National Australia Bank Ltd v Ladbrooke
[2006] VSC 107
•24 March 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4386 of 2003
| NATIONAL AUSTRALIA BANK LTD | Plaintiff |
| v | |
| LINDA MAREE LADBROOKE AND ANOTHER | Defendants |
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JUDGE: | HARPER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 7 & 8 MARCH 2006 | |
DATE OF JUDGMENT: | 24 MARCH 2006 | |
CASE MAY BE CITED AS: | NAB LTD v LADBROOKE | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 107 | |
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MORTGAGE – Default by mortgagee – Claim for possession – Construction of a non-standard clause in standard loan facility agreement – Claim upheld.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T. Messer | Russell Kennedy |
For the Firstnamed Defendant | Mr M. Lapirow | BM Legal |
| No appearance for the Secondnamed Defendant |
HIS HONOUR:
If there is a villain in this story, it is Mr Edwin Ladbrooke, the second defendant. He met the first defendant, Linda Maree Ladbrooke, on 4 January 1999. They were married on 2 October that year. They decided to live in Williamstown. The property at 106 Crofton Drive was available. The second defendant purchased it on 21 December 1999, for $375,000, and was subsequently registered as the sole proprietor.
Mr Ladbrooke was then a customer of the plaintiff, the National Australia Bank, at its Malvern Business Banking Centre. His "business manager" at that branch was Mr Scott Graham, an employee of the plaintiff. It was through Mr Graham’s good offices that the second defendant, having told Mr Graham (as was the fact) that he intended to establish his matrimonial home at the Crofton Drive property, entered into a fixed rate owner occupied home loan with the plaintiff. As security, he gave the plaintiff a first mortgage over the land (which land is described in Certificate of Title volume 10334 folio 886).
The marriage was short-lived. On 2 June 2000, the second defendant met with Mr Graham and told him that he and the first defendant were shortly to separate. The Williamstown property had already been listed for sale, and was (according to the second defendant) expected to realise between $600,000 and $650,000. Each defendant intended to put the proceeds towards the purchase of a separate dwelling; but it was expected that bridging – and perhaps additional – funding would be required. Mr Ladbrooke sought the plaintiff’s assistance in obtaining that finance.
In the meantime, the search for new, separate, dwellings continued. On 5 June 2000, Mr Ladbrooke sent by fax a letter to Mr Graham. It disclosed that “Linda and I found a house on the weekend at 8 Graham Court Altona Meadows for $225,000.” On 8 June 2000, Mrs Ladbrooke put down a deposit of $22,500 on a property at 8 Graham Court, Altona Meadows. These funds were her own. But the matrimonial home had not then been sold, and so additional finance was needed.
On 29 June 2000, the defendants met with Mr Graham at the plaintiff's Malvern Business Banking Centre. Arrangements were then made for the first defendant to borrow $180,000, of which $11,155.35 consisted of fees and charges, with the balance being $168,844.65. This was to be repaid over 25 years by 299 instalments of $1,312.76 each, and a final instalment of $712.82: a total of $393,228.06, of which interest charges amounted to $213,228.06. Mr Ladbrooke was nominated as the “customer … to receive notices”.
Security was required. Accordingly, Mrs Ladbrooke on 29 June 2000 signed a mortgage in favour of the plaintiff. The land the subject of the mortgage is described in two Certificates of Title: volume 10378 folio 913 and volume 10430 folio 509. With the funds borrowed from the plaintiff, together with Mrs Ladbrooke’s own contributions of not only the deposit ($22,500) but also a further $22,200, the total purchase price of $225,000 was raised.
Settlement was effected on 30 June 2000. This was followed on 15 July by the sale of 106 Crofton Drive. Unhappily, the sale price was not the anticipated $600,000 to $650,000; it was, rather, $530,000.
Mrs Ladbrooke claims that the whole of this sum (less, perhaps, the costs of and associated with sale) should have been used to eliminate the loan taken out by her for the purchase of 8 Graham Court. This, she says, was agreed to by both Mr Ladbrooke and the Bank. The former accepted that, if she paid the deposit on 8 Graham Court, “he will pay off the rest of the house.”[1] As for the Bank, she submitted that it was (with the second defendant) bound by a clause in the facility agreement; and that clause governed the loan of $180,000. In that document, opposite the heading "Security" there appear the words:
"The following securities … have been or are to be taken by us: first registered mortgage over property located 8 Graham Court, Altona Meadows. On sale and subsequent settlement of property located at 106 Crofton Drive, Williamstown this facility is to be cleared in full and title returned to [the first defendant]."
[1]Transcript, p. 93.
According to the first defendant, the plaintiff was by this clause required to employ the whole of the proceeds of sale of the Williamstown property first to clear “in full” the outstanding debt secured on the Altona Meadows property. That, it was submitted, is the clear meaning of the words employed. Given that it is, she is not indebted to the plaintiff although repayments are in arrears in the sum (agreed for the purposes of its calculations, but not otherwise, at $220,777.92, as at 6 March 2006). The true debtor, according to Mrs Ladbroke, is the second defendant.
The words of the clause, read on their own, are up to a point unambiguous. The plaintiff acknowledges that it has taken a security by way of a registered first mortgage over the property at 8 Graham Court, Altona Meadows. It then anticipates the sale and subsequent receipt of the purchase price of the property at 106 Crofton Drive, Williamstown. When that happens “this facility”, which can only mean the loan secured by the mortgage over the Graham Court property, “is to be cleared in full”. The title to that property, which up to that point will be held by the plaintiff as mortgagee, is then to be returned to Mrs Ladbrooke.
The first defendant points out that the plaintiff drew this clause. Not only that, but it is not a standard term in a standard form of printed agreement. It is a specially drawn and typewritten clause in an otherwise standard form. It is either ambiguous, or its meaning is plain. If it is ambiguous, the ambiguity is to be resolved in favour of the other party or parties; and while it is of course to be read in the context of the entire agreement, including both the loan agreement and the mortgage by which the obligations of the borrower under the loan agreement are secured, nevertheless it is to be given that pre-eminence accorded to specially drawn clauses in otherwise standard terms. And if, the argument on behalf of Mrs Ladbrooke continues, the meaning of words is on their face clear and unambiguous, an ambiguity is not to be imported by reading those words in the context of the matrix of facts against which the contractual arrangements were made.
It is therefore of no avail to the plaintiff that it had a mortgage over 8 Graham Court and that, if the first defendant is right, that mortgage would have had very little efficacy. The courts are not concerned to ascertain whether the consideration given by one side to a bargain matches that given by the other. Questions of undue influence and the like aside - for these are not relevant here - it is for the parties, not the courts, to determine whether the bargain, no mater how lopsided it may appear, is or is not in their interests.
For all the strength of these submissions, a case may be put for the other side. First, even conceding that the law does not generally concern itself with the sufficiency of consideration once consideration is given, the fact that the plaintiff had a mortgage over the Altona Meadows property is significant because the courts will endeavour to avoid a construction that is unreasonable. And it is unreasonable to suppose that the plaintiff, which required a mortgage of the 8 Graham Court property as security for its loan of $180,000, would then pledge that the funds realised on the sale of the Williamstown property - also mortgaged to the plaintiff - would first be used to pay out the Altona Meadows loan and only thereafter would be available (so far as any balance remained) to repay the Williamstown loan.
The plaintiff pointed to terms in the loan agreement and the mortgage which are incompatible with the clause with which we are here concerned. So they are; but if reconciliation is otherwise impossible, a specially drawn clause takes precedence.
The plaintiff is nevertheless saved from the consequences of a very carelessly drawn clause. It is indeed the plaintiff which took the security. It is likewise the plaintiff which holds the title to 8 Graham Court, Altona Meadows; and it is the plaintiff which must return that title to the first defendant when the debt is “cleared in full”. It is, however, the second defendant who owned 106 Crofton Drive, Williamstown; and Mr Ladbrooke is as much a borrower from the plaintiff in respect of the purchase price of 8 Graham Court as is Mrs Ladbrooke, albeit that, because the title was in her name alone, she is the sole mortgagor. In these circumstances, it is possible and appropriate, in my opinion, to construe the clause in question as requiring Edwin Ladbrooke, after settlement of the sale of the Williamstown property, to clear the entire Altona Meadows debt. The plaintiff will then be required to return the title of 8 Graham Court to Mrs Ladbrooke, she being the mortgagor.
This construction, it seems to me, better accords with the intentions of the parties as these are expressed in the contractual documents, read as a whole, than any alternative construction. It is clear that only the plaintiff has the title to the Altona Meadows property, and only the Bank can therefore return it to the first defendant. If one of the contracting parties is to assume the sole responsibility for this part of the process, there seems no reason why Mr Ladbrooke should not assume sole responsibility for another. This is especially so given that it was he, and certainly nobody else, who promised his wife that he would relieve her of the burden of repaying the plaintiff for the Altona Meadows loan. I accept Mrs Ladbrooke's evidence on this point.
Both sides called evidence about conversations that had as their subject matter the Bank's position in relation to the financial arrangements for the purchase of the Altona Meadows property. Mr Graham, in evidence to which no objection was taken, said that it was Mr Ladbrooke's intention that any surplus from the sale of the Williamstown property "would go towards any property that was purchased in favour of Linda."[2] Mrs Ladbrooke said that she queried with Mr Graham the effect of the clause in controversy. In response, he told her (according to the evidence) that "if Crofton Drive sells I won't have to pay anything"; and that, therefore, "If I sign this document [the loan contract] now I won't have to pay anything at all".[3]
[2]T.39
[3]T.66
I accept that, as between the defendants, Mr Ladbrooke assumed sole responsibility for repayment of the loan secured on 8 Graham Court, Altona Meadows. I also find that he informed Mr Graham that this was his position. I further accept that his intentions were discussed in the presence of the first defendant and Mr Graham, and that he then made it plain that any surplus following the sale of 106 Crofton Drive, Williamstown would be used to reduce or eliminate the Altona Meadows debt. But there was no agreement on the part of the Bank to employ the Williamstown proceeds first in the discharge of that (secured) debt and only thereafter direct the balance to its reduction. Yet Mrs Ladbrooke formed a contrary belief, then she misunderstood the Bank's position. I accept Mr Graham's evidence where there is a discrepancy between his and hers.
It follows that the plaintiff has made out its case. There must be judgment for the plaintiff, and a consequential order that it be granted possession of the Altona Meadows property and be paid the amount currently outstanding on the relevant loan.
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