Shields, I.J.M. v Australia & New Zealand Banking Group
[1995] FCA 550
•1 AUGUST 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 965 of 1993
)
GENERAL DIVISION )
BETWEEN:ISAAC JOHN MACKAY SHIELDS
First Applicant
JENNIFER MARGARET SHIELDS
Second Applicant
AND:AUSTRALIA AND NEW ZEALAND BANKING GROUP
Respondent
JUDGE MAKING ORDER: LOCKHART J.
WHERE ORDER MADE: SYDNEY
DATE ORDER MADE: 1 AUGUST 1995
MINUTE OF ORDER
THE COURT ORDERS THAT:
The application is dismissed.
The applicants pay the costs of the respondent of the proceeding including the costs of the motion.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
CATCHWORDS
LAW OF MORTGAGES - notice of power of sale pursuant to s. 57(2)(b) Real Property Act 1900 (NSW) - whether in accordance with strict requirements - whether mortgagor exercising power of sale owes a fiduciary duty or a duty of care - whether exemplary damages.
PRACTICE & PROCEDURE - application to dismiss proceeding on ground that no reasonable cause of action is disclosed.
Real Property Act 1900
ISAAC JOHN MACKAY SHIELDS, JENNIFER MARGARET SHIELDS v AUSTRALIA AND NEW ZEALAND BANKING GROUP
NG 965 of 1993
LOCKHART J.
1 AUGUST 1995
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 965 of 1993
)
GENERAL DIVISION )
BETWEEN:ISAAC JOHN MACKAY SHIELDS
First Applicant
JENNIFER MARGARET SHIELDS
Second Applicant
AND:AUSTRALIA AND NEW ZEALAND BANKING GROUP
Respondent
1 August 1995
REASONS FOR JUDGMENT
LOCKHART J.
This is a motion by the respondent to the proceeding, Australia and New Zealand Banking Group Limited (the respondent) seeking a number of orders in the alternative; but what is primarily sought is an order dismissing the proceeding on the ground that no reasonable cause of action is disclosed (O. 20 r. 2(1)(a); O. 11 r. 16(a)).
The applicants appeared in person. Counsel for the respondent prepared a full outline of submissions of the respondent. Mr and Mrs Shields also prepared a full written submission to the Court and I gave them the right to supplement it if they wished by replying to the cases referred to in the written outline of the respondent.
The case arises out of a mortgage transaction. The applicants were formerly the owners of a property at Kincumber
on the central coast of New South Wales. They mortgaged the property to the National Mutual Royal Bank Limited in 1990. The mortgage was assigned to the respondent in November 1991 when the whole of the property of the National Mutual Royal Bank Limited vested in the respondent.
In January 1992 the respondent served notice of demand on the applicants requiring payment of the moneys due under the mortgage. This led to proceedings being instituted in this Court by the applicants on 21 September 1992 to which the respondent was the principal respondent. The respondent filed a cross-claim seeking orders for possession of the property and for repayment of the amount claimed to be owing under the mortgage together with interest.
On 22 December 1992 a judge of the Court made orders dismissing the application of the applicants with orders for costs and entering judgment for the respondent on its cross-claim in the sum of $139,829.37, this being the amount due in respect of the mortgage debt. The judgment also provided for entry of judgment for possession in favour of the respondent with a stay to operate until 8 August 1993 upon certain conditions.
The applicants subsequently applied by motion to this Court to set aside the orders made previously. A judge of the Court gave judgment in relation to this motion on 20 July 1993 dismissing the motion with costs. The basis of the motion was that the orders were not entered with the consent of the applicants. His Honour rejected their case. The applicants then appealed from his Honour's orders to a Full Court of this Court which on 3 March 1994 dismissed the appeal with costs. The applicants then sought special leave to appeal from the Full Court's judgment to the High Court which refused special leave on 15 February 1995.
The present proceeding was commenced by the applicants by filing an application and statement of claim on 8 December 1993. Both documents were subsequently amended. The amended application and further amended statement of claim in their present form were filed on 10 August 1994 (I allowed a further amendment to the amended application on 20 July 1995 of a formal nature). It is these last mentioned documents that are the subject of the respondent's motion presently before the Court.
No argument was addressed to the Court by counsel for the respondent with respect to issue estoppel or res judicata.
I shall for convenience refer to the amended application and the further amended statement of claim simply as the application and the statement of claim.
The statement of claim alleges, so far as presently material, the facts which are said to support the following causes of action:-
The demand served by the respondent upon the applicants demanding repayment of the moneys said to be owing under the mortgage and dated 29 June 1992 is alleged to have contained a notice pursuant to s. 57(2)(b) of the Real Property Act 1900 (NSW).
A later demand dated 5 August 1992 was also served upon the applicants allegedly pursuant to s. 57(2)(b).
Damages are claimed by the applicants from the respondent by reason of the alleged failure of the respondent to serve a notice which complied with s. 57(2) of the Real Property Act. It is alleged that the notices were not in accordance with the strict requirements of that Act.
Another demand is also relied upon in the statement of claim dated 16 January 1992 that is also the source of a claim for damages. The demand of 16 January 1992 is said to allege a default which had not yet occurred at that time. The applicants allege they were misled by certain conduct of the respondent with respect to the notices and claim damages accordingly.
The applicants allege that the respondent as mortgagee sold the property at an undervalue.
It is alleged that the respondent owed a fiduciary duty to the applicants presumably in relation to the exercise of the power of sale.
It is also alleged that the respondent owed a duty of care to the applicants as mortgagee of the property and that the duty was breached.
It is alleged the respondent acted contrary to its duties as mortgagee.
Exemplary damages are claimed by the applicants from the respondents.
Various declarations are also sought by the applicants.
Section 57(2) of the Real Property Act is in the following terms:
"A registered mortgagee, chargee or covenant chargee may, subject to this Act, exercise the powers conferred by section 58 if:
(a)in the case of a mortgage or charge, default has been made in the observance of any covenant, agreement or condition expressed or implied in the mortgage or charge or in the
payment, in accordance with the terms of the mortgage or charge, of the principal, interest, annuity, rent-charge or other money the payment of which is secured by the mortgage or charge or of any part of that principal, interest, annuity, rent-charge or other money;
(a1)in the case of a covenant charge, default has been made in:
(i)the payment, in accordance with the terms of the judgment to which the covenant charge relates, of the principal, interest or other money the payment of which is secured by the covenant charge; or
(b)where:
(i)the default relates to that payment; or
(ii)in the case of a mortgage, the default does not relate to that payment and notice or lapse of time has not been dispensed with under section 58A,
a written notice that complies with subsection (3) has been served on the mortgagor, charger or covenant charger in the manner authorised by section 170 of the Conveyancing Act 1919;
(b1)where a notice is required to be served under paragraph (b), a copy of that notice has been served (in the manner authorised by section 170 of the Conveyancing Act 1919) on:
(i)each mortgagee, chargee or covenant chargee (if any) of the land mortgaged or charged under a registered mortgage, charge or covenant charge which has less priority than that of the person intending to exercise the power of sale; and
(ii)each caveator (if any) who claims as an unregistered mortgagee or chargee to be entitled to an estate or interest in the land mortgaged or charged; and
(c)where such a notice is so served, the requirements of the notice are not complied with within the time notified pursuant to subsection (3)(d)."
(s. 57(2) notices)
I shall assume for the purposes of the motion that the applicants have a cause or causes of action for damages against the respondent by reason of a failure (which I shall also assume) to serve notices in compliance with s. 57(2) of the Real Property Act. As to this see Coroneo v Australian Provincial Assurance Association Limited (1935) 35 SR(NSW) 391 and Manton v Parabolic Pty Limited [1985] 2 NSWLR 361. However, the most that the applicants would be entitled to recover from the respondent would be the value of their interest, if any, in the mortgaged property at the date of the exercise by the respondent of its power of sale (11 December 1993). The applicants themselves have alleged that the market value of the property at that date was approximately $150,000, a higher figure than the respondent attributed to the value. But I shall make the assumption that the property was then worth $150,000.
At that date the applicants owed the respondent $139,829.37 being the amount of the judgment debt to which
there should be added interest at the rate of 10 per centum per annum for ten months, approximately $11,650, that being the interest which had accrued in the earlier proceeding in this Court (proceeding No. 694 of 1992): see Federal Court Rules O 35 r 8. The applicants were also liable for the costs of those proceedings. Hence it follows in my opinion that the applicants could not sustain a claim that they had an interest in the mortgage property at the relevant date, namely, 11 December 1993. They have therefore in my opinion no reasonable prospect of establishing to the satisfaction of the Court that they suffered any loss under this head.
Sale at undervalue
A plaintiff must establish his cause of action at the date of the commencement of the proceeding; and an amendment dates back to the original filing of the initiating process. Hence a plaintiff cannot in the absence of statutory authority amend the proceeding without the defendant's consent by adding a cause of action which has accrued to him since the commencement of the action: Eshelby v Federated European Bank Limited [1932] 1 KB 254 and Wigan v Edwards (1973) 1 ALR 497 per Mason J. at 515 with whose reasons for judgment Walsh J. and Gibbs J. agreed on this matter at 501 and 508-9 respectively.
Although the proceeding was commenced on 8 December 1993 (only three days before the exercise by the respondent of its power of sale), nevertheless the cause of action was not complete until at the earliest 11 December 1993. Hence the relevant paragraphs of the statement of claim must be struck out or the proceeding dismissed in relation to that cause of action.
(Fiduciary duty)
A mortgagee in exercising his power of sale is not a trustee of that power for the mortgagor; but he must not sacrifice the mortgagor's interest: Kennedy v DeTrafford [1897] AC 180 at 185; David v Taylor (1948) 48 SR(NSW) 514; Equity Doctrines & Remedies, Meagher Gummow & Lehane, 3rd ed., 1992, paras. 230 and see also para. 501 and James v Australia & New Zealand Banking Group Limited (1986) 64 ALR 347 per Toohey J. at 391. Whilst a mortgagee must not wilfully or recklessly sacrifice interests of the mortgagor and must act in good faith to him in the exercise of his power of sale, he does not otherwise owe a fiduciary duty to the mortgagor: see James v Australia & New Zealand Banking Group Limited, supra. See also Fisher & Lightwood's Law of Mortgage, para. 20.18, where the authorities are conveniently collected.
The case pleaded against the respondent of breach of fiduciary duty must fail.
(Duty of care)
It follows from what I have said in the immediately preceding section relating to breach of fiduciary duty that the relevant duty owed to the applicants by the respondent as mortgagee in exercising its power of sale was not to sacrifice the interests of the applicants. No duty of care as such is owed in the sense pleaded in this case by the respondent to the applicants. This aspect of the case must also fail.
(Sale at undervalue)
There is nothing in the pleading or in the evidence before me which suggests that there is substance in the assertion that the property was sold by the respondent at an undervalue.
(Exemplary damages)
As in my opinion there is no reasonable cause of action revealed by the statement of claim, damages would not be recoverable by the applicants on any basis, let alone exemplary damages.
The motion succeeds. The application is dismissed and the applicants must pay the costs of the respondent of the proceeding including the costs of the motion.
The principles governing motions to strike out pleadings or dismissal of proceedings under the rules of the kind which relate to this application are well established. It is sufficient to refer to Dey v Victorian Railway Commissioners (1949) 78 CLR 62 per Dixon J. at 91 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 per Barwick C.J. at 129. In my opinion the claims made in this case are so clearly untenable that they cannot possibly succeed.
I certify that this and the preceding ten (10) pages are a true copy of the reasons for judgment herein of the Honourable Justice Lockhart.
Associate
Dated: 1 August 1995
Isaac John MacKay Shields appeared in person.
Counsel for the Respondent : Mr G Blake
Solicitors for the Respondent : Norton Smith & Co.
Date of Hearing : 20 July 1995
Date of Judgment : 1 August 1995
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