invalid –ENFORCEMENT ACTION – whether proceedings void pursuant to s 6 of the Farm Debt Mediation Act – whether enforcement action prior to mediation – scope of enforcement action under the Farm Debt Mediation Act – was notice of cancellation of overdraft a farm mortgage – whether bank entitled to withdraw reliance on default notices – whether bank engaged in continuation of enforcement action – TRUST LAW – was property held by trust – is trust liable to pay the loans rather than individual – whether joint trustee – whether individual validly resigned as trustee – whether individual indemnified under trust deed – SERVICE – was cancellation notice required to be served – was cancellation notice served – was default notice served – CONSUMER LAW – misleading or deceptive conduct – whether representation made by bank that facilities would be extended – ADMINISTRATIVE LAW – judicial review – error of law – procedural fairness – application for extension of time to bring proceedings – application dismissed

Legislation Cited:

Civil Procedure Act 2005 (NSW)
Conveyancing Act 1919 (NSW)
Crimes Act 1900 (NSW)
Crimes Act 1958 (Vic)
Farm Debt Mediation Act 1994 (NSW)
Farm Debt Mediation Amendment Act 2018 (NSW)
Oaths Act 1900 (NSW)
Real Property Act 1900 (NSW)
Supreme Court Act 1970 (NSW)
Trustee Act 1925 (NSW)
Trustee Act 1958 (Vic)
Uniform Civil Procedure Rules 2005 (NSW)
Water Management Act 2000 (NSW)

Cases Cited:

Aiton v Transfield (1999) 153 FLR 236; [1999] NSWSC 996
ALYK (HK) Ltd v Caprock Commodities Trading Pty Ltd [2015] NSWSC 1006
Annetts v McCann (1990) 170 CLR 596; [1990] HCA 57
Australian Innovation Ltd v Dean-Willcocks (2001) 166 FLR 360; [2001] NSWSC 1204
Bendigo and Adelaide Bank Ltd v Tombs [2010] NSWSC 1427
Boz One Pty Ltd v McLellan (2015) 105 ACSR 325; [2015] VSCA 68
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60
Carr v Finance Corporation of Australia Ltd (No 2) (1982) 150 CLR 139; [1982] HCA 43
Cherryop Pty Ltd v Commonwealth Bank of Australia (1996) 39 NSWLR 337
Dewhirst v Edwards [1983] 1 NSWLR 34
Director of Public Prosecutions (SA) v District Court of South Australia and Lawrie (2005) 92 SASR 94; [2005] SASC 260
Dobbie v Department of Social Security [1995] FCA 1191
Escobar v Spindaleri (1986) 7 NSWLR 51
Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252
Gooley v NSW Rural Assistance Authority (No 2) [2017] NSWSC 1336
Kiriwina Investment Company Pty Ltd v Green Lees Developments Pty Ltd [2017] NSWSC 1727
Kirkham Estate Wines Pty Ltd v General Manager, NSW Rural Assistance Authority [2004] NSWADTAP 24
MacarthurCook Fund Management Ltd v Zhaofeng Funds Ltd [2012] NSWSC 911
Mayes v Mayes [1971] 2 All ER 397
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; [1986] HCA 40
Minister for Immigration and Border Protection v SZSSJ (2016) 259 CLR 180; [2016] HCA 29
Minister for Immigration and Border Protection v WZARH (2015) 256 CLR 326; [2015] HCA 40
Minister for Immigration and Citizenship v SZJSS (2010) 243 CLR 164; [2010] HCA 48
National Australia Bank Limited v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority [2018] NSWSC 157
National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 2) [2018] NSWSC 969
National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 3) [2018] NSWSC 970
Photios v Cussen [2015] NSWSC 336
R v Medical Practitioners Professional Conduct Tribunal; Ex parte Medical Board (1985) 40 SASR 84
R v Windridge; Ex parte Pacific Coal Pty Ltd [1992] 2 Qd R 180
Re Bluenergy Group Ltd (2015) 300 FLR 155; [2015] NSWSC 977
Re Maria’s Farm Veggies Pty Ltd [2016] NSWSC 1770
Re Minister for Immigration and Multicultural Affairs; Ex parte Lam (2003) 214 CLR 1; [2003] HCA 6
Re Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 206 CLR 57; [2001] HCA 22
Roxo v Normandie Farm (Dairy) Pty Ltd [2012] NSWSC 765
State Bank of New South Wales v Topfelt Pty Ltd (Unreported, Supreme Court of New South Wales, Brownie J, 11 March 1993)
State Bank of NSW v Freeman (Unreported, Supreme Court of New South Wales, Badgery-Parker J, 31 January 1996)
Suncorp Insurance and Finance v Commissioner of Stamp Duties (1997) 36 ATR 514; [1998] 2 Qd R 285
Suncorp-Metway Ltd v Nam Property Holdings Pty Ltd (2010) 16 BPR 30,859; [2010] NSWSC 1078
Thai v Deputy Federal Commissioner of Taxation (1994) 53 FCR 252
Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369
Van Stappen v Mackenzie (2008) 14 BPR 26,387
Varga v Commonwealth Bank of Australia (1996) BPR 97,617
Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 31; [2012] HCA 4

Texts Cited:

Australian Law Dictionary (Oxford University Press, 2nd ed, 2013)
D C Pearce and R S Geddes, Statutory Interpretation in Australia (LexisNexis, 8th ed, 2014)
Encyclopaedic Australian Legal Dictionary (LexisNexis, online edition)
Thomson Reuters, Ford and Lee: The Law of Trusts (at August 2019)

Category:

Principal judgment

Parties:

2015/27843
National Australia Bank Ltd (Plaintiff / Cross-Defendant)
Josephine Joan Charlton in her own capacity and as trustee for the Phoenix Trust (Defendant / First Cross-Claimant)
Kevin Michael O’Brien (Second Cross-claimant)

  2016/122304
Josephine Joan Charlton (First Plaintiff)
Kevin Michael O’Brien as trustee of the Phoenix Trust (Second Plaintiff)
The General Manager, NSW Rural Assistance Authority (First Defendant)
National Australia Bank Ltd (Second Defendant)

Representation:

Counsel:
2015/27843
C Colquhoun (Plaintiff / Cross-Defendant)

 

2016/122304
C Colquhoun (Second Defendant)

 

Solicitors:
2015/27843
Dentons Australia Pty Ltd (Plaintiff / Cross-Defendant)

  2016/122304
Dentons Australia Pty Ltd (Second Defendant)

File Number(s):

2015/27843; 2016/122304

Judgment

1. HIS HONOUR: By a statement of claim brought on 16 January 2015, the National Australia Bank Ltd (“NAB”) brought debt and possession proceedings against Josephine Joan Charlton in her own capacity and as trustee for the Phoenix Trust (“the Trust”) (case number 2015/27843) (“the debt and possession proceedings”). NAB claimed a debt owed by Ms Charlton which was made up of an Overdraft, a First Business Options Loan and a Second Business Options Loan (each of which will be set out below) and NAB sought an order for possession under a mortgage.

2. A reply to the statement of claim was filed 4 May 2016. A reply to this reply was filed 5 May 2016. An amended statement of claim was filed on 4 May 2016. An amended defence was filed on 20 May 2016.

3. By a statement of cross-claim filed 9 July 2015 (and later amended on 6 August 2015), Ms Charlton, then as the first cross-claimant, and Kevin Michael O’Brien, as a second cross-claimant, brought a cross-claim in the debt and possession proceedings (“the cross-claim proceedings”). A defence to the first cross-claim was filed 2 September 2015. An amended defence was filed to the cross-claim proceedings on 4 May 2016.

4. Proceedings were commenced by summons by “[Ms] Charlton in her own capacity” and “Mr O’Brien as Trustee of Phoenix Trust” on 21 April 2016 against the General Manager of the NSW Rural Assistance Authority (“the RAA”) and NAB. These were judicial review proceedings and bore the case number 2016/122304 (“the judicial review proceedings”).

5. On 2 June 2016, Schmidt J made orders that the debt and possession and judicial review proceedings would be heard together whereby the evidence in the one matter would be evidence in the other. (Collectively the debt and possession, cross-claim and judicial review proceedings shall be referred to as “the proceedings”).

6. The proceedings have a lengthy case management history which was, in part, described in a judgment of the Court in National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority [2018] NSWSC 157 (“Charlton No 1”) at [21]-[50]. The pleadings are summarised in Charlton No 1 at [15]-[20].

7. Ms Charlton filed a notice of motion dated 5 September 2017 (“the first notice of motion”) seeking summary dismissal of the debt and possession proceedings, or alternatively that the judicial review proceedings be heard separately (and before) the debt and possession proceedings (the first notice of motion was formally filed on 27 September 2017). The first notice of motion was dismissed in Charlton No 1.

8. By notice of motion filed on 28 February 2018 (“the second notice of motion”), Ms Charlton sought a stay of debt and possession proceedings, pursuant to s 67 of the Civil Procedure Act 2005 (NSW), and a vacation of the hearing dates set for the proceedings upon the basis that Ms Charlton intended to appeal the decision in Charlton No 1 (“the stay application”). No stay application was brought in relation to the related cross-claim proceedings and judicial review proceedings. The second notice of motion was dismissed on 14 March 2018 (the first day of the trial) in National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 2) [2018] NSWSC 969.

9. By a notice a motion filed 8 March 2018 (“the third notice of motion”), Mr O’Brien sought to be added as a defendant in the debt and possession proceedings. This motion was heard on the latter half of the first day of the trial after the Court had delivered judgment on the stay application. The third notice of motion was dismissed on 15 March 2018 with reasons delivered on 26 June 2018: National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 3) [2018] NSWSC 970.

10. The trial then proceeded over 6 more days, albeit spread out over a considerable period of time for a variety of reasons. (The Course of the Proceedings up to Charlton No 1 appears in Charlton No 1, including settlement discussions, a further court ordered mediation, an intention to appeal from the same and a withdrawal of an application for mediation. The reasons for further delays are reflected in the transcript of proceedings but, in part, concerned Ms Charlton, a self-represented litigant, being afforded latitude in bringing her case).

THE EVIDENCE

11. There was a substantial amount of documentary evidence.

12. The following witnesses gave evidence for NAB in the proceedings:

1. Murray Reid (affidavit dated 16 May 2018): Mr Reid operated V.C Reid & Sons Stock and Station Agency at Forbes NSW, a livestock marketing business. Ms Charlton was a client of the business.

2. Ingrid Scharenguivel (affidavit dated 23 May 2018): Ms Scharenguivel was a Legal Services Associate employed by NAB. Her roles included sending legal notices to customers and maintaining files in respect of those customers.

3. Benjamin Stead (affidavit dated 24 May 2018): Mr Stead was a CPA with David Bicket Certified Practising Accountancy firm in Parkes NSW who conducted a review of Ms Charlton’s personal financial situation on 17 May 2018.

4. Ashley Gardiner: Ms Gardiner was an officer of NAB within the Strategic Business Services department (“SBS”). Ms Gardiner swore three affidavits dated 30 July 2015, 14 April 2016 and 8 March 2018, respectively.

5. Clive Hugh Thomas: Mr Thomas was an officer of NAB who was a “Junior Manager” at the Forbes branch of NAB from 6 July 2011 to December 2012 and an “Agribusiness Manager” at the Taree branch of NAB from January 2013. Mr Thomas swore two affidavits dated 24 September 2015 and 8 April 2016, respectively.

13. Ms Gardiner and Mr Thomas were required for cross-examination.

14. The evidence for Ms Charlton and Mr O’Brien respectively was as follows:

1. Ms Charlton swore seven affidavits dated:

1. 26 August 2015 (as defendant);

2. 26 August 2015 (as first cross-claimant);

3. 16 October 2015;

4. 1 April 2016;

5. 27 April 2016;

6. 15 June 2016; and

7. 28 May 2018.

2. Mr O’Brien swore eight affidavits dated:

1. 26 August 2015;

2. 14 October 2015;

3. 1 April 2016;

4. 27 April 2016;

5. 15 June 2016;

6. 13 March 2018;

7. 25 May 2018; and

8. 28 May 2018.

15. Ms Charlton and Mr O’Brien were required for cross-examination.

16. It should be noted that Mr O’Brien did not make oral submissions at the hearing. Rather, he alerted the Court that he would rely on the submissions made by Ms Charlton. Mr O’Brien did, however, file separate closing written submissions dated 2 October 2018. Where those submissions did not, in substance, differ from the submissions of Ms Charlton, they have been dealt with, without separate reference, from the submissions of Ms Charlton. Where Mr O’Brien’s submissions differed or significantly expanded on Ms Charlton’s submissions, I have endeavoured to attribute the submission to Mr O’Brien in the relevant section of this judgment.

RELEVANT FACTUAL BACKGROUND

17. The relevant factual background will be summarised in chronological order and addressed seriatim below. Prior to that summary, for ease of reference, a summary of the key events and relevant dates appears in tabular form below (although the table anticipates some rulings that I will make as to the course of events):

Event	Relevant Date(s)
Establishment of the Trust	1996
Purchase of the Property	2002
The Overdraft and Loan Facilities	2005 to 2008
Ms Charlton’s Default	2011
Attempts by NAB to Discuss the Default with Ms Charlton	July-August 2011
Purported Resignation as Trustee of the Trust	August 2011
Discussions with the O’Briens	August-September 2011
Notice of Cancelation	25 and 26 October 2011
Financial Ombudsman Service Complaint	December 2011 to November 2013
Expiry of First Business Options Loan	31 August 2012
Farm Debt Mediation	January- August 2014
Notice of Cancellation	17 October 2014
Second Business Options Loan in Arrears	May 2011 to October 2014
Outstanding Debt	6 March 2018

Establishment of the Trust

18. The Trust was established on 22 January 1996 by the execution of the Trust Deed (“the Deed”).

19. Ms Charlton’s brother, Gavin Michael O’Brien, was named as the original trustee of the Trust. Mr Gavin O’Brien, Ms Charlton and her brother, Justin William Laurence O’Brien, were named as beneficiaries.

20. Their uncle, John Laurence O’Brien, was named as the appointor of the Trust

21. On 1 June 1997, John O’Brien wrote a letter with an addressee marked as “To whom it may concern” which stated that Mr O’Brien was appointed as an additional trustee of the Trust. Mr O’Brien’s appointment as trustee of the Trust, as well as NAB’s notice of the same, will be discussed in relation to the Misrepresentation Issue in the proceedings (which is set out in the list of issues for the proceedings appearing later in the judgment).

22. On 1 July 2001, Gavin O’Brien resigned, and Ms Charlton was appointed, as a trustee of the Trust.

Purchase of the Property

23. In about October 2002, Ms Charlton was considering purchasing a property.

24. On 7 October 2002, a meeting was held in relation to the proposed purchase of “Oriel”, Tottenham NSW (Lot 22, Plan DP 724651, Folio Identifier 22/724651) (“the property”). A handwritten note of a “Meeting of Phoenix Trust” recorded that the meeting was held at 24 Court Street, Parkes, and commenced at 2.35 pm. The handwritten note was made by Mr Bill Burke, Ms Charlton’s solicitor at that time.

25. The meeting was attended by Ms Charlton, Justin O’Brien and Gavin O’Brien. In addition, Mr O’Brien and a Mr Burke attended the meeting “by invitation only”.

26. The handwritten note recorded the decision “that Phoenix Trust trustee enter into Contract for Sale from Eldridge for purchase of ‘Oriel’ Tottenham for $360,000” and “that Phoenix Trust trustee negotiate and enter mortgage arrangements (1) to Vendor 2nd Mortgage $60,000 and (2) to Suncorp-Metway 1st Mortgage for $250,000, with personal guarantees provided by all beneficiaries”.

27. Following the meeting, on 8 October 2002, Ms Charlton executed a contract for sale in respect of the purchase of the property for $360,000 in her capacity as trustee of the Trust.

28. It appears that Ms Charlton obtained loans totalling $315,000 to finance the purchase of the property. On 25 October 2002, Ms Charlton executed a mortgage in favour of Suncorp-Metway Ltd in respect of the property. The stamp on that mortgage recorded the amount secured by the mortgage as $255,000.

29. At around the same time, Ms Charlton executed a further mortgage in favour of Mr Warrick Eldridge and Ms Joanne Eldridge in respect of the property. Annexure A to the mortgage recorded the amount secured by the mortgage as $60,000.

30. On 11 December 2002, Mr Warrick Eldridge, Ms Joanne Eldridge and Ms Charlton executed a transfer in respect of the property for $360,000.

31. All of these documents recorded Ms Charlton as the sole purchaser of the property, and at least insofar as the contract for sale is concerned, the sole trustee of the Trust.

The Overdraft and Loan Facilities

32. This next section concerns the circumstances in which Ms Charlton obtained an Overdraft (with a limit of $150,000), the First Business Options Loan and the Second Business Options Loan. The following tables provide an overview of the history of the Overdraft (and its increased limits) as well as the two additional loan facilities with reference to the date that Ms Charlton executed the relevant documentation and the amounts of the facilities or loans as at the date they commenced (discussed below):

The Overdraft

Date Executed by Ms Charlton	Limit
5 September 2005	$50,000
21 November 2006	$100,000
10 September 2007	$150,000
2 September 2008	$200,000

First Business Options Loan

Date Executed by Ms Charlton	Amount
10 September 2007	$110,000

Second Business Options Loan

Date Executed by Ms Charlton	Amount
10 September 2007	$340,000

(The circumstances of default will be returned to under a separate heading).

First Business Letter of Offer

33. In around 2005, Ms Charlton approached NAB for further finance.

34. On 30 August 2005, NAB issued the “First Business Letter of Offer” to Ms Charlton as trustee for the Trust. Pursuant to the First Business Letter of Offer, NAB agreed to provide the Overdraft to Ms Charlton with a limit of $50,000, which was to be secured by a guarantee and indemnity from Ms Charlton. The account number of the Overdraft was 57-039-1525 (“the Overdraft”).

33. The First Business Letter of Offer contained the Overdraft Terms. A summary of the terms relevant to the proceedings, together with references to the corresponding clauses in that document, appear below:

1. Ms Charlton agreed to keep the Overdraft within the facility limit unless Ms Charlton obtained NAB’s prior approval and the Overdraft could be cancelled or reduced by NAB at any time: cl A.2;

2. Ms Charlton agreed to pay the total amount owing, including all drawings and any other amounts received by her under the Overdraft, and interest charges and other amounts payable under the First Business Letter of Offer: cl 4;

3. Ms Charlton agreed to immediately repay any amount drawn on the Overdraft in excess of its facility limit unless NAB otherwise agreed: cl 6.1;

4. If the Overdraft was cancelled by NAB, Ms Charlton agreed to pay the total amount owing for the Overdraft, and the facility limit was reduced by the amount of any cancellation: cl 6.3;

5. Ms Charlton was in default if she did not pay on time any amount due under the First Business Letter of Offer or another agreement she had with NAB, or if she did something she agreed not to do or did not do something she agreed to do under the First Business Letter of Offer or another agreement she had with NAB: cl 15(a)-(b);

6. If Ms Charlton was in default and failed to correct the default within any period given in any notice, the total amount owing under the Overdraft became immediately due for payment, and if she did not pay it, NAB could sue for that amount or enforce any security (or do both): cl 16;

7. Ms Charlton warranted that she was the only trustee of the Trust, that she had the power under the Deed to enter into and observe the trustee’s obligations under the First Business Letter of Offer, that she had in full force and effect the authorisation necessary to enter the First Business Letter of Offer, to perform her obligations under the First Business Letter of Offer and allow them to be enforced, and that she was not in default under the Deed: cl 23(b)(i), (iv), (v) and (viii); and

8. Ms Charlton undertook to ensure that, except with NAB’s prior written consent, she would not retire as trustee of the Trust: cl 23(c)(ii).

36. Mr Michael Underwood executed the First Business Letter of Offer on behalf of NAB on 5 September 2005. Ms Charlton executed the First Business Letter of Offer at about the same time.

37. On 6 September 2005, Ms Charlton executed the guarantee and indemnity in respect of the Overdraft.

38. Two other matters should be mentioned in this context.

39. First, a “Trustee Company Confirmation” form was created by NAB on about 19 August 2005 (“the confirmation”).

40. The first page of the document contained the statement: “Account styling - Gavin Michael O’Brien and Josephine Joan O’Brien as trustee for the Phoenix Trust”. The second page contained a heading “Comments” under which appears: “the letter appointing the new trustee, Josephine Joan O’Brien has been appointed as an additional trustee. However, your memo is headed Josephine Charlton”. However, as noted above, Gavin O’Brien had resigned as trustee on 1 January 2001, which explains why he was not recorded as trustee of the Trust in the First Business Letter of Offer. Ms Charlton accepted in her submissions that her maiden name was Josephine O’Brien and that she and her brother Gavin O’Brien had never been trustees “at the same time”.

41. The document also noted, “We have perused the Trust Deed”, and in relation to whether the Deed allowed the trustee to claim a right of indemnity from the trust fund, it stated: “refer to ‘Attachment 11’”. Attachment 11 stated: “The Trust Deed does not provide for the Trustee to claim a right of indemnity from the Trust Fund and therefore the Trust Deed requires amendment”. I agree with the submission by NAB that such a statement was internal advice to NAB, not to Ms Charlton. I will return to general law rights of trustees in the context of the Right of Indemnity Issue later in the judgment.

42. Second, the Overdraft appears to have been obtained in the context of a broader refinance by Ms Charlton.

43. On 1 September 2005, the mortgage in favour of Suncorp-Metway Ltd in respect of the property was discharged, and on 27 September 2005, Ms Charlton executed a mortgage in favour of Stacks Managed Investments Ltd in respect of the property (“the Stacks mortgage”). The mortgage recorded the amount borrowed by Ms Charlton under the Stacks mortgage as $380,000.

44. Ms Charlton suggested in cross-examination that the Stacks mortgage was taken out by herself and Mr O’Brien. She stated “National Bank paid out the mortgage to Stacks and there were two borrowers at the time, both trustees, Kevin O'Brien and myself at that time”. She gave evidence that “the original document didn’t have the other trustee on it but was later adjusted and the National Bank paid out the mortgage with two trustees on that document as the co-existing borrowers”. However, no documents in evidence verified that statement. The Stacks mortgage recorded Ms Charlton as the sole borrower and mortgagor, and that mortgage remained on the title until it was discharged in October 2007. Whilst there is no issue raised as to Ms Charlton fabricating this evidence, her memory of the transaction is, in the light of the evidence before the Court, faulty. Her evidence cannot be accepted.

First Notice of Agreed Changes

45. On 20 November 2006, NAB issued the First Notice of Agreed Changes to Ms Charlton.

46. Pursuant to the First Notice of Agreed Changes, NAB agreed to increase the limit of the Overdraft to $100,000, which was to be secured by a further guarantee and indemnity from Ms Charlton. The First Notice of Agreed Changes was executed by Ms Charlton on 21 November 2006.

47. On 21 November 2006, Ms Charlton executed a guarantee and indemnity in respect of the $100,000 limit under the Overdraft.

Second Notice of Agreed Changes, Second Business Letter of Offer and Mortgage

48. On 31 August 2007, NAB issued the Second Notice of Agreed Changes to Ms Charlton.

49. Pursuant to the terms of the Second Notice of Agreed Changes, NAB agreed to increase the limit of the Overdraft to $150,000, which was to be secured by a mortgage to NAB in respect of the property. The Second Notice of Agreed Changes was executed by Ms Charlton on 10 September 2007.

50. Also on 31 August 2007, NAB issued the Second Business Letter of Offer to Ms Charlton.

51. Pursuant to the Second Business Letter of Offer, NAB agreed to provide two further facilities to Ms Charlton:

1. the First Business Options Loan in the amount of $110,000 (“the First Business Options Loan”); and

2. the Second Business Options Loan in the amount of $340,000 (“the Second Business Options Loan”).

52. Those facilities were secured by a mortgage to NAB in respect of the property. The Second Business Letter of Offer was also executed by Ms Charlton on 10 September 2007.

53. The Second Business Letter of Offer contained the Business Options Loan Conditions, which included the following:

1. The First Business Options Loan and the Second Business Options Loan were for facility terms of 5 and 10 years, respectively, from 31 August 2007;

2. Ms Charlton agreed to pay half yearly interest only instalments, payable in arrears;

3. Ms Charlton agreed to pay the total amount owing, including all drawings and any other amounts received by her under the First Business Options Loan and Second Business Options Loan, and interest charges, fees, charges, premiums and all other amounts payable under the Second Business Letter of Offer: cl 4.1;

4. Ms Charlton agreed to immediately repay any amount drawn on the First Business Options Loan and Second Business Options Loan in excess of the facility limits: cl 4.3;

5. Ms Charlton agreed to pay the total amount owing for the First Business Options Loan and Second Business Options Loan on the due date for last repayment of those facilities: cl 4.6;

6. Ms Charlton warranted that she was the only the trustee of the Trust, that she had the power under the Deed to enter into and observe the trustee’s obligations under the Second Business Letter of Offer, that she had in full force and effect the authorisation necessary to enter the First Business Letter of Offer, to perform her obligations under the First Business Letter of Offer and allow them to be enforced, and that she was not in default under the Deed: cl 10(b)(i), (iv), (v) and (viii);

7. Ms Charlton undertook to ensure that, except with NAB’s prior written consent, she would not retire as trustee of the Trust: cl 10(c)(ii);

8. Ms Charlton was in default if she did not pay on time any amount due under the Second Business Letter of Offer or another agreement she had with NAB, or if she did something she agreed not to do or did not do something she agreed to do under the Second Business Letter of Offer or another agreement she had with NAB: cl 12(a)-(b); and

9. If Ms Charlton was in default and failed to correct the default within any period given in any notice, the total amount owing under the First Business Options Loan and the Second Business Options Loan became immediately due for payment, and if she did not pay it, NAB could sue for that amount or enforce any security (or do both): cl 13(b).

54. On 10 September 2007, Ms Charlton made a statutory declaration to the effect that:

1. She was the trustee of the Trust;

2. She would not relinquish her trusteeship of the Trust without the prior consent in writing to NAB;

3. The Second Business Letter of Offer and mortgage had been signed or were being signed by her in her own capacity and as trustee of the Trust and for the benefit of the beneficiaries of the Trust; and

4. She had the power under the Deed to enter into and observe the obligations under these documents.

55. On 10 September 2007, NAB advanced $35,200 to Ms Charlton pursuant to the terms of the First Business Options Loan. The account number of the First Business Options Loan was 85-732-3431.

56. On 2 October 2007, NAB advanced a further $74,800 to Ms Charlton pursuant to the terms of First Business Options Loan, and $340,000 to Ms Charlton pursuant to the terms of the Second Business Options Loan. The account number of the Second Business Options Loan was 85-857-0549.

57. Of this total amount of $414,800, $383,848.22 was used to discharge the Stacks mortgage and the remaining amount of $30,951.78 was deposited into the Overdraft.

58. On 31 October 2007, Ms Charlton executed a mortgage over the property in favour of NAB, which was registered with dealing number AD551517 (that mortgage shall hereinafter be referred to as “the Mortgage”). The Mortgage incorporated a Memorandum registered with dealing number AB922379.

59. The Mortgage Terms of the Mortgage and Memorandum included:

1. For the purpose of securing to NAB the payment of amounts owing, Ms Charlton mortgaged to NAB all of her estate and interest in the property: cl 1.1;

2. Ms Charlton agreed that by signing the Mortgage she incurred certain obligations and gave NAB rights concerning her and the property, including that, if she did not comply with her obligations, NAB could take possession of the property, sell it and sue her for any remaining money she owed NAB: cl 2.1;

3. Ms Charlton agreed that she was liable for all of her obligations under the Mortgage: cl 2.2;

4. Ms Charlton agreed to ensure that she was not in default under the Mortgage and to carry out on time all of her obligations under every agreement covered by the Mortgage: cl 2.3;

5. Ms Charlton agreed that, if she held the property as trustee, she was liable both personally and in her capacity of trustee and declared that she had power and authority as trustee of the Trust to give the Mortgage: cl 20(a)-(b)(i);

6. Ms Charlton was in default if she did not pay the amount owning when due for payment, or did something she agreed not to do or did not so something she agreed to do under the Mortgage or an agreement covered by the Mortgage: cl 26(a)-(b);

7. Ms Charlton was also in default if she did not carry out in full an undertaking given in connection with the Mortgage or an agreement covered by the Mortgage within the period specified or within seven days if no period was specified, or she was in default under any agreement covered by the Mortgage or an event of default, however described, occurs under an agreement covered by the Mortgage: cl 26(d) and (f);

8. If Ms Charlton was in default for more than one day, NAB had given her a default notice allowing her a period of at least 31 days from the date of the notice to remedy the default (to the extent consumer credit legislation applies to the default), NAB had given her any other notice required by any provision of any law relating to the enforcement of the Mortgage and the notice was not complied with, then the whole of the amount owing became payable on demand, and if NAB demanded payment of the amount owing but it was not paid, NAB could enforce the Mortgage pursuant to cl 27.2: cl 27.1;

9. NAB could enforce the Mortgage by, amongst other matters, suing Ms Charlton for the amount owing and taking possession of the property: cl 27.2; and

10. To the extent consumer credit legislation applies, Ms Charlton agreed to pay to NAB, when it asked, the reasonable expenses reasonably incurred by it in enforcing the Mortgage: cl 27.3.

Business Letter of Advice

60. On 27 August 2008, NAB issued the Business Letter of Advice to Ms Charlton.

61. Pursuant to the Business Letter of Advice, NAB agreed to increase the limit of the Overdraft to $200,000. Ms Charlton executed the Business Letter of Advice on 2 September 2008.

62. On 3 September 2008 NAB increased the Overdraft limit to $200,000, pursuant to the terms of the Business Letter of Advice.

Ms Charlton’s Default

63. Ms Charlton defaulted under the Overdraft on 29 April 2011, when the Overdraft went over its limit of $200,000. I accept NAB’s contention that the default has not been remedied since that date.

64. It was contended by Ms Charlton (and by Mr O’Brien in his email to Mr Thomas dated 16 August 2011 at 8.23am) that the Overdraft returned back under the prescribed $200,000 limit at 31 August 2011. Ms Charlton referred, in that respect, to a “Transaction Listing” for the period 27 June to 1 September 2011, in which the amount of the Overdraft, on 31 August 2011, was shown as being $199,835 and then $199,845 before returning above the $200,000 limit.

65. However, the “Transaction Listing” specified, under the heading “Important”: “This provisional list is NOT A STATEMENT of account”. The actual statement of account for the period 21 June 2011 to 20 September 2011 (statement number 41) shows the balance of the Overdraft never appeared lower than the $200,000 prescribed limit. Mr Thomas, in his email dated 5 September 2011 at 10.17am to “Justin”, “Kate” (Justin O’Brien’s wife), “Kevin” and “Wendy” (Mr O’Brien’s wife) explained that the account was not “back in order” on 31 August 2011 because, on that date, “interest was also charged on the Overdraft of $2,118.65” (while the account did briefly move below the $200,000 limit, it did not do so for a full day, which was required to restart the “days irregular” count).

66. Similarly, Ms Charlton had failed to make any payments towards the First Business Options Loan and the Second Business Options Loan since May 2011. Ms Charlton had also failed to make any payments towards the Overdraft since 31 August 2011.

Attempts by NAB to Discuss the Default with Ms Charlton

67. Mr Thomas commenced as an Agribusiness Manager at NAB’s Forbes branch on 6 July 2011. One of the customers he was responsible for was Ms Charlton.

68. As the Overdraft was 36 days overdrawn by this time, Ms Charlton was one of Mr Thomas’ priority clients. That was because it was NAB’s policy, that where facilities were more than 30 days overdrawn, the file would be sent to SBS for credit review.

69. From that time, Mr Thomas repeatedly attempted to contact Ms Charlton to ask that she urgently attend a meeting with him. Despite those attempts, he was never able to arrange a meeting with Ms Charlton.

70. On 6 July 2011, Mr Thomas tried to call Ms Charlton. As there was no answer, he sent an email to her.

71. The email noted that he had taken over from Mr Chris Eyles, who said that he should telephone her regarding the Overdraft. The email also stated that the account was $1,685 over the limit and sitting at 30 days irregular. The email further noted that once the Overdraft was more than 30 days irregular, control was taken out of Mr Thomas’ hands and subsequent approvals became difficult.

72. On 7 July 2011, Mr Thomas made a file note of his attempt to call and email Ms Charlton in relation her failure to rectify the default under the Overdraft.

73. On 13 July 2011, Ms Charlton responded to Mr Thomas’ email. The email stated that she had “let the family know at the farm” what was required to square the account, and that she understood the account went out of the local manager’s control after 30 days so she would “try and be prompt”.

74. On 13 July 2011, Mr Thomas responded to Ms Charlton’s email. He confirmed that he was the new manager, that Mr Chris Eyles had been promoted to Orange, and said that he was looking forward to catching up.

75. On 14 July 2011, Mr Thomas sent an email to Ms Charlton saying that he wanted to let her know that the account was sitting at 44 days irregular. The email stated:

Please if you can organise to regularise the excess asap that would be appreciated. If there is anything I can do to help don’t hesitate to call.

76. Ms Charlton did not respond to that email.

77. On 15 July 2011, Mr Thomas issued a report to a NAB credit manager, Mr Nigel Dunn. The report indicated that Ms Charlton had an aggregated group debt of $650,000, and that the Overdraft had been irregular for 44 days.

78. On 18 July 2011, Mr Thomas attempted to leave a voicemail for Ms Charlton requesting an urgent discussion. He made a file note of this attempt.

79. On 21 July 2011, Mr Thomas sent an email to Ms Charlton, informing her that he had been attempting to contact her to discuss her current and future business plans. Mr Thomas also stated the account was 51 days irregular and that the credit team had requested to review the account. He stated: “As such I need to talk to you please. Don’t hesitate to contact me”. Ms Charlton did not respond to this email.

80. On 26 July 2011, Mr Thomas spoke to Ms Charlton’s mother, Wendy O’Brien. Mr Thomas took a file note of that discussion. Mrs O’Brien informed Mr Thomas that her husband and son were out on the farm capturing goats and that she hoped that the “excess” would be cleared by 29 July 2011. No such rectification was undertaken.

81. On 26 July 2011, Mr Thomas attempted to send a fax to Ms Charlton asking her for an update of how the goat catching went over the weekend. It appears that the fax was unable to be transmitted, as on 30 July 2011 Mr Thomas sent an email to Ms Charlton requesting an update on the sale of the goats, noting: “I tried to fax you so you could ring me but the fax would not go through”.

82. On 3 August 2011, Ms Charlton responded to Mr Thomas’ email of 30 July 2011, stating that she had “finally got Dad on the phone last night” and that they were “carting goats now”. The email also stated that her father would make a direct deposit into the account to speed up payments. Mr Thomas made a file note in relation to that email.

83. On 3 August 2011, Mr Thomas responded to Ms Charlton’s email, requesting a meeting in order to prepare a cash flow and to ascertain the asset and liabilities position. Ms Charlton did not respond to this email.

84. On 4 August 2011, a payment of $233.53 on the Overdraft was returned on account of the Overdraft being overdrawn. Mr Thomas made a file note in relation to this.

85. On 4 August 2011, Mr Thomas sent an email to Ms Charlton, stating that he had been advised by his credit manager to have a meeting with her to better understand her position and plan in order to chart the way forward within 14 days. He stated: “Please get hold of me to discuss so we can plan a time & date”. Again, Ms Charlton did not respond to that email.

76. On 8 August 2011, Mr Thomas spoke to Mrs O’Brien. Mr Thomas made a file note of that discussion. The file note recorded that Mr Thomas stressed the importance of a face to face meeting in order to prepare a cash flow budget, a statement of position and to propose a plan, as Ms Charlton’s file was now with SBS.

77. On 10 August 2011, Mr Thomas left a voicemail on the telephone number to which the last four digits were 1059. Ms Charlton stated in cross-examination that this number was her mother and father's number being the number assigned to 110 Forbes Street.

78. Mr Thomas then wrote another email to Ms Charlton. The email again informed Ms Charlton that he had been advised to meet with her as soon as possible. Mr Thomas explained that her file had been “called for by the NAB team in Sydney which deals with delinquent accounts”, and stated that, unless he met with her and received a cash flow budget for the next 12 months, the current asset and liability position and a proposed plan going forward, “control of your business would be transferred to the NAB team in Sydney”. That team would then make an informed decision as to whether NAB would “continue with the relationship” or “take steps to exit our relationship”.

79. Mr Thomas also explained that the situation was not as simple as getting the account back in order, and that the “pink” file supplied by Ms Charlton would need to be supplemented by the requested information, to determine whether Ms Charlton was going according to the plan she supplied to NAB in the “pink” file and whether she was likely to achieve her goals.

80. Mr Thomas also requested updated contact details, as he had found the methods of communication with Ms Charlton to be inefficient. He concluded by stating:

I reiterate your business is now in a serious position. Getting the above information requested will go along [sic] way to alleviate your situation. Please do not hesitate to contact me.

91. Ms Charlton did not respond to the email. However, later on 10 August 2011, Mr Thomas received a telephone call from Mr O’Brien. Mr Thomas made a file note of that discussion. The file note recorded that Mr O’Brien said that his son was returning to the farm on 12 August 2011, and that Mr O’Brien would call Mr Thomas as soon as his son returned so that Mr Thomas could carry out the cash flow budget and statement of position, and prepare an updated plan. Mr Thomas again stressed importance of a meeting, because the file was with SBS.

Purported Resignation as Trustee of the Trust

92. On 15 August 2011, Mr Thomas received an email from Mrs O’Brien. The email stated that Ms Charlton was “no longer Trustee for Phoenix Trust” and that matters concerning the Trust would be dealt with by Mr and Mrs O’Brien. The email also stated: “We have a large amount of paperwork to go through - we have been thrown in at the deep end”. The email further stated that Justin O’Brien, who was described as “the hands on at the farm”, was available to meet with Mr Thomas at the Forbes branch on 22 August 2011.

93. Ms Charlton prepared two separate letters to resign as trustee of the Trust on 20 August 2011. However, those were not provided to Mr Thomas until 31 August 2011.

94. On 22 August 2011, Ms Charlton sent Mr Thomas confirming that she had resigned as trustee of the Trust. The email continued:

My reasons for resigning are numerous and I am very upset about the whole situation. The situation with the bank should not have even evolved had a few plans been followed. I am not about to run anyone down, theres [sic] more to me than that but I have recognised that I will not be put in a position anymore where my personal integrity is compromised. I hope you understand, that the emails I sent to you were truly what I was told was happening. In the interests of my young family its [sic] time for me to move on. Please make the appropriate changes to the contracts.

95. NAB submitted that it may be inferred from this email that Ms Charlton resigned as trustee because she was not happy with the way in which the property was being farmed and managed by her brother, Justin O’Brien, who as noted above, was the “hands on” at the farm.

96. In my view, such a finding is available on the evidence. Apart from the email in question, the evidence is consistent with such a finding.

97. In one part of her evidence, Ms Charlton denied that the reason she resigned as trustee was because she was upset with the way Justin O’Brien was operating the farm:

Q. Do you agree with this proposition, the reason you resigned as trustee of the trust is because you were upset with the way in which Justin was operating the farm?

A. No, that is not correct. Because he wasn't the only one operating the farm.

98. However, that resistance was, when understood in the light of the evidence referred to below, merely concerned with the question as to whether Justin alone was responsible for the resignation. That further evidence is as follows:

Q. Yes, and just to round this issue out, the reason you resigned as trustee of the trust I will rephrase that. The reason that you purported to resign as trustee of the trust is because you were upset, correct?

A. I have already said that, Mr Colquhoun.

Q. Yes.

A. But it wasn't the only reason.

Q. Yes. And you were upset because of what was happening on the farm and the plans not being followed, correct?

A. They were trying to do what they said they were trying to do. It was just proving that it was taking too long and I have already answered that too.

Q. And that's Gavin, your brother

A. No.

Q. who was operating the farm at the time?

A. No. It was Justin.

99. On 25 August 2011, Mr Thomas responded to Ms Charlton’s email dated 22 August 2011, requesting that she remain a trustee of the Trust until such time as he has the loan application approved, and the documentation recording the change in trustee and the new loan documents had been executed. He noted that if Ms Charlton did not wish to remain as trustee, he would be forced to place all existing facilities in “reduction”, meaning that all accounts would be stopped to debit and credit operations.

100. Ms Charlton did not respond to that email.

Discussions with the O’Briens

101. On 22 August 2011, Mr Thomas met with Mr O’Brien, Mrs O’Brien, Justin O’Brien and Kate O’Brien at the NAB office in Forbes.

102. Mr Thomas’s file note of that meeting records that there was a discussion of the “overdrawn account & way forward”, and that a “production plan for the next 12 months” and an “updated SOP [statement of position]” was prepared. A statement of position is a pro forma spreadsheet used by NAB to assess a customer’s net asset position. During the course of the meeting, Mr Thomas populated the pro forma spreadsheet with information provided to him by Mr O’Brien, Mrs O’Brien, Justin O’Brien and Kate O’Brien.

103. The file note also recorded that Mr Thomas would prepare a “cash flow budget” based on the assumptions in those documents and, after obtaining the clients’ agreement, as well as put a plan to his Level 3 manager with a “view to rectifying current excess”. A cash flow budget is another pro forma spreadsheet used by NAB to ensure that the debt can be serviced by the customer.

104. At the conclusion of the meeting, Mr Thomas said that he would need to visit the farm in order to verify the information provided to NAB.

105. Following the meeting, Mr Thomas prepared two cash flow budgets.

106. On 23 August 2011, Mr Thomas sent an email to Mr O’Brien, Mrs O’Brien, Justin O’Brien and Kate O’Brien attaching copies of the two cash flow budgets for the business, stating: “Please look at these & let me know if there are any irregularities”.

107. The email also stated that the cash flow budgets showed the need for an Overdraft of $25,000 and credit approval over a new term debt loan of $670,000 to cover the Overdraft, First Business Options Loan and Second Business Options Loan, as well as the interest on those loans which would be charged to the Overdraft at the end of August 2011. The email stated that the cash flow budgets were dependent on “sticking to projections i.e. we have the income coming in & expenses going out as predicted”.

108. Mr Thomas concluded by saying:

Have a look & let me know & then I will put up the proposition to credit. Don’t hesitate to call me if you don’t understand anything.

109. Whilst Mr O’Brien did not respond to this email, he accepted in cross-examination that he understood at this time that any transfer of the loans and security to him as a trustee would be dependent on the assessment of the credit department of NAB.

110. Mr Thomas sent a follow up email on 25 August 2011. The email noted that Mr Thomas had “not started anything with your application as I am waiting to hear back from you all”. Mr Thomas’ email also noted NAB’s policy regarding a change in trustees.

111. On the same day, Mr Thomas sent a further email to Mr and Mrs O’Brien, Justin O’Brien and Kate O’Brien requesting an update on the goat sales and enquiring whether the account would be brought back under the limit before Mr Thomas submitted the application for the new facilities.

112. A response was sent from Kate O’Brien’s email address on 30 August 2011. That email stated: “We are not adding a new trustee to the Trust, we are simply removing one and leaving the other existing trustee”.

113. Mr Thomas responded to Mr O’Brien (but to Kate O’Brien and Mrs O’Brien’s email addresses) on the same day, stating:

In all the paperwork you have supplied us in the past with regards to the trust nowhere does it say that you are or ever have been a ‘trustee’.

114. Mr Thomas also noted that the documents showed Gavin O’Brien being the original trustee, and following his resignation, Ms Charlton becoming the trustee. Mr Thomas asked for a deed of removal and appointment, and noted that NAB’s legal department would need to confirm that the change in trustee was valid, and if so, the facilities and supporting security would need to be re-documented in the name of the new trustee.

115. I accept NAB’s submission that Mr Thomas requested the documentation removing Ms Charlton as trustee and appointing Mr O’Brien as trustee, documentation from Mr O’Brien’s solicitor for the Land Titles Office to record the new trustee as the registered owner and the execution of new mortgage and loan documentation.

116. Mr Thomas sent a further email on 30 August 2011 which attached a copy of the title search for the property, recording Ms Charlton as the sole registered proprietor.

117. On 31 August 2011, Mr Thomas received a fax from Mr O’Brien. The fax included a number of attachments, including a letter dated 20 August 2011 signed by Ms Charlton confirming her resignation as a trustee of the Trust, and the letter dated 1 June 1997 signed by John Lawrence O’Brien purporting to appoint Mr O’Brien as a trustee of the Trust. Mr O’Brien accepted in cross-examination that he had never provided the letter dated 1 June 1997 to NAB before that date.

118. Later that same day, Mr Thomas sent an email to Mr O’Brien. Mr Thomas noted that “NAB have never had the letter that you supplied us with today showing you has having been appointed as a ‘trustee’”. Mr O’Brien did not dispute this.

119. I find that the communication of 31 August 2011 was the first time NAB had been advised that Mr O’Brien had been appointed as trustee. My preliminary reasons for coming to that conclusion are derived from the factual background described at [110]-[116] above. However, there are further reasons in that respect which result from the resolution of part of the dispute arising in relation to the Misrepresentation Issue.

120. Whether Mr O’Brien was validly appointed as a trustee of the Trust and whether NAB had sufficient notice of the alleged appointment will be discussed below in consideration of the Misrepresentation Issue.

121. Mr Thomas also informed Mr O’Brien that he would send the original Deed along with the letters supplied by Mr O’Brien to NAB’s legal department. He noted: “If all is [in] order & we can get your application through credit loan documents will have to be signed”. That communication gave advice to Mr O’Brien that the entry into new loan documentation and the approval of any new loan by NAB’s credit department was a prerequisite to any change in trustee.

122. Mr Thomas also noted that before any loans could be drawn in the new entity name “Kevin Michael O’Brien ATF Phoenix Trust”, Mr O’Brien would need to provide a transfer prepared by Mr O’Brien’s solicitor taking Ms Charlton off, and putting Mr O’Brien on, the title to the property.

123. On 2 September 2011, Mr Thomas prepared an internal file note recording that, as at 2 September 2011, the account was 94 days irregular and $23,179 overdrawn.

124. Mr Thomas also recorded that as the security over the loan was a mortgage over the property in the name of Ms Charlton, he had asked her to remain as trustee of the Trust until such time as NAB had made the necessary changes, approved the application for replacement facilities and the new documents had been executed, but he had not heard back from her.

125. The file note further recorded that NAB was not previously aware that Mr O’Brien had been appointed as trustee. It also noted that Mr Thomas would visit the farm the following week.

126. On 2 September 2011, Mr Thomas sent a further email to Ms Charlton. Mr Thomas asked Ms Charlton whether she would remain as trustee until the new loans and associated documentation had been executed. Once again, Ms Charlton did not respond to Mr Thomas’ email.

127. On 4 September 2011, Mr Thomas sent an email to Justin O’Brien and Ms Kate O’Brien asking if he could attend the farm on 6 September 2011.

128. Ms Kate O’Brien responded on 5 September 2011. Ms Kate O’Brien said that it was not possible to attend the farm on 6 September 2011 because Justin was completing mine training. The email stated that Mr and Mrs O’Brien had an appointment with a solicitor in Sydney that week and that someone would call Mr Thomas when they were available for a visit.

129. Mr Thomas responded the same day. He asked Ms Kate O’Brien to let him know when he could visit the farm. He also noted:

At this stage I am not going to put forward the application for additional finance until I have done the farm visit. I want to be sure myself of numbers, assets etc & confirm the cashflow with yourselves before I do so.

130. Mr O’Brien confirmed in cross-examination that he understood that one of the conditions required by NAB for the approval of a new loan was a farm visit and that Mr Thomas needed to take certain steps before putting forward the application for additional finance.

131. The email also noted that the Division of NAB which had authority over the file was now sitting in Sydney and that he and his senior credit manager no longer had control of the file. It further noted that the legal department had come back and informed him that Mr O’Brien as trustee was “OK going forward”. Ms Charlton referred to this communication in support of her submission that NAB made a representation to her and/or Mr O’Brien that the trust facilities would be continued. Whether a representation was made will be discussed later in the judgment when the Misrepresentation Issue is dealt with in this judgment.

132. As mentioned above, the email noted that the account never got back in order, and that the account was 97 days irregular and $23,179.25 overdrawn.

133. On 13 September 2011, Mr Thomas telephoned Ms Kate O’Brien. Mr Thomas made a file note of this telephone discussion. The file note recorded that Ms Kate O’Brien had informed him that he could not visit the farm in the week of 12-16 September 2011, as Mr Justin O’Brien was away. She said that she would telephone on 16 September 2011 to let Mr Thomas know whether he could possibly visit on 22 September 2011. It does not appear that Ms Kate O’Brien ever telephoned Mr Thomas to arrange such a visit.

134. On 14 September 2011, Mr O’Brien sent an email to Mr Thomas requesting all signed documents pertaining to the mortgages and loans of the Trust. Mr Thomas responded on the same day, asking Mr O’Brien to telephone him. Mr O’Brien responded to this email by informing Mr Thomas that the best means of contact for him was via email.

135. Mr Thomas responded on 15 September 2011. Mr Thomas stated:

NAB will not be able to supply documents you will be expected to sign yet as the restructure / plan / loans going forward have still to be accepted / signed off by credit in Sydney. Documents are only produced after credit has been approved. Hence my earlier emails about doing the farm visit asap before I have no say in the matter. I cannot do anything for you until the cash flow budget in agreed upon with yourselves. I also need to satisfy myself with stock numbers & assets before I will put my name forward in conjunction with your proposal.

136. Mr O’Brien accepted in cross-examination that he was aware of these requirements at the time. The Overdraft was 107 days irregular and $23,179 overdrawn at this time.

137. Mr O’Brien responded on 16 September 2011. He said that the “restructure” and the “farm visit” should be “placed on hold” until documents signed by Ms Charlton had been evaluated by his solicitor. He also noted that he was aware of the Overdraft account, but asserted that it should only have been 16 days irregular. As discussed above, I do not consider Mr O’Brien’s assertion to be correct as the account did not remain under the prescribed limit for a day as was required to reset the “days irregular” count. Mr Thomas received the last of the loan documents requested by Mr O’Brien on 22 September 2011. He sent an email to Mr O’Brien confirming this on the same day, requesting him to send a signed letter from Ms Charlton authorising him to send Mr O’Brien the hard copies of the loan documentation.

138. The email also stated:

I acknowledge receipt of your faxed letter sent to me stating that you are an actual trustee of Phoenix Trust. However in all NAB’s dealings with yourself & subsequent loans taken out this was never mentioned or brought to NAB’s attention until I received your fax on 31/8/11.

139. Mr O’Brien did not respond to this email.

Notices of Cancelation

140. On 20 October 2011, NAB informed Ms Charlton that enforcement action would be taken by NAB immediately in order to recover the amounts owing, but asked her to contact Mr Thomas if she wished NAB to consider alternative arrangements in respect of her debts. It does not appear that Ms Charlton took steps to contact Mr Thomas.

141. On 25 October 2011, NAB issued a notice of cancellation to Ms Charlton at 110 Forbes Street, Trundle in respect of the Overdraft (“the 25 October 2011 cancellation notice”). The notice was signed “K. White”. The notice demanded payment of $228,784.91, being the amount then owing in respect of the Overdraft. Ms Charlton accepted that she received the 25 October cancellation notice.

142. When Mr Thomas was sent a copy of the 25 October 2011 cancellation notice, he noticed that it ought to have been addressed to Ms Charlton at 74 Long Street, Trundle, so on 26 October 2011 he sent an email to Mr Gardiner noting that the correct address was 74 Long Street, Trundle. On that same day, NAB issued a notice to Ms Charlton at 74 Long Street, Trundle (“the 26 October 2011 cancellation notice”). The notice demanded payment of $228,860.48, being the amount then owing in respect of the Overdraft. Ms Charlton observed that the 26 October 2011 cancellation notice was not signed. It stated signed “on behalf of National Australia Bank Limited by its duly authorised attorney”. Ms Charlton submitted that the service of the 26 October cancelation notice was defective because it was not served on her.

143. Ms Charlton contended there was no evidence that she had been served with the 26 October 2011 cancellation notice (and the 25 October 2011 cancellation notice was not relied upon by NAB). It was contended that Ms Scharenguivel’s evidence did not address this question. It was further contended that NAB could not rely upon service of the 25 October 2011 cancellation notice to prove service of the 26 October 2011 cancellation notice.

140. However, the evidence supports the fact that NAB had notice that Ms Charlton’s correct address was 74 Long Street, Trundle at the relevant period in 2011. The evidence of Mr Thomas in his affidavit of 24 September 2015 was:

On 31 August 2011 I received a facsimile from Mr Kevin O’Brien. The facsimile attached two letters addressed to “Whom it may Concern” dated 20 August 2011 and 1 June 1997.

145. The letter of 20 August 2011 was a letter from Ms Charlton confirming her resignation as trustee of the Trust. Importantly, that letter states, in the top right hand corner, that Ms Charlton’s address was “74 Long Street Trundle NSW 2875”.

146. Further, it is apparent that Mr Thomas, as a result of his belief that the Long Street address was correct, thought that the notice sent to Ms Charlton on 25 October 2011 was sent to the incorrect address. Mr Thomas, in an email to Ms Gardiner dated 26 October 2011 stated:

Ash

It has been brought to my attention that the mailing address is incorrect.

The correct mailing address is: 74 Long Street, Trundle NSW 2875.

regards

Clive Thomas

147. The details of the “correct” mailing address were then sent by Ms Gardiner to Ms Scharenguivel by email later that day. The email requested, inter alia, “Could you please confirm the address detail and re issue”. As Ms Charlton accepted that she was properly served with the 25 October 2011 cancellation notice, a presumption of regularity arises that the 26 October cancellation notice was also properly served. This is supported by the following evidence of Ms Gardiner in cross-examination:

Q. In your experience of dealing with Ms Scharenguivel what the usual practice she would follow in relation to requests such as one contained in this email?

A. She would have reissued the document.

148. It is true that NAB, in its pleadings, relied solely on the 26 October 2011 cancellation notice. However, even if that notice was not served, Ms Charlton did, by virtue of the 25 October 2011 cancellation notice, which she accepted she received, have notice of the cancellation. A cancellation notice is not a notice pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW) (“RPA”). No statutory requirements for the manner in which notice is provided, therefore, arise under s 57(2)(b). Similarly, a cancellation notice is not a notice required or authorised by the Conveyancing Act 1919 (NSW). Thus, the service requirements of s 170 of that Act do not apply (the provision is limited to notices “required or authorised by [that] Act”). I therefore consider that Ms Charlton was provided sufficient notice of the cancellation of the Overdraft by virtue of the 25 October 2011 cancellation notice.

149. Ms Charlton also claimed the 26 October 2011 cancellation notice was defective because it was not signed. For the reason just mentioned, there was no formal requirement for the cancellation notice to be signed. In any event, Ms Charlton was provided sufficient notice by the 25 October cancellation notice, which was signed.

150. By 26 October 2011, the Overdraft was 128 days overdrawn. From the time of the cancellation of the Overdraft on 26 October 2011 until 17 October 2014 Ms Charlton failed to make any payment towards the amount owing in respect of the Overdraft, and interest continued to accrue on the amount owing, calculated and compounded bi-monthly and on the basis of default interest rates.

151. On 27 October 2011, Ms Jennifer Harris rang Mr Thomas to advise him that she was the solicitor engaged by Mr and Mrs O’Brien. The substance of the discussion was recorded in a Note Details Report dated 2 November 2011. It does not appear that Ms Harris was further engaged in relation to the matter.

152. On 16 November 2011, NAB issued a default/demand notice on Ms Charlton demanding payment of $691,301.53 (“the first default notice”), being the total amount then owing under the Overdraft, First Business Options Loan and Second Business Options Loan, plus enforcement expenses. The first default notice was a statutory enforcement notice as it gave notice under s 57(2)(b) of the RPA.

153. On 24 January 2012, NAB served a further default/demand notice on Ms Charlton demanding payment of $707,710.08, being the total amount then owing under the Overdraft, First Business Options Loan and Second Business Options Loan, plus enforcement expenses (“the second default notice”). Unlike the notice issued on 16 November 2011, this notice did not give notice under s 57(2)(b) of the RPA.

Financial Ombudsman Service Complaint

154. On 29 November 2011, NAB Resolve (a service that works with customers who are in dispute with the bank) received a formal letter of complaint from Mr O’Brien. Mr Thomas responded to Mr O’Brien’s formal letter of complaint on 1 December 2011, noting that NAB could not respond to Mr O’Brien’s complaint without the consent of Ms Charlton, as Ms Charlton was referred to in NAB’s documentation as the trustee for the Trust. Mr O’Brien sent a further letter of complaint to NAB Resolve on 6 December 2011.

155. On 13 December 2011, Mr Thomas sent an email to Ms Charlton requesting that she confirm her availability for a meeting with Mr Underwood and himself of NAB to discuss the ramifications of the loans under her name as well as security for the loans.

156. Ms Charlton responded on 15 December 2011. The email stated that she felt that the meeting may be “premature” due to the pending investigation by the Financial Ombudsman Service (“FOS”).

157. This is a reference to the complaint made by Ms Charlton and Mr O’Brien to the FOS.

158. On 24 October 2012, the FOS sent a letter to NAB confirming that the matter would be allocated a case manager and would be investigated further.

159. On 19 August 2013, the FOS issued a recommendation in relation to the dispute.

160. On 7 November 2013, the FOS issued a determination in relation to the dispute. By this determination, the FOS concluded that NAB was able to enforce its mortgage and that Ms Charlton was liable for the credit facilities provided by NAB. The determination also found that the first default notice (issued by NAB on 16 November 2011) was invalid. That conclusion was based on the FOS’s view that Ms Charlton was a farmer at the relevant time and therefore that NAB was required to send a notice offering mediation under s 8 of the Farm Debt Mediation Act 1994 (NSW) (“FDM Act”) to her prior to the issuing of that s 57(2)(b) notice, namely, the first default notice, which constituted enforcement action. NAB did not rely on the first default notice in these proceedings.

161. An issue arose in the proceedings as to whether Ms Charlton was a farmer within the meaning of the FDM Act in late 2011, when NAB had sought to take action with respect to the defaults. NAB considered that Ms Charlton was not a farmer at this time as Justin O’Brien was operating the farm. Ms Charlton disagreed. However, as mentioned, the FOS determination that the first default notice was invalid, combined with the fact that NAB did not rely on that notice in these proceedings, leads to the conclusion that it is not necessary to determine whether Ms Charlton was a farmer at that time.

162. As to Ms Charlton being a farmer under the FDM Act later in time, NAB took the position that Ms Charlton had been a farmer since the end of 2013. There was no demur from Ms Charlton in that respect. In fact, in final submissions, Ms Charlton expressly argued that she was the farmer. She stated:

CHARLTON: Yes. Now, I believe from my perspective, my father might have a different view on this, but I believe that because I was on the contracts and the bank was a creditor for the purposes of the Farm Debt Mediation Act, and I consider I was a farmer, they have admitted I was a farmer, FOS says I was a farmer, the Financial Ombudsman Service.

HIS HONOUR: You say you're the farmer?

CHARLTON: Yes, I believe I am a farmer. And I say that for a number of reasons…

Expiry of the First Business Options Loan

163. The First Business Options Loan expired on 31 August 2012.

164. From 31 August 2012 to 27 October 2014, Ms Charlton failed to make any payment towards the amount owing in respect of the First Business Options Loan, and interest continued to accrue on the amount owing in respect of the First Business Options Loan, which was calculated and compounded bi-annually and on the basis of default interest rates.

Farm Debt Mediation

165. On 22 January 2014, following the resolution of the FOS complaint, NAB issued a notice under s 8 of the FDM Act to Ms Charlton (“the s 8 notice”). The notice stated that NAB “intends to take enforcement action against property over which it holds a farm mortgage under which you [Ms Charlton] are in default”. The notice then provided:

1. the details and dates of the act/s of default;

2. the details of the security instrument;

3. the details of the property;

4. the facilities and the balance of those facilities at the date of the notice;

5. the farmer’s rights under the FDM Act;

6. the action required by the farmer; and

7. instructions as to the action required by the farmer.

166. On 13 February 2014, Ms Charlton issued a notice under s 9 of the FDM Act (“the s 9 notice”) to NAB. That notice stated that Ms Charlton was “requesting mediation in regard to our farm debt and farm mortgage under which I am in default referred to in the Section 8 Notice … issued by the creditor on 21st January 2014, dispatched 22 January 2014 and received by the farmer on 28th January 2014”.

167. On 14 February 2014, NAB sent a letter to the RAA advising that mediation was required in respect of the matter. NAB also asked the RAA to forward a mediation kit to Ms Charlton. That letter attached the s 8 notice and the s 9 notice.

168. On 20 February 2014, the RAA sent a mediation kit to Ms Charlton.

169. On 7 April 2014, NAB wrote to Ms Charlton stating the following:

NAB has previously advised you that it does not seek to rely on any notices issued prior to the Farm Debt Mediation notice issued in February 2014. That position remains unchanged.

170. NAB also noted in that communication:

You have failed to make arrangements to meet the interest obligations on your facilities since May 2011.

171. On 17 July 2014, NAB and Ms Charlton signed an agreement to mediate and attended a farm debt mediation (“the mediation”).

172. On 18 July 2014, the mediator, Mr Dan O’Keefe completed and signed a summary of mediation indicating that the parties did not reach an agreement. That same day, NAB applied to the RAA for a certificate under s 11 of the FDM Act in respect of the Overdraft, First Business Options Loan and Second Business Options Loan (“the s 11 certificate”).

173. On 25 July 2014, the RAA advised Ms Charlton that NAB had applied for the s 11 certificate. On the same day, Ms Fran Willard of the RAA made a note of the documents served on Ms Charlton. That same day, the RAA also wrote to NAB acknowledging receipt of the s 11 certificate application and noting that Ms Charlton had been advised of the application and that she had until 22 August 2014 to lodge a submission.

174. On 14 August 2014, both Ms Charlton and Mr O’Brien wrote separate communications to the RAA. Ms Charlton’s communication objected to the issuance of the s 11 certificate. Mr O’Brien’s communication advised that the contents of Ms Charlton’s letter dated 14 August 2014 were true and correct.

175. On 25 August 2014, NAB sent a response to the RAA in relation to Ms Charlton’s submission.

176. On 29 August 2014, NAB confirmed to the RAA that Ms Charlton was in default under the Mortgage and that she had failed to remedy the default detailed in the s 8 notice.

177. On 29 August 2014, the Section 11 Committee of the RAA met and determined to issue the s 11 certificate to NAB. The minutes noted:

In reaching a decision to issue a certificate in terms of Section 11(1)(c)(i) NA the committee took into consideration the claims made by National Australia Bank Limited in their application, the summary of mediation provided by Dan O’Keefe the mediator at the completion of a 6 hour mediation session, the submission from the farmer and the response from the National Australia Bank and Mediator and the statement provided by National Australia Bank Limited claiming the farmer is in default under the farm mortgage as at 29 August 2014.

178. On 29 August 2014, the RAA issued the s 11 certificate to NAB, confirming that it was satisfied that the FDM Act did not apply in respect of the Mortgage.

179. In summary, the following notices were issued with respect to the mediation proceedings:

Document	Issued by	Issued on	Issued to
s 8 notice	NAB	22 January 2014	Ms Charlton
s 9 notice	Ms Charlton	13 February 2014	NAB
s 11 certificate	RAA	29 August 2014	NAB

180. Ms Charlton submitted that the decision of the RAA to issue the s 11 certificate was in error because, inter alia, the RAA did not have reference to Ms Charlton’s complaints about the “2011 conduct” (as Ms Charlton described it), being the issuance of the first default notice and the 25 October 2011 cancellation notice (as stated above, Ms Charlton disputed the service of the 26 October 2011 cancellation notice).

181. However, I accept the submission of NAB that the material before the RAA contained references to the “2011 conduct”. For example, Ms Charlton’s bundle of submissions to the RAA included in it a letter titled “Confidential to Mediator Only At This Point” and dated 4 July 2014, which, inter alia, stated:

On top of all of this the laws have already been broken the Farm Debt Mediation Act breached by the bank, statutory enforcement notices already issued, contracts terminated against applicable law guidelines and Section 8 (1) Notice issued 797 days approx. after enforcement action already committed and enforcement fees charged to bank account all actions able to be voided by Section 6) of the Farm Debt Mediation Act, are we going to add an invalid mediation to that list based on a "void" Section 8 (1) notice possibly an incorrect Section 11 issued to me as the beneficiary (not legal) based on a dysfunctional contract which voided the farmers rights to legally mediate, I think we need to stop this now treat the situation for what it is "wrong & illegal", the worst part of this is if it continues if s a financial gain by deception by the bank and we all know what that means. Resolution is simple really but it requires addressing the problem not covering it up at my expense or the expense of the continuing Trustee and the beneficiaries.

182. That statement, provided to the RAA, was clearly a complaint directed towards the 2011 conduct.

Notice of Cancellation

183. On 17 October 2014, NAB issued a notice demanding payment of the sum of $422,717.14, being the amount then owing in respect of the Overdraft (“the 2014 cancellation notice”).

184. On or about 27 October 2014, NAB issued a default/demand notice to Ms Charlton demanding payment of $1,023,719.70, being the total amount then owing under the Overdraft, First Business Options Loan and Second Business Options Loan, plus enforcement expenses (“the third default notice”). NAB relied upon the affidavit of Ms Scharenguivel sworn 23 May 2018 to prove service.

185. Ms Charlton contended that the third default notice had not been served on her. She advanced the following submissions:

1. The affidavit of Ms Scharenguivel could not prove service. In order to prove service, NAB needed to provide evidence of Ms Renel Cabezuelo, a legal services assistant who authored a form (referred to in the proceedings as “the acknowledgment of service”) showing service at 74 Long Street trundle. Ms Scharenguivel was unable to directly confirm service.

2. The acknowledgement of service referred to steps taken in the singular, namely, “a document” in “an envelope”. This suggests there was not a distribution to two persons, namely Ms Charlton and Mr O’Brien (it was only served on Mr O’Brien).

3. The signature of Ms Cabezuelo on the acknowledgement of service raises “authenticity issues” given the signature on the third default notice and the acknowledgment of service do not match.

4. No copy of the envelope used to serve the third default notice was produced by NAB.

5. Ms Scharenguivel did not state how the notices were served.

186. Based on the evidence contained in the affidavit of Ms Scharenguivel sworn 23 May 2018, I accept NAB’s submission that Ms Charlton was served with the third default notice.

187. The affidavit of Ms Scharenguivel was not objected to and NAB correctly submitted that the evidence of Ms Scharenguivel was not challenged. In fact, Ms Charlton argued that she wanted the affidavit admitted to prove that it was deficient and to challenge the evidence contained within the affidavit. The absence of evidence from Ms Cabezuelo is of no significance as her evidence was tendered, without objection, in circumstances where Ms Cabezuelo was no longer employed by NAB and Ms Scharenguivel, who essentially had the same role as Ms Cabezuelo, was employed, and had access to the relevant files.

188. Annexed to Ms Scharenguivel’s affidavit was a screenshot of NAB’s electronic Charlton File displaying a document titled “Notice.pdf” within a folder titled “Charlton (Section11)”. The document had last been modified on 27 October 2014. Ms Charlton seemed to contend that the authenticity of those documents was in question. She stated:

At no stage did Ms Scharenguivel indicate that she actually saw those notices served. There was no definite answer. And I also want to bring to your attention, your Honour, that in the transcript where we discussed that, I did challenge issues on this very notice quite extensively, and I brought your attention to the fact that there was a lot of signatures, there was differences in the signatures from the signature of Ms Renel Cabezuelo.

189. There was no proper basis for this challenge to authenticity. No objection was made in that respect upon the tender of the affidavit of Ms Scharenguivel. It is true that Ms Charlton considered the file to be incomplete. She stated:

It seems to be an incomplete file in regard to my entire matter and it's actually just showing an electronic record absent of a lot of statutory enforcement notices in the matter. I do not feel it includes anything.

190. However, contrary to her submission, Ms Charlton had not in fact previously raised the issue of signatures prior to the submission.

191. The business records held on the electronic Charlton file by NAB also included an acknowledgement of service form signed by Ms Cabezuelo, which stated that the notice was served by prepaid mail on 27 October 2014 to Ms Charlton at “74 Long Street Trundle, NSW 2875” (and to Mr O’Brien at “110 Forbes Street Trundle, NSW 2875”).

192. The acknowledgement of service recorded that Ms Cabezuelo had placed the third default notice in “an envelope” which had been sent by prepaid mail to both Mr O’Brien and Ms Charlton. In the latter case, the third default notice was sent to 74 Long Street Trundle.

193. The evidence of Ms Scharenguivel confirms that NAB’s general practice was for an acknowledgement of service to be completed and placed on the customer file when a legal services associate sent a legal notice of demand to a customer, which was intended to record which legal services associate or other employee served the legal notice of demand, how the document was served, the date that the document was served and the address to which the documents were sent. As the acknowledgement of service was on the customer file, it can and should be inferred that the document had already been served.

194. By the Default Notice Issue in the proceedings (which is set out in the list of issues for the proceedings appearing later in the judgment), the issue of the operation of s 170(1) of the Conveyancing Act is raised. Relevantly, that issue concerns Ms Charlton’s submission that the third default notice was not served.

195. Section 57(2)(b) of the RPA required a written notice that complied with s 57(3) to be served on the mortgagor, charger or covenant charger in the manner authorised by s 170 of the Conveyancing Act. Section 170(1) of the Conveyancing Act provides:

500. I accept the submission advanced by NAB that the authorities relied upon by Ms Charlton – State Bank of New South Wales v Topfelt Pty Ltd (Unreported, Supreme Court of New South Wales, Brownie J, 11 March 1993) (“Topfelt”) and Carr v Finance Corporation of Australia Ltd (No 2) (1982) 150 CLR 139; [1982] HCA 43 – are both primarily directed to the circumstances in which a mortgagee is entitled to exercise its power to sell the mortgaged property and are, therefore, irrelevant to the question of whether an order for possession should be made; in Topfelt, Brownie J still made an order for possession of the mortgaged property, despite also finding that the s 57(2)(b) notice that had been issued in that case was defective.

501. The service of a default notice is not a precondition to the mortgagee bringing proceedings seeking possession of the mortgaged land as a result of a default because such a notice relates to the exercise of the power of sale: Bendigo and Adelaide Bank Ltd v Tombs [2010] NSWSC 1427 at [36] (per Johnson J) and Suncorp-Metway Ltd v Nam Property Holdings Pty Ltd (2010) 16 BPR 30,859; [2010] NSWSC 1078 at [41] (per Garling J). The suggestion by Ms Charlton that the s 57(2)(b) notice is a “condition precedent” to the commencement of this proceeding is incorrect.

ISSUE 6: SECTION 38 TRUSTEE ACT ISSUE

504. This issue appears to relate to issue 25 of the issues identified by Ms Charlton and Mr O’Brien in the following terms:

25. Whether there are exceptions in relation to the indefeasibility of "Oriel's" title, due to the existence of the discretionary trust and the terms of the Phoenix Trust Deed whereby neither the Trustee nor the beneficiary can own any part of the capital of the Trust and given Section 38 of the Trustee Act 1925 being expressly excluded from the Trusts Deed removing any registered title holder being for the time being possessed in respect of any mortgage charge and in particular as the property has not been distributed out of the capital of the Trust Fund.

505. The axis of this submission appears to be cl 7 of the Deed.

506. Clause 7 of the Deed is in the following terms:

7. The provisions of Sections 37 and 38 of the Trustee Act shall not apply to the provisions of this Trust and the same are hereby expressly excluded and save as may be hereinafter contained any power of accumulation given by that Act or by any Act of the Commonwealth of Australia or of any ordinance of a Territory of the Commonwealth of Australia or of any Act of a State thereof is hereby negatived.

507. Reference must also be made to cll 12, 13 (b)-(c), (o) and (z). Those clauses are extracted below:

12. All moneys available for investment may be invested in any one or more of the following investments in the Commonwealth of Australia or in any part of the world that is to say in the purchase of any real or personal property or interest of any nature whatsoever therein or in any of the Public funds or Government securities of any Government or in the purchase of or loan upon mortgage over any freehold or leasehold lands in any of the Australian States or Territories or elsewhere or shares whether fully paid up or otherwise or stock debentures secured or unsecured notes or rights to new issues of shares in any corporation whether public or private carrying on business in the Commonwealth of Australia or elsewhere or upon deposit for a fixed term or otherwise with any corporation or institution carrying on a business in the Commonwealth of Australia or elsewhere with liberty to vary or transpose any such investments from time to time.

…

13. Notwithstanding the trust powers and provisions hereinbefore contained the Trustee shall have the following absolute powers and discretions in addition to the cowers vested in it by law:

…

(b) To purchase and or to sell real property or any interest Therein and generally to traffic in real property or any interest therein including the taking and granting of leases or licences over such property in such manner as the Trustee shall deem fit and so long as any real property or interest in real property shall form part of the Trust Fund at the discretion of the Trustee to manage use or let the same or any part or parts thereof to receive stock on agistment to erect pull down rebuild and repair buildings and erections to carry out improvements of any nature to purchase such stock plant equipment and fittings as the Trustee considers necessary having regard to the purposes for which the real property is from time to time being used to make allowances to any arrangements with tenants to grant or acquire easements or other rights and generally to deal with such property or interest or join in dealing with the same as if it was absolute owner beneficially entitled thereto without being responsible for loss and without any of the restrictions imposed by law on Trustees.

(c) To raise or concur in raising any money which the Trustee shall think expedient for any purpose in relation to the execution of the Trusts and powers conferred on the Trustee by this settlement including the purchase of property and the payment of calls on shares or generally for the benefit of the beneficiary by mortgaging or charging with or without a power of sale all or any part of the Trust Fund or the assets from time to time representing the same or without security and with or without interest and any such mortgage may be an overdraft or contributory one and may also be a joint mortgage with other persons or a guarantee mortgage and whether in any case whatsoever the liability arising out of such borrowing is joint or several and no lender shall be concerned to enquire into the necessity for any such borrowing or the application of the money borrowed.

…

(o) To contract with and/or sell or grant options to purchase any part of the Trust Fund to or to purchase real or personal property from or to borrow money from or to enter into any sharefarming or agistment agreements leases or tenancies or partnerships with the trustee in its own capacity or any or either of the Trustees if more than one in its personal capacity either alone or in conjunction with another or others notwithstanding that if it may be a Trustee hereof and any partnership agreement may provide for reasonable remuneration of partners including the Trustees or one or more of them.

…

(z) To encumber all or any part of the assets of the trust by way of charge, mortgage or otherwise for the purpose of giving third party security to any person body or organisation for any reason whatsoever in order to secure a loan to the Trustee or Trustees for the tame being hereof any one or more of the beneficiaries for the time being hereof or any other person whether he or they be associated with this trust or otherwise or any company organisation corporation or other entity.

508. Section 38 of the Trustee Act 1925 (NSW) provides:

38 Raising money

(1) Where a trustee is authorised by the instrument, if any, creating the trust or by law to pay or apply capital money for any purpose or in any manner, the trustee shall have and shall be deemed always to have had power to raise the money required by sale, conversion, calling in, or mortgage of all or any part of the trust property for the time being in possession held upon the same trusts as the capital money.

(1A) Where a trustee holds land in respect of which moneys are due and payable for rates or taxes or in respect of which the trustee is under a statutory obligation to expend moneys and the trustee has no moneys subject to the same trusts as such land wherewith to pay such rates or taxes or discharge such statutory obligation the trustee shall have and shall be deemed always to have had power to raise the money required to make such payment or discharge such obligation by sale or mortgage of the whole or part of such land or by sale, conversion, calling in, or mortgage of all or any part of the trust property for the time being in possession held upon the same trusts as such land.

(2) This section shall not apply to a trustee of property held for charitable purposes.

509. Ms Charlton’s submission was that, by the exclusion of s 38 of the Trustee Act (and also s 37 of that Act) by the Deed, Ms Charlton was unable to hold “acquire and mortgage” property in her own right. The limit of Ms Charlton’s capacity was to acquire the property as a trustee on behalf of the trustees.

510. As to that contention, NAB submitted:

This contention concerns the exclusion of s 38 of the Trustee Act 1925 (NSW) by cl 7 of the trust deed for the Phoenix Trust. Whilst difficult to understand, it appears to be contended that, although Ms Charlton had been appointed as trustee, she had no power to acquire or mortgage the Property by reason of the exclusion of s 38 by cl 7 of the trust deed.

…

This contention proceeds on a misapprehension. That is because the trust deed confers express powers on the trustee - Ms Charlton - to acquire and mortgage the Property: see e.g. cll 12, 13(b)-(c), (o), (z).

511. I accept NAB’s submission that the Deed provided that a trustee of the Trust had the power to acquire and mortgage trust property pursuant to cll 12, 13(b)-(c), (o) and (z). It follows that Ms Charlton was permitted to buy trust property on her own account. A similar conclusion will apply to the Joint Trustee Issue discussed below.

ISSUE 7: JOINT TRUSTEE ISSUE

512. There appears to be five issues raised by Ms Charlton and Mr O’Brien which concern or relate to the Joint Trustee Issue. Those issues are 2, 4, 6, 19 and 20, which were in the following terms:

2. Whether National Australia Bank should have raised the issue of Ms Charlton being an additional Trustee with her and then included Mr O'Brien as Trustee of Phoenix Trust as the Co-Trustee in the execution of the contracts and subsequent mortgage.

…

4. Whether the loan contracts and mortgage were correctly executed with the requisite authority in relation to Phoenix Trust given the that Trustees are required to act jointly when more than one exists to effectuate legal dealings as described in the Trustee Act 1925 and Phoenix Trust Deed Clause 13t).

…

6. Whether the National Australia Bank was aware of the missing legal authority in respect of its dealings with the Phoenix Trust.

…

19. Whether NAB was entitled to use the contract against Ms Charlton as being legally binding and enforceable without Phoenix Trust co-trustee's Mr O'Brien authorisation, such as Mr O'Brien being required to be a named party to the contract for contract to have legal effect, then proceed to obtain a Section 11 Certificate without the participation of Mr O'Brien the Trustee of Phoenix Trust in the purported 1st Mediation.

20. Whether NAB is entitled to use a contract which lacks requisite authority, to seek judgement for a debt where there is no default, by the Trustee of Phoenix Trust, the continuing trustee who is not a contracting party, and the beneficiary of the Phoenix Trust who resigned as a Trustee according to the rights given under Phoenix Trust Deed prior to NAB commencing legal action.

513. Further, Ms Charlton did not agree with the statement of issue by NAB, which she described as “misleading and deceptive”.

514. The development of Ms Charlton’s critique of the issue exposes the nature of the contentions advanced by her. Those submissions were as follows:

1. The “loans” were offered to the Trust by letter of offer.

2. Clause 13(t) of the Deed requires the trustee to act “jointly”. NAB knew there was more than one trustee but offered “the loans only to Ms Charlton at the time a trustee”.

3. Ms Charlton had “absolute unfettered discretionary powers confined on the Trustee” so long as it was for the benefit of the beneficiaries.

4. Mr O’Brien was a trustee jointly with Ms Charlton until she resigned. Mr O’Brien remained a trustee with “sole vesting rights” to manage and operate the Trust.

5. Ms Charlton cannot deliver up possession and is not liable to repay the loans “she never received personally”.

6. NAB refused to change the Certificate of Title from Ms Charlton (recorded as Ms O’Brien), notwithstanding her resignation as trustee. This is “unconscionable” and damaging to all parties.

515. Reference was made again to the confirmation provided to Ms Charlton (see the Right of Indemnity Issue, discussed above).

516. NAB described the contention of Ms Charlton, in this regard, as follows:

Ms Charlton contends that because Mr O’Brien was joint trustee of the Trust at the time that she took out the loans from NAB, she is not bound by those loan agreements and the Mortgage securing her obligations under those agreements. Her contention appears to be to the effect that because she and Mr O’Brien acted in breach of trust by failing to act jointly in taking out the loans and executing the Mortgage, NAB cannot enforce those loan agreements and the Mortgage against her.

517. This apprehension of the contentions advanced by Ms Charlton is not entirely consistent with her written and oral submissions but is reflected in Ms Charlton and Mr O’Brien’s statement of issues set out above.

518. I also accept NAB’s characterisation of Ms Charlton’s submissions as being consistent with a proposition that the fact Mr O’Brien was a joint trustee affected the validity of her loan agreements and the Mortgage with NAB but not the validity of her acquisition of the property.

519. The Deed contemplated there may be more than one trustee (see cll 1 and 15). As discussed in the context of the Section 38 Trustee Act Issue above, the Deed also provided that a trustee has power to acquire and mortgage trust property (cll 12, 13(c), (t) and (z)).

520. NAB is correct to submit that, whatever the various expressions of the issue, the central tenet of these contentions was not pleaded. That contention is correct but, in any event, Ms Charlton’s submissions, such as they are, cannot be sustained.

521. I will firstly turn to the factual premises for Ms Charlton’s contentions, neither of which were available on the evidence. The first is that, if there was a breach of the Trust, that NAB was aware of the same.

522. As mentioned in the context of the Misrepresentation Issue above, the evidence did not support the conclusion that, if Mr O’Brien was a trustee of the Trust, NAB was aware of the same at the time it entered into the loan agreements and accepted the Mortgage. Nor was there evidence that Ms Charlton or Mr O’Brien sought to clarify with Mr Thomas that position.

523. As mentioned above, I do not accept the evidence of Ms Charlton and Mr O’Brien during cross-examination to suggest NAB had knowledge of Mr O’Brien’s position as a trustee. It was, as Mr Colquhoun submitted, “belated” and it was in the light of the entirety of the evidence, unconvincing.

524. In any event, if Mr O’Brien was a trustee of the Trust, I find on the balance of probabilities that he gave Ms Charlton delegated authority to enter into the loan agreements and grant the Mortgage.

525. I also find that Ms Charlton had authority to acquire the property. That conclusion is supported by the evidence of Mr O’Brien in cross-examination. Relevantly, he stated:

Probably two days before that I didn't even know that I'd be attending that meeting. And that was the situation why she had permission to do that purchase because I could not tell you. I was subject to the Rural Lands Protection Board telling where me to be at a certain time with the cattle, when to move it, and when you're doing a mob like that by yourself your company is 12 dogs, four or five horses and a motorbike and a truck and a ute.

So I knew that through the negotiations of buying the property and all of that I would not be available to the solicitor. I would not be available to dealing with the people. And in actual fact I didn't even see the property until right near the sale day. And I was given another day off by another farmer to go out and have a quick look and he took my mob in my absence. So because of the circumstances of the time I delegated under 13T of the Trustees Act Josie had the right to act in my thing.

526. However, even aside from that finding, I do not consider the position of Ms Charlton may be sustained on the broad basis she has articulated for three reasons:

1. If Mr O’Brien was the joint trustee of the Trust then Ms Charlton breached the warranties given by her under cl 23 of the Overdraft Terms in the First Business Letter of Offer, cl 10 of the Second Business Letter of Offer and cl 20 of the Mortgage Terms.

2. Any equitable relief sought by Ms Charlton (for example, a constructive trust or declaratory relief) should not be granted because she does not come to the Court with clean hands. This is because any claim against NAB for knowingly receiving trust property necessarily relies on her own breach of trust, which means that the impropriety (Ms Charlton’s breach of trust) has “an immediate and necessary relation to the equity sued upon”: Dewhirst v Edwards [1983] 1 NSWLR 34 at 51 (per Powell J)

3. On the assumption that Ms Charlton’s case is one of knowing receipt of trust property, knowing receipt does not mean that a registered purchaser is subject to a personal equity: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [193]-[196].

ISSUE 8: FURTHER MEDIATION ISSUE

527. This issue appears to concern or relate to issues 14 and 15 of the issues presented by Ms Charlton and Mr O’Brien, now extracted:

14. Whether the second purported mediation while proceedings on foot in matter 2015/27843 which included different parties can serve to validate the existing Section 11 Certificate.

15. Whether the undetermined second mediation whether for the sake of conformity the named registered proprietor entitles NAB to enforce or seek possession without proper legal proprietorship.

528. The issue concerns a mediation ordered by Schmidt J in those proceedings. Ms Charlton contended that the orders required Mr O’Brien to participate, notwithstanding that “he did not appear on the loan contracts” and he did not participate in the mediation held 17 July 2014. It was said the further mediation was ordered to be “a mediation that satisfied the [FDM Act]”.

529. Ms Charlton seemed to contend this mediation was not in accordance with the FDM Act because the mediation occurred in circumstances where enforcement action remained on foot, including the very proceedings before Schmidt J. No s 11 certificate was applied for by NAB although it was submitted that no s 11 certificate could ever be validly issued by this further mediation because it would be a retrospective “issuance of a s 11 certificate” to serve the purpose of validating proceedings.

530. I agree with the submission of NAB that it is difficult to understand the purport of that submission on the issues raised.

531. It is not entirely clear that Ms Charlton did contend that the mediation affected NAB’s ability to enforce the loan agreement and the Mortgage or that the mediation could not overcome defects arising with respect to the earlier mediation. Schmidt J ordered the following with respect to the mediation:

DIRECTIONS MADE:

Parties take the necessary steps to arrange a mediation which satisfies the requirements of the Farm Debt Mediation Act and that mediation occur on or before 30 October 2015.

In the event that the mediation is unsuccessful, the parties have liberty to approach the Listings Manager for a hearing date with an estimate of 1 day.

532. It is sufficient to find, in the disposition of this issue, that the mediation ordered by Schmidt J does not prevent NAB relying upon the extant s 11 certificate, provided that it is (as discussed with respect to earlier issues) valid.

ISSUE 9: DEED OF RELEASE ISSUE

533. NAB contended that the issue raised by Ms Charlton was that the provision of a draft Deed of Release by NAB’s solicitors to Ms Charlton’s then solicitors, in the context of this litigation, affects NAB’s ability to enforce the loans agreements and the Mortgage in these proceedings.

534. Ms Charlton disagreed and contended the significance of the draft Deed of Release reflected the conduct of NAB in the proceedings and its attitude to the FDM Act. It was designed to avoid the exposure of the “factual matrix” of the matter and to avoid the operation of law.

533. NAB is entirely correct to submit that the issue does not arise on the pleadings. There is no evidence as to the draft Deed of Release and any role it played in the proceedings. Just how any offer by NAB by deed or otherwise may have affected its ability to enforce loan agreements or the Mortgage was not explained.

534. I reject Ms Charlton’s contentions under this issue.

ADDITIONAL ISSUES

537. The additional issues were earlier dealt with under the heading “Issues”.

THE CROSS-CLAIM PROCEEDINGS

538. The cross-claim proceedings were ventilated in the context of the Misrepresentation Issue. As I have rejected Ms Charlton’s submissions as to the Misrepresentation Issue, the cross-claim proceedings must accordingly fail.

CONCLUSION

539. Having regard to the findings made at [205] and [206] of this judgment, and the resolution of the issues raised by the parties in these proceedings so far as they were properly amenable to resolution (see [207]-[214]), I consider that NAB has discharged its onus of establishing the matters necessary for an entitlement to possession and judgment for debt.

540. For the reasons given above, the cross-claim proceedings should be dismissed.

541. So far as Ms Charlton and Mr O’Brien brought an application to extend time to bring the judicial review proceedings, that application is refused. In any event, the judicial review proceedings would alternatively have been dismissed as a matter of merit.

542. The question of costs has not been the subject of submissions and is reserved.

543. NAB shall bring in short minutes of order reflecting this judgment within 14 days of the publication of the judgment. If there is dispute as to the orders proposed, NAB should file and serve a submission in support of the order within the same period. Ms Charlton and Mr O’Brien should, in the event of a dispute as to whether the proposed orders reflect this judgment, file and serve a submission in reply within a further 14 days.

DIRECTIONS

544. The Court makes the following directions:

1. NAB should file and serve short minutes of order reflecting this judgment within 14 days of its publication together with a submission in support of the orders proposed in the event of any dispute as to the proposed orders.

2. In the event as to any dispute as to the short minutes of order reflecting the terms of this judgment, Ms Charlton and Mr O’Brien shall file and serve submissions as to that issue within 14 days of the receipt of NAB’s short minutes of order and submissions in support thereof.

3. The Court will make orders administratively in Chambers upon the receipt of consent short minutes of order or, in the event of any dispute as to the form of the orders, after consideration of the submissions advanced by the parties.

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Decision last updated: 29 October 2019