Nikoloff v Perpetual Trustee Company Limited
[2021] WASCA 94
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: NIKOLOFF -v- PERPETUAL TRUSTEE COMPANY LIMITED [2021] WASCA 94
CORAM: MURPHY JA
MITCHELL JA
HEARD: 21 MAY 2021
DELIVERED : 21 MAY 2021
PUBLISHED : 24 MAY 2021
FILE NO/S: CACV 114 of 2020
BETWEEN: NADIA NIKOLOFF
Appellant
AND
PERPETUAL TRUSTEE COMPANY LIMITED
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: ACTING MASTER STRK
Citation: PERPETUAL TRUSTEE COMPANY LIMITED -v- NIKOLOFF [2020] WASC 389
File Number : CIV 2368 of 2019
Catchwords:
Practice and procedure - Interim order - Application for stay - Judgment for possession and payment of debt in respect of default under loan agreement - Where appellant contended stay required because appeal would be rendered nugatory - Balance of convenience - Stay not in the interests of justice
Legislation:
Nil
Result:
Application for stay dismissed
Category: B
Representation:
Counsel:
| Appellant | : | In person |
| Respondent | : | C H Thompson |
Solicitors:
| Appellant | : | In person |
| Respondent | : | Dentons Australia |
Case(s) referred to in decision(s):
Beeck v Kohlen [2013] WASCA 134
Duckworth v Commonwealth Bank of Australia [2013] WASCA 24
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; (1972) 126 CLR 161
Palmer v Permanent Custodians Ltd [2009] VSCA 164
Perpetual Trustee Company Limited v Nikoloff [2020] WASC 389
Raysun Investments Pty Ltd v Caruso [2013] WASCA 13
Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168
REASONS OF THE COURT:
Introduction
On 21 May 2021, we heard the appellant's application, filed 12 April 2021, for a stay of the primary court's orders for possession and the payment of a debt. We dismissed the application and said we would provide written reasons. These are our reasons.
The dispute relates to a loan agreement entered into by the appellant (Ms Nikoloff) secured by mortgages granted in favour of the respondent (Perpetual) over two properties in Beckenham (Beckenham properties). The orders made by Acting Master Strk on 28 October 2020, on a summary judgment application by Perpetual, included orders to the effect that (1) Ms Nikoloff pay to Perpetual the sum of $855,772.52 plus interest at the rate specified in the loan agreement and the mortgages from the date of the judgment until payment, and (2) within 28 days of the date of judgment, Ms Nikoloff give possession to Perpetual of the Beckenham properties. Written reasons for the decision were published: Perpetual Trustee Company Limited v Nikoloff[1] (primary decision).
[1] Perpetual Trustee Company Limited v Nikoloff [2020] WASC 389.
The primary proceedings
Perpetual's case was that, on or about 6 January 2014, Perpetual advanced two loans, totalling $760,000, to Ms Nikoloff pursuant to a loan agreement. The loan agreement was varied on or about 13 November 2014.[2] The loan amount was secured by registered mortgages in favour of Perpetual over the Beckenham properties.[3]
[2] Primary decision [17].
[3] Primary decision [18].
Perpetual alleged default by Ms Nikoloff and commenced proceedings seeking to recover the debt under the loan agreement and possession of the Beckenham properties.[4]
[4] Primary decision [4], [21] - [22].
Perpetual applied for summary judgment against Ms Nikoloff in respect of its claims, as well as on a counterclaim filed by Ms Nikoloff.[5] In support of its application, Perpetual filed several affidavits which verified the facts on which its claim was based, including the entry into the loan agreement and mortgages in favour of Perpetual and matters relating to default.[6]
[5] Primary decision [8].
[6] Primary decision [23] - [25].
Ms Nikoloff opposed Perpetual's application for summary judgment. She raised four issues to the following effect:
1.Ms Nikoloff claimed that the loan was securitised by Perpetual without notice to Ms Nikoloff.[7]
2.Ms Nikoloff contended that the loan agreement lacked certainty, and that the loan agreement and mortgages were unenforceable on that basis.[8] In this regard, she also complained as part of her counterclaim that Perpetual was given unfettered discretion in relation to the rate of interest.[9]
3.Ms Nikoloff said that she had entered the loan agreement under the mistaken belief that the variable interest rate under the loan agreement would always align with the RBA cash rate.[10] Ms Nikoloff contended that while she had read a note in the financial information table of the loan agreement, which stated that the specialist lending variable rate may be changed without her consent, she had interpreted this as allowing the bank to adjust the interest rate in line with the RBA cash rate.[11]
4.Ms Nikoloff contended that Perpetual engaged in unconscionable conduct.[12]
[7] Primary decision [36].
[8] Primary decision [40].
[9] Primary decision [41].
[10] Primary decision [66].
[11] Primary decision [68].
[12] Primary decision [73].
Ms Nikoloff also raised additional matters concerning the conduct of banks generally.[13]
[13] Primary decision [93] ‑ [94].
Primary decision
The acting master was satisfied[14] that (1) Perpetual's affidavits provided prima facie evidence of its claims, (2) Perpetual had satisfied the criteria to exercise the power of summary judgment, and (3) Perpetual had a prima facie entitlement to judgment on its claim. As Perpetual had established a prima facie case, the evidentiary onus shifted to Ms Nikoloff to demonstrate that there was an arguable defence or other reason for trial.[15]
[14] Primary decision [4], [26] - [27].
[15] Primary decision [28].
The acting master found that, in all of the circumstances, she was satisfied that Ms Nikoloff had no arguable defence to the claim.[16] In respect of the first issue raised by Ms Nikoloff, the acting master found that there was no evidentiary basis for this claim and it was a mere assertion.[17] In any event, it did not provide Ms Nikoloff with a viable defence to Perpetual's claim nor counterclaim. The acting master found that insofar as Ms Nikoloff claimed that a lack of notice invalidated the loan agreement, the terms of the loan agreement were such that Perpetual was able to 'assign or otherwise deal with its rights in any way and there [was] no requirement in the loan agreement or mortgage for notice of any assignment to be given to [Ms Nikoloff] … '.[18]
[16] Primary decision [95].
[17] Primary decision [38].
[18] Primary decision [39].
As to the second issue raised by Ms Nikoloff, the acting master found that, based on the authorities considered, it was not arguable that the provisions of the loan agreement as to interest were void for uncertainty. Further, the acting master determined there was also no need to consider whether it was arguable that the interest provision was not severable from the contract.[19]
[19] Primary decision [63].
In respect of the third issue, the acting master accepted the submission by Perpetual that the terms of the loan agreement with respect to the interest rate, and the right to vary the interest rate, were clear on the face of the documents signed by Ms Nikoloff. There was no representation in these documents that the variable interest rate would align with the RBA cash rate. The acting master also found there was nothing in the wording of the note, or the loan agreement as a whole, that was capable of giving rise to the interpretation suggested by Ms Nikoloff.[20]
[20] Primary decision [70].
As to the fourth issue raised by Ms Nikoloff, the acting master considered the possibility of unconscionable conduct both in equity and under s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).[21]
[21] Section 12CB of the ASIC Act provides:
As to the position in equity, the acting master found that there was no arguable defence or counterclaim for Ms Nikoloff based on unconscionable conduct.[22] The reasons for this were, in effect, (1) Ms Nikoloff's perceived difference in bargaining position was insufficient of itself to give rise to a special disadvantage,[23] (2) it was not arguable that Ms Nikoloff's mistaken belief regarding the calculation of interest on the loan seriously affected her ability to make a judgment as to her best interests such as to constitute a special disadvantage,[24] (3) even if there was a special disadvantage, there was no evidence that it was sufficiently evident to Perpetual,[25] and (4) there was no evidence that there was conduct by Perpetual which was harsh or oppressive involving taking advantage of any purported special disability of Ms Nikoloff.[26]
[22] Primary decision [84].
[23] Primary decision [79].
[24] Primary decision [80].
[25] Primary decision [81].
[26] Primary decision [82].
The acting master also found that there was no arguable defence or counterclaim for Ms Nikoloff based on unconscionable conduct under s 12CB of the ASIC Act.[27] The reasons for this were, in effect:[28]
[27] Primary decision [89].
[28] Primary decision [90].
1.There was no evidence of the relative strengths of the bargaining positions of the parties at the time they entered into the loan agreement and mortgages, nor of actual inequality.
2.There was no evidence that the bargain struck was procured by Perpetual's unfair exploitation of Ms Nikoloff's weakness.
3.There was no evidence of the terms under which Ms Nikoloff could have acquired identical or equivalent financial services from a lender other than Perpetual, or indeed whether such services were available to Ms Nikoloff.
4.There was no evidence that Ms Nikoloff sought to negotiate the terms of the loan agreement and mortgages, and was refused by Perpetual.
5.Ms Nikoloff voluntarily entered a loan agreement with a variable interest rate.
6.There was no evidence Perpetual misled Ms Nikoloff regarding the variable interest rate.
7.Despite Ms Nikoloff's mistaken belief regarding the variable interest rate, she is an accountant.
8.There was no evidence Ms Nikoloff was unable to understand the terms of the loan agreement or mortgages, nor that Perpetual caused or contributed to, or knew or ought to have known about, her mistaken belief regarding the variable interest rate.
9.Changes to the interest rate under the loan agreement were made in accordance with Perpetual's express contractual rights.
The acting master considered that the additional and more general complaints raised by Ms Nikoloff were insufficient to demonstrate an arguable defence or other reason for trial.[29]
[29] Primary decision [93] - [94].
The appellant's case
The appellant's case filed on 24 February 2021 refers, in effect, to nine 'grounds' of appeal in which Ms Nikoloff alleges errors of law.
Grounds 1 to 3 allege errors of law in relation to the loan agreement. Grounds 1 and 2 allege that at [41] and [45] of the primary decision, the acting master's arguments focus was on the narrow interpretation of contract law, ie, that both parties have agreed to the terms and that they are fair and reasonable. Ground 3 further alleges that at [61] of the primary decision, focus is given only to the wording without consideration as to the fair and reasonable implications of the words, undermining any possibility of good faith.
Grounds 4 and 5 allege errors of law in relation to 'Contract Uncertainty'. Ground 4 alleges that at [62] of the primary decision, the acting master made assumptions based on the wording of the definition of 'specialist lending rate', which lead to an incorrect decision. Ground 5 alleges that at [64] of the primary decision, the acting master summarises the decision 'against cases based on uncertainty of contract, however the same cases also support [Ms Nikoloff's] argument'.
Ground 6 alleges an error of law in relation to 'Unconscionability'. Ms Nikoloff alleges that the acting master's discussion at paragraph [77] of the primary decision was 'not complete'. She states:
Implying that because I was an accountant, I could judge for myself, however, it is this very training at university that led me to trust in the integrity of the system as I know there are laws in place to ensure that the lender will act within the law and with good faith and hence the belief that the system in place will keep the superior party honest, fair and reasonable.
Grounds 7 ‑ 9 allege errors of law relating to 'Additional doctrines not taken into consideration'. Ground 7 alleges consideration was not given to the 'doctrine of implied good faith'. Ground 8 alleges the acting master did not take into account 'duress/economic duress'. Ground 9 alleges the acting master did not take into account an 'unfair term going to the heart of the contract'.
The application for a stay
Ms Nikoloff's affidavits
Ms Nikoloff filed affidavits sworn 12 April 2021 and 7 May 2021.
Ms Nikoloff's affidavit filed 12 April 2021 annexed correspondence from Perpetual's solicitors dated 5 February 2021 to the effect that (1) Perpetual had commenced the process of enforcing the acting master's orders of 28 October 2020 by serving Notices to Vacate to the tenants occupying the Beckenham properties, and (2) the Notices to Vacate required the tenants to vacate the Beckenham properties on 29 March 2021, following the end of the emergency period under the Residential Tenancies (COVID-19 Response) Act 2020 (WA).
Ms Nikoloff also deposed, in effect, that:
1.She does not agree with the primary decision, as indicated by the fact she has 'gone to the expense of appealing the ruling'. Despite this, Perpetual want to continue with foreclosure. Ms Nikoloff seeks to ensure that the sale of the Beckenham properties is not allowed until the appeal has been heard.
2.She has owned one of the two Beckenham properties since 1980 and it has been her family home. The property is of significance to her family and she did not choose to put it at risk, and she was 'forced' into this position.
3.It is unconscionable to sell the property before the appeal is completed, according to the 'reasonable person'.
4.It is wrong to sell a property before the appeal is heard, on the basis of 'natural law'.
5.Perpetual's intention to take the property prior to the appeal being heard is evidence of unconscionable conduct.
6.She has not contacted Perpetual as the letter she received dated 5 February 2021 was definitive and implied there is no discussion to be entered into.
In her affidavit of 7 May 2021, Ms Nikoloff said, in effect, that:
1.She is 'confused' as to the relevance of the 'Upper Class Collection' reports annexed to Ms Strack's affidavit of 28 April 2021.
2.There has been no justification given for the premature sale of the Beckenham properties.
3.Perpetual's solicitors are pre-empting the appeal decision, and the Beckenham properties could not be returned to her if they were sold.
4.The Beckenham properties are tenanted. Ms Nikoloff has not received rent for over two years as Perpetual's solicitors have sent out termination notices, and then had people 'knocking on the doors', which takes away the tenant's right to quiet enjoyment.
5.Her rights as the owner of the Beckenham properties have been 'compromised drastically' by the behaviour of Perpetual and its solicitors. She has been placed in an 'extremely compromising' position due to the 'superior power' of Perpetual.
6.Ethically, Ms Nikoloff could not terminate the leases. If she did, she would not be able to get new tenants given that Perpetual and its solicitors were 'harassing' the occupants of the Beckenham properties.
7.Ms Nikoloff has not been able to contact the tenants for some time. She presumes they were avoiding her due to the large amount of overdue rent.
8.The notice left by the tenants makes it apparent to Ms Nikoloff that they also want to be treated as 'human beings' by Perpetual and their solicitors.
9.Evidence of the valuation of the Beckenham properties does not provide justification of a 'premature' sale.
Perpetual's affidavits
Perpetual filed affidavits of Ms T Strack, solicitor, sworn 28 April 2021 and Mr B Hooper, an employee of RESIMAC Ltd, the mortgage manager of Perpetual, sworn 3 May 2021.
In her affidavit, Ms Strack deposed, in effect, that:
1.On 31 March 2021, she instructed 'Upper Class Collections' to attend the Beckenham properties to make enquiries to determine if the properties were occupied. The annexed report summarised the attendances of the agents between 2 and 8 April 2021, and indicated that (1) although there was evidence of occupation, there was no answer to calls at the door, and (2) on one of the properties there was a notice affixed to the front door. The notice stated:
We the tenants hereby give notice, by way of courtesy, that we have sought legal advice in this matter and thus, we have instructed our solicitor to lodge an Application for a Suspension Order.
2.Ms Strack deposed that, based on the notice, she believed that at the time of the agents' enquiries, the Beckenham properties were both occupied, and the occupant of one of the Beckenham properties was a tenant under a residential tenancy agreement.
Mr Hooper deposed, in effect, that:
1.At the date of swearing the affidavit, the full judgment debt in the sum of $855,772.52 remains outstanding. Interest continues to accrue on the judgment debt at a rate of 6.77% per annum.
2.On 23 February 2021 RESIMAC Ltd, the mortgage manager for Perpetual, obtained kerbside valuations of the properties on the Beckenham properties from Jones Lang LaSalle Advisory Services Pty Ltd (which he annexed).
3.The kerbside valuations indicated that each of the Beckenham properties is estimated to be valued at $360,000 to $390,000.
Ms Nikoloff's submissions
Ms Nikoloff relied on the grounds raised in her affidavit and, in that context, responded to Perpetual's written submissions. Ms Nikoloff accepted that even if the appeal were to succeed, she may face the prospect of having to repay at least the original borrowing. However, she emphasised that the balance of convenience nevertheless favoured a stay in the meantime given that even if Perpetual were kept out of the money due to it (as found by the primary court) now, it would suffer no hardship because the Beckenham properties are likely to be worth more after the determination of the appeal having regard to rising property values.
Perpetual's submissions
In its submissions, filed 13 May 2021, Perpetual contended:
1.The appeal will not be rendered nugatory if a stay is not granted, because:
(a)there is no evidence that the Beckenham properties are irreplaceable, or of a special significance that damages would not be adequate compensation in a successful appeal; and
(b)Ms Nikoloff would not be entitled to retain the benefit of the transaction in the event of a successful appeal, and subsequently a successful trial; she would still be required to repay the principal, and interest at a reasonable rate.
2.The prospects of success of the appeal are not strong.
3.The balance of convenience does not favour granting a stay, due to:
(a)the judgment debt increasing at 6.77% per annum;
(b)no payments having been paid by Ms Nikoloff;
(c)the estimated value of the Beckenham properties is less than the outstanding debt; and
(d)Ms Nikoloff has not disclosed other assets which could be used to satisfy the judgment debt.
4.These circumstances mean there is obvious prejudice to Perpetual if a stay is granted, as there is a continuing accrual of interest on the judgment debt.
5.Any disruption, inconvenience and disappointment experienced by Ms Nikoloff, while unfortunate, is the inevitable and ordinary consequence of the order for delivery up of possession of the Beckenham properties to Ms Nikoloff.
6.Ms Nikoloff has said she has not received any rental income from the Beckenham properties for over two years, so there is no risk of potential loss of income to her if a stay is not granted.
7.The rule in Inglis v Commonwealth Trading Bank of Australia[30] should apply. The stay should be refused if Ms Nikoloff is unwilling or unable to make a payment into court or provide alternate security as a condition of the relief sought.
[30] Referring to Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; (1972) 126 CLR 161.
Principles
The general principles in relation to a stay pending the determination of the appeal are as follows:[31]
1.The successful litigant is ordinarily entitled to enforce a judgment pending the determination of any appeal.
2.It is for the applicant for a stay to move the court to a favourable exercise of its discretion. Under s 15(3) of the Civil Judgments Enforcement Act 2004 (WA) this court may only make a suspension order if there are 'special circumstances' that justify doing so and in an application for a stay under the Supreme Court (Court of Appeal) Rules 2005 (WA) this is also a usual requirement.
3.The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation or whether a refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. This may shortly be described as requiring the court to consider whether the right of appeal will be rendered nugatory if a stay is not granted.
4.If it can be demonstrated that the right of appeal will be rendered nugatory if a stay is not granted, the stay will generally still be refused unless it can be established that the appeal has ultimately reasonable prospects of success.
5.Finally, a stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted.
[31] Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 [9]; Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168 [22].
Disposition
We were not persuaded that it was in the interests of justice to grant a stay, for the following reasons. First, we accepted that there is a risk that the Beckenham properties may be sold before the determination of the appeal and, in that sense, the appeal would likely be rendered nugatory if a stay were not granted. However, the significance of this is tempered by the fact that, as a preliminary impression, even if Ms Nikoloff succeeded on the appeal and had the transaction set aside, there would be the prospect that it would be conditional on the payment of the principal sum and at least some interest to Perpetual, which may be greater than the value of the properties - a matter also relevant to the balance of convenience.[32]
[32] cf Duckworth v Commonwealth Bank of Australia [2013] WASCA 24 [5].
Secondly, on a necessarily preliminary review of the grounds of appeal, it was difficult to conclude that the appeal would enjoy reasonable prospects of success in the relevant sense.
Thirdly, the balance of convenience did not favour the grant of a stay. One of the factors which may be taken into account is whether the property in question has irreplaceable value such that damages would not be adequate compensation in the event of a successful appeal.[33] In this matter, although there was evidence (albeit lacking any real particularity) that one of the properties had been Ms Nikoloff's family home, there was no evidence that it continued to be the residence of her and her family and, further, the other property appeared to be in the nature of a tenanted investment property.
[33] Beeck v Kohlen [2013] WASCA 134 [19]; Palmer v Permanent Custodians Ltd [2009] VSCA 164 [62]; Raysun Investments Pty Ltd v Caruso [2013] WASCA 13 [15].
Also in relation to the balance of convenience, there was no suggestion that Ms Nikoloff was dependent on the rental income. The evidence was that the tenants had not paid rent for some time.
Further, the valuation evidence indicated that the realisable value of the Beckenham properties is unlikely to discharge the debt in the event that Ms Nikoloff were to fail in the appeal, with the prospect that Perpetual would be left as an unsecured creditor with risk of under‑recovery. There was no evidence in support of Ms Nikoloff's contention that the properties would be realisable at a higher value after the determination of the appeal. There was no suggestion that Perpetual would not be good for the money if the appeal succeeded.
Conclusion
For these reasons, we dismissed the appellant's application filed 12 April 2021.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DM
Associate to the Honourable Justice Murphy
24 MAY 2021
12CB Unconscionable conduct in connection with financial services
(1) A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of financial services to a person; or
(b)the acquisition or possible acquisition of financial services from a person;
engage in conduct that is, in all the circumstances, unconscionable.
(2)This section does not apply to conduct that is engaged in only because the person engaging in the conduct:
(a)institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
(b)refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.
(3) For the purpose of determining whether a person has contravened subsection (1):
(a)the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and
(b)the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.
(4) It is the intention of the Parliament that:
(a)this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct; and
(b)this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and
(c)in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of:
(i) the terms of the contract; and
(ii) the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract.
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