National Australia Bank Ltd v Hanger - [1999] QSC 128

IN THE SUPREME COURT
OF QUEENSLAND No. 9872 of 1998
Brisbane
[National Australia Bank Ltd v Hanger]
BETWEEN:

NATIONAL AUSTRALIA BANK LIMITED
(ACN 004 044 937)
Plaintiff

AND:
PAULA BEATRICE HANGER
Defendant
REASONS FOR JUDGMENT - MOYNIHAN J.

Judgment delivered 17 June 1999.

CATCHWORDS: TRUSTS AND TRUSTEES - application by mortgagee/plaintiff for summary judgment for recovery of possession of land - whether execution of mortgage proper exercise of defendant’s powers as trustee - whether unconscionable conduct by plaintiff.

Counsel:Mr P.P. McQuade for the plaintiff.
Mr P.W. Hackett for the defendant.

Mr A.F. Maher for certain residuary beneficiaries.

Solicitors: Mallesons Stephen Jaques for the plaintiff.
Baker Johnson Lawyers for the defendant.
James & Co Lawyers for certain residuary beneficiaries.

Date of Hearing:          17 March 1999
IN THE SUPREME COURT
OF QUEENSLAND  No. 9872 of 1998
Brisbane
BETWEEN:

NATIONAL AUSTRALIA BANK LIMITED
(ACN 004 044 937)
Plaintiff

AND:
PAULA BEATRICE HANGER
Defendant
REASONS FOR JUDGMENT - MOYNIHAN J.

Judgment delivered 17 June 1999.

This is a mortgagee’s application for summary judgment for recovery of possession of a property at Redcliffe. It is resisted by the defendant on the basis that there is no indebtedness and that the mortgage was, to the plaintiff’s knowledge, given in breach of the defendant’s fiduciary duty and is void. The defendant’s affidavit raises issues of unconscionable conduct by the plaintiff.
The action has its origins in the will of Samuel Marwick Stanton. The defendant is the executor, trustee and a beneficiary under the will. The defendant’s opposition to the application is supported by two other beneficiaries. The will gave the defendant a life interest in the property and provided that should she cease to live permanently there or in any residence provided in substitution then the property or the new residence was part of the residuary estate which was bequeathed to her children Daryl Kevin Hanger, Trevor Paul Hanger, Julie Beatrice Stack and Vicki Elizabeth Kingwill as tenants in common in equal shares. Julie Beatrice Stack and Vicki Elizabeth Kingwill appeared to support the defendant’s opposition to the plaintiff’s application.
The mortgage on which the plaintiff’s action is founded was granted in this way. The plaintiff made an advance and provided an overdraft facility to Roxbond Pty Ltd through which company the defendant’s son and a residuary beneficiary, Daryl Kevin Hanger, conducted a printing business.
The plaintiff required that the defendant and Daryl Kevin Hanger provide a guarantee of the obligations of Roxbond Pty Ltd and that the defendant give a mortgage over the property to secure her obligations as guarantor. The defendant contends, and the form of the guarantee and indemnity on its face provides support for it, that the guarantee was given in her personal and not her representative capacity. The deed provides some support because there is no indication in the identification of the defendant as a guarantor, that she is acting in a representative capacity. On the other hand, where the standard form provides for a guarantor acting in a trustee capacity, Telbrook Pty Ltd as trustee for the Hanger Family Trust is inserted but there is no reference to the defendant as trustee of the estate of Stanton. On the other hand the mortgage is, on its face, given in the defendant's capacity as “personal representative” under Stanton’s will.
The defendant apparently executed the guarantee and mortgage in December 1996. Roxbond Pty Ltd defaulted in the performance of its obligations to the defendant and in January 1998 it commenced collection proceedings.
The defendant deposes that her son, Daryl Hanger, a residuary beneficiary, was a director of Roxbond Pty Ltd. She deposes to the effect that Daryl was under considerable pressure from the defendant’s manager at Coolangatta to provide security for Roxbond’s loan and overdraft. She further deposes that the manager told her that the property was required as security but that she said the property could not be mortgaged “for the Bank’s purposes” as her solicitors had informed her that she was not entitled to mortgage the property “for her own purposes” and that she gave the manager a copy of the will. She further deposes that the manager told her that he would not register the mortgage which was subsequently registered.
The defendant was, at all material times and if her evidence is accepted, to the knowledge of the defendant’s manager, an undischarged bankrupt. She deposes that she felt “trapped and very emotional” when pressed by the manager and so agreed to execute the mortgage. She further deposes that when she attended on the bank’s solicitors for the purpose of executing the mortgage she expressed reservations because of the matters she had raised with the manager but these were brushed aside. These allegations are, of course, as yet uncontroverted but are not such that they can be ignored.
Vicki Elizabeth Kingwill and Julie Beatrice Stack, who are residuary beneficiaries, are not presently parties to the action. They depose that they did not know of or consent to the mortgage. It seems, however, that Vicki Kingwill was, at the relevant time, a director of Roxbond Pty Ltd or one of the co-guarantors of Telbrook Pty Ltd as trustee for the Hanger Family Trust and the plaintiff submits that she acquiesced in the mortgage as did Daryl Hanger.
As I have said, it is at least arguable that the guarantee was given in the defendant’s personal capacity and the mortgage in her representative capacity. If that is the case here, the defendant’s material affords no explanation. As previously mentioned, the defendant was an undischarged bankrupt and she told the plaintiff’s manager that.
The defendant’s argument that there is no debt secured by the mortgage depends on the guarantee having been given in the defendant’s personal capacity and the mortgage being given in her representative capacity. The mortgage defines what it secures in terms of a definition of “amount owing” which is:-
“. . . money owed or becoming owed and which may in law be secured including:-
(a)under an agreement covered by this mortgage; and
(b)in respect of any credit provided by the bank due other than under an agreement provided by this mortgage; and
(c)otherwise part of this mortgage.”
The only agreement under which money is owed or becomes owed is the Deed of Guarantee and Indemnity given by the defendant in her personal capacity.
I should have thought that of itself there is no reason why a mortgage might not be given in a representative capacity to secure a personal liability subject of course to the proper exercise of a power to do so.
The defendant submits to the effect that there was a wide power to mortgage at “the absolute discretion of the trustee” and that included a power to mortgage for the benefit of the defendant as a beneficiary and Daryl Kevin Hanger a residual beneficiary of Stanton’s estate.
Thus far the points raised in opposition to the application may be arguable but it is difficult to conclude that they raise a serious question to be tried. It must however be acknowledged that they arise in the context of the defendant’s, as yet, uncontroverted version of the circumstances in which the mortgage was executed. The facts if made out, to my mind give a serious rise to an issue of whether the execution of the mortgage, particularly if it was to secure a personal liability of the bankrupt defendant, was a bona fide exercise of the defendant’s power as trustee of Stanton’s estate. Moreover, there seems to me to be an issue as to whether the mortgage was for the benefit of the beneficiaries or a beneficiary of Stanton’s estate when it was for the purpose of securing Roxbond’s indebtedness when Roxbond was entirely unconnected with the estate.
A further consideration arises if the defendant’s account of the circumstances in which the securities were executed is ultimately made out. Firstly, if the mortgage was not bona fide, it is fairly arguable that the defendant’s manager knew that it was not. Secondly, the account he gives raises sufficiently, for present purposes, an issue as to whether the plaintiff, through its manager, acted unconscionably in procuring the defendant to execute the mortgage in her capacity as executor or trustee of Stanton’s estate.
The considerations being those to which I have adverted, the application should be dismissed. I should say that I have not purported to determine whether the residuary beneficiaries who complain of the transaction (Julie Beatrice Stack and Vicki Elizabeth Kingwill) are necessary parties to any action (including counterclaim).