Radin, Michael v Commonwealth Bank of Australia

[1998] FCA 652

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 437 of 1996

BETWEEN:	MICHAEL RADIN APPLICANT
AND:	COMMONWEALTH BANK OF AUSTRALIA RESPONDENT

JUDGE:	LINDGREN J
DATE:	25 MAY 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT
(ex tempore)
(motion for interlocutory injunction to restrain sale by mortgagee)

There is before the Court a motion brought by the applicant, in which he seeks an order that until further order the respondent (“the Bank”) be restrained from carrying out or exercising its power of sale under a mortgage over a residential property situate at 11 Appian Way, Burwood (“the Property”).  The Property is currently advertised to be put up for sale by auction next Saturday, 30 May. 

The proceeding is one of three that were heard together and in which I have reserved judgment.  In each, the Bank is the respondent.  It is the successor to the Commonwealth Savings Bank of Australia (“the Savings Bank”) and the Commonwealth Trading Bank of Australia (“the Trading Bank”).  In proceeding NG 984 of 1995, Mr Radin's mother, Mrs Vladimirka Radin, is the applicant.  In proceeding NG 985 of 1995, Mrs Judith Radin, Mr Radin's former wife, is the applicant.

In the proceedings the respective applicants seek to challenge various securities given by them to the Bank.  The Property is the former matrimonial home of Mr and Mrs Radin.  The mortgage presently in question is a first mortgage registered number X381289 dated 5 January 1988 to the Savings Bank  (“the Savings Bank Mortgage”) and secures a home loan and a home improvement loan. 

By a cross-claim in Mrs Judith Radin’s proceeding, the Bank sought judgment for possession of the Property under the Savings Bank Mortgage, leave to issue a writ of possession and a money judgment for $711,011.06.  On 30 April 1997, summary judgment was given for the Bank accordingly.  The bank issued a writ of possession.  Mrs Judith Radin, who lived in the Property with two children of the marriage, made applications for stays of execution of the writ.  The Bank has in recent times obtained vacant possession.

In seeking interlocutory relief Mr Radin must demonstrate that there is “a serious issue to be tried” and that the balance of convenience favours the granting of interlocutory relief.  The two are interrelated.  I turn first to the matter of a serious issue to be tried.  It seems to me that in this respect Mr Radin faces a fundamental problem.   When one speaks of a serious issue to be tried one means a serious issue to be tried as to whether the applicant for interlocutory relief will obtain final relief of a kind which the interlocutory relief is calculated to make effectual  Thus, if Mr Radin were to be seeking final relief in the form of a declaration that the Savings Bank Mortgage was void or final relief in the form of a permanent injunction against the Bank's exercising its power of sale under the Savings Bank Mortgage, an interlocutory injunction of the kind presently sought would be in aid of such final relief, and a question would arise whether there was a serious issue to be tried that final relief of that form would be granted.   But Mr Radin does not seek to challenge the validity of the Savings Bank Mortgage and does not seek final relief directed to preventing the Bank from exercising its rights as mortgagee under it.  For this reason alone, in my view, the present motion must be dismissed.

In my reasons for judgment dated 8 May 1997 on the Bank’s motion for summary judgment, I noted (at page 2) that an important distinction was to be made between the Savings Bank Mortgage and the various other mortgages.  The distinction was that while the Radins were seeking to have the others set aside, neither Mr nor Mrs Radin challenged the validity or enforeceability of the Savings Bank Mortgage. 

The Bank filed its notice of motion for summary judgment on 16 April 1997.  On 18 April 1997 Mr Radin filed a notice of motion seeking to be added as a respondent to that motion.  On the day of the hearing, 30 April 1997, both Mr Radin's motion to be added as a respondent to the Bank's motion and the Bank’s motion for summary judgement itself were fixed for hearing.  Mr Naiman appeared for Mr Radin.  He announced that Mr Radin was not proceeding on his motion to be added as a respondent.  In fact, Mr Radin’s motion seeking that order was dismissed by consent,  although Mr Naiman remained in Court during the hearing of the Bank's motion for summary judgment.

Much later, Mr Radin sought leave to amend his amended statement of claim in this proceeding, which had been filed on 19 February 1997, by taking in a reference to the Savings Bank Mortgage.  Paragraph 6 of the amended statement of claim sought

(a)“[a]n injunction to restrain the Defendant from taking possession of land or taking any further action pursuant to:

...

(e)Mortgage Registered Number W254833 made between the Plaintiff and Judith Ann Radin as Mortgagors and the Defendant as Mortgagee (Security:  11 Appian Way, Burwood - Folio Identifier 1/304076).”

The reference to “plaintiff” is explained by the fact that proceeding NG 437 of 1996 had commenced life as proceeding 12233 of 1993 in the Common Law Division of the Supreme Court of New South Wales and was transferred to this court.

I gave reasons on 3 September 1997 for refusing Mr Radin leave to amend.  I need not repeat or summarise those reasons.

The upshot of all this is that for a very long while it has been evident that Mr Radin does not seek final relief challenging the validity of the Savings Bank Mortgage or the Bank's right to exercise its powers under it.

For the reasons given above alone, the motion for interlocutory relief will be dismissed with costs.  But I will say something about the way in which counsel for Mr Radin puts the claim for the interlocutory relief.  He says that if the Bank had not defrauded Mr Radin, he would have re-financed his borrowings from the Bank and paid out the Savings Bank Mortgage.  On the present motion, I do not, of course, make any findings and in view of the fact that judgment is reserved on the principal proceeding, I do not propose to discuss in detail the nature or strength of Mr Radin’s case.  However, it is true that Mr Radin does seek to make out a case of fraud and a case that but for the Bank's fraud, he would have re-financed his indebtedness to the Bank, and, as a result, saved his legal practice, for example.

But the precise nature of the case which would have to be established on the present motion, at least at the “serious question” level, should be carefully noted.  It is not only that there was fraud by the Bank and that but for the fraud there would have been a re-financing and payment out of Mr Radin’s business indebtedness to the Bank, but quite precisely that there would have been a re-financing and payment out of the home loan and the home improvement loan secured by the Savings Bank Mortgage.  All that I need say is that on the evidence, the case that this precise course of events would have occurred is not a strong one. 

Indeed, it may well be that close attention was never given to this particular aspect during the conduct of the case - I have noted earlier that it appears that the issue of the Savings Bank Mortgage and the enforcement of it has really been treated as an issue between the Bank and Mrs Radin: the evidence is that Mr and Mrs Radin separated in about November 1988 and that Mr Radin ceased to reside in the Property at about that time. 

The fact that the case on the motion is a weak one is perhaps supported by a close analysis of the figures which are referred to in submissions which have been made in the principal proceeding.  They suggest, on one view of them, that if there had been a re-financing, the net amount available for payment out of the Savings Bank Mortgage may have, in fact, been less than the amount owing on it.  However, I do not rely upon those figures in relation to this question of the weakness of the case.  I merely say, without making any finding, that whatever may be the result in relation to the other properties in question, the evidence is not strong that a re-financing would have been applied to discharge the Savings Bank Mortgage. 

I now come to a further matter relevant to the question of a serious issue to be tried.  This is what has been referred to in submissions on the motion as the principle in Inglisv Commonwealth Trading Bank (1972) 126 CLR 161. The principle is that ordinarily a mortgagor in default will be granted relief against an exercise by the mortgagee of its remedies under the mortgage only if the mortgagor brings into Court, or provides security for, the amount outstanding secured by the mortgage. That has not occurred here. There is an exception to the general position where the validity of the security is challenged, but it is not challenged here.

Counsel for Mr Radin has referred me to the decision of the New South Wales Court of Appeal in Horrobin v Australia and New Zealand Banking Group Limited (1996) 40 NSWLR 89 as lending support to the view that where there is fraud by a mortgagee, the principle to which I have referred does not apply. In that case the fraud was by the Australia and New Zealand Banking Group Limited (“ANZ”) but ANZ was not initially the mortgagee. Initially, the mortgagee was National Mutual Royal Bank Limited and it was not suggested that that bank had been guilty of any fraud or involved in the fraud of ANZ. Thus, the mortgage was valid and it was enforceable by National Mutual Royal Bank Limited. However, subsequently the mortgage became the property of ANZ as a result of Act No 35 of 1991, the Australia and New Zealand Banking Group Limited (NMRB) Act 1991.  Thus, the initial fraudster, ANZ, became the mortgagee.  

The members of the Court of Appeal accepted that in these circumstances, there was jurisdiction to restrain ANZ from exercising its powers as mortgagee.  The case is different from the present one.  In that case, the fraud went to the giving of the mortgage, which was, of course, the instrument which gave the power of sale.  In the present case, no fraud is alleged to have affected the giving of the Savings Bank Mortgage.

Accordingly, the Horrobin case does not govern the present one.  However, I would not decide on this motion that fraud by a mortgagee occurring after a mortgage is given could not under any circumstances ground injunctive relief in respect of a threatened exercise of the power of sale.  But clearly the fraud would have to touch the arising of the power of the sale.  This brings me back to the problem which confronts the present application; the fraud relied upon is that Mr Radin was deprived of the opportunity to refinance.  This itself was not directed to the enforcement of the mortgage.  In effect, Mr Radin says that the fraud deprived him of obtaining money which he would have chosen to apply, inter alia, to discharge the Savings Bank Mortgage.  I do not think that the exception to the Inglis principle goes so far.  The default under the Savings Bank Mortgage occurred prior to the alleged fraud.

I pass now to the balance of convenience.  Mr Radin says that he wants “to retain the house as a family home”.  He give no particulars.  I suppose he means that he has a hope of again living there.  He does not attempt to show how this would be likely to happen.  He has not lived there since late 1988 when his marriage broke up.  Mrs Judith Radin, his co-owner, may well have a similar aspiration.  Unless an accommodation is reached between them, the Property would have to be sold in any event.  In the circumstances, I give no weight to Mr Radin’s evidence of his desire.  But obviously, as one of the two registered proprietors, he has an interest which would be prejudiced by the sale, and should not be deprived of the Property except in accordance with law.  In assessing the prejudice, however, again one must take into account the long history of this matter and the features of that history to which I referred earlier.

On the Bank's side, the prejudice on which it relies is the advertising and expenditure of money in seeking to enforce its security.  There is evidence of the engagement of Mr M.J. Nolan of Nolan's First National Real Estate as agent for sale, extensive advertising of the Property, and the expenditure of $23,335.00 in connection with the proposed auction.  Counsel for Mr Radin pointed out that it may be that the advertising expenditure will not be wasted because, so far as the affidavit goes, the advertising may have consisted of  brochures not tied to a particular auction date.  I would infer, however, that at least a substantial part of the expenditure would be wasted, since it is inconceivable that at least some of the advertising has not identified the particular auction date of 30 May.  Indeed, I would infer that all or most of it has done so, since the affidavit describes the amount of $23,335.00 as having been incurred by the Bank “associated with the prospective auction”.

In the result, I think that the balance of convenience also favours allowing the auction to proceed and leaving Mr Radin to his remedy in damages.

Accordingly, the orders of the Court are that:

1.  The motion brought by the applicant by notice of motion filed 18 May 1998 is dismissed; and

2.  The applicant is ordered to pay the respondent's costs of that motion.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren

Associate:

Dated:             2 June 1998

Counsel for the Applicant:	Mr G J McVay
Solicitors for the Applicant:	Milicevic Solicitors
Counsel for the Respondent:	Mr R S Hollo
Solicitor for the Respondent:	Abbott Tout
Date of Hearing:	22 May 1998
Date of Judgment:	25 May 1998