Schultz v Bank of Queensland Ltd

[2015] QCA 19

[2015] QCA 19

COURT OF APPEAL

GOTTERSON JA

Appeal No 616 of 2015
SC No 6255 of 2012

KYM ELEANOR SCHULTZ  Applicant

v

BANK OF QUEENSLAND LIMITED  Respondent
ACN 009 656 740

BRISBANE

TUESDAY, 24 FEBRUARY 2015

JUDGMENT

GOTTERSON JA: This is an application made under rule 716(2) of the Uniform Civil Procedure Rules for the stay of seven orders made by a judge of the trial division on the 17th of December 2014.  Those orders require delivery of possession of two real estate properties to the respondent within 30 days and that the applicant pay costs of the proceedings.  The properties are owned by the applicant for the stay.  They consist of a house at 50 Kawana Street, Virginia Beach and a unit at Cottontree Parade, Maroochydore.  Both properties are mortgaged to the respondent to the application.  The mortgages support a guarantee given by the applicant to the respondent with respect to a loan made by it to accompany Camelon Proprietary Limited in its role as trustee for a family trust with which the applicant is associated.  In respect of the Cottontree Parade unit, there is also a further mortgage given by the applicant to the respondent which is unrelated to the guarantee.

The applicant was the plaintiff in the proceedings in the trial division in which she sought to have the guarantee and supporting mortgages set aside and a reliance upon two different bases.  One of the bases is commonly known as the Yerkey principle and the other the Garcia principle.  The respondent counterclaimed for a money judgment based on the guarantee.  The applicant’s claim was dismissed.  Subsequently a money judgment was entered against her.  On the 14th of January 2015 the applicant filed an appeal against the orders and the money judgment to which I’ve referred.

The stay application was filed two days later.  It is well settled that on an application for a stay, the applicant need demonstrate a good, arguable case on appeal.  I turn first to that issue and I adopt, as the relevant frame of reference, the appeal point that the applicant claims is available to her in her written submissions, both for the appeal and for the stay application.  And it relates to the Yerkey principle.  The learned primary judge was prepared to assume that the applicant was a volunteer.  He accepted that it would have been a material misunderstanding for the purposes of that principle had the applicant misunderstood a number of facts.  Those facts included that her liability under a guarantee was for interest and costs as well as the loan amount.  And that she might be made bankrupt if the amount payable under the guarantee was not paid.

The applicant’s case at trial was positive on the factual propositions that she misunderstood both those matters at the time when she executed the guarantee and the mortgages.  That is to say those were the submissions made on her behalf.  His Honour observed that the applicant gave no evidence that she did not understand that she would be liable for interests and costs as well as the amount of the loan under her guarantees or that she might be made bankrupt if the guaranteed amount payable was not paid.  That observation is not challenged upon appeal.  He also held that it was not appropriate to infer misunderstandings as to those facts from the evidence otherwise.  Hence no such findings were made.

However, the other evidence, which his Honour noted was given, included a statement made by a lending officer of the respondent to the applicant at the relevant time that the worst case scenario for her was that she could be asked to sell the house and repay the loan.  The statement, in its terms, did not refer to any requirement to pay outstanding interest on the loan or to costs that might be incurred in selling the house.  His Honour also found that the officer did not, at that or any other time, tell the applicant that she might be made bankrupt if the guaranteed monies were not paid.

This evidence does give rise to an issue of whether or not his Honour erred in declining to infer from it and the other evidence misunderstanding on the applicant’s part as to those facts.  The issue arises more visibly in the case of the requirement to pay interest and costs where what was said by the bank officer on its face might well have been understood as an exhaustive statement of the applicant’s exposure.  The issue was one that was raised in the applicant’s outline of submissions and falls within the broadly expressed ground 1 in the notice of appeal.  It is a significant issue on which the applicant is placed to advance a serious argument.

It is, in that sense, a good arguable point.  That is, of course, not to say that it’s a winning point or one that, on the balance, is more likely to succeed than not.  However it is serious in its content and warrants consideration.  Turning to other considerations, I note that the respondent rightly acknowledges that the applicant’s material asserts that she will be disadvantaged if either or both properties are sold.  Beyond domestic disruption there are other costs of sale.  And in the case of the unit, the incurrence of a capital gains tax liability.  The respondent too is at risk of disadvantage if sale of the properties is delayed.  Valuation evidence suggests that the properties together would realise just sufficient to pay the judgment debt and another secure loan of $67,000 on the unit.

In all probability, there would be sufficient – I should say in all probability, they would be insufficient to meet also the costs of sale and the costs order under appeal.  However, the risk of loss to the respondent can be ameliorated to some extent by the ability of this court to offer a relatively early hearing date for the appeal.  I would mention at this point that the applicant has also contended that the respondent is contractually bound by the version of the Code of Banking Practice dated the 1st of May 2004 and that the respondent is acting in breach of the code by seeking to enforce a judgment against her without first having sought to enforce a judgment against Camelon.  Those contentions were not live in the proceedings below, nor are they raised in the appeal.

If the applicant has any contractual rights to have the respondent restrained from enforcement against her she may seek to invoke it in separate proceedings.  The stay application is an inappropriate vehicle for so doing.  Any stay granted now ought not be tailored to be a means for enforcement indirectly of any such right.  Overall, the disadvantages for each side are relatively evenly balanced.  In the circumstances, I consider that a stay order ought be made.  However, it is one that would operate only until the conclusion of the hearing of the appeal.  The court that hears the appeal will be better placed to determine whether the stay ought to be continued beyond that time or not.

Now, before I make orders there is a question of costs.  It would seem to me that the appropriate order with respect to costs is that in the case of both sides, they be costs in the appeal.  In other words, whoever wins the appeal gets their costs on it.  The orders on the stay application are:

1.   That orders 2, 3 and 5 made on the 17th of December 2014 be stayed until the conclusion of the hearing of the appeal; and

2.   That each party’s costs of this application be costs in the appeal.

There’s one other matter I’d mention.  It won’t be the subject of the order.  But enquiries I made this morning of the Court of Appeal registry indicate that available dates for hearing of the appeal are Thursday the 30th of April or Friday the 1st of May.  The Deputy Registrar concerned is Mr Paul Wigley.  So I’d urge the parties to liaise with him with a view, if possible, to using either of those dates or taking advantage of either of those dates.  If that’s not possible, one shortly thereafter.