St George Bank Ltd v Keirnan

[2001] NSWSC 417

CITATION:	St George Bank Ltd v Keirnan [2001] NSWSC 417
CURRENT JURISDICTION:	Common Law Division
FILE NUMBER(S):	SC 10867/00
HEARING DATE(S):	02/05/01
JUDGMENT DATE:	23 May 2001
PARTIES :	St George Bank Limited Formerly Known As St George Building Society Limited - Plaintiff Mark Andrew Keirnan - Defendant
JUDGMENT OF:	Bell J at 1

COUNSEL :	D.J. Brogan - Plaintiff J. S. Mendel - Defendant
SOLICITORS:	Owen Hodge Lawyers - Plaintiff Mark Andrew Keirnan - Defendant
LEGISLATION CITED:	Real Property Act 1900 Supreme Court Rules 1970
DECISION:	Defendant to pay the plaintiff’s costs of the proceedings, including costs reserved on 15 December 2000 by Greg James J, as agreed or assessed.

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BELL J
23 May 2001
S10867/00 - ST GEORGE BANK LIMITED ACN 055513070 (Formerly known as ST GEORGE BUILDING SOCIETY LTD ) v Mark Andrew KEIRNAN

JUDGMENT
HER HONOUR:

1    By statement of claim filed on 12 April 2000 the plaintiff Bank (“the Bank”) sought an order for possession of premises located at (i) 21 Leichhardt Street and (ii) 58 Mackenzie Street, Leichhardt pursuant to the terms of a mortgage dated 2 August 1994 (registered number U507230).

2    The matter was listed for hearing on 2 May 2001. At the commencement of proceedings on that day I was informed that the parties had reached agreement on all matters save the question of costs. Terms of settlement were handed up. Mr Brogan, who appeared on behalf of the Bank, sought an order that the defendant pay the Bank’s costs of the proceedings. Mr Mendel, who appeared on behalf of the defendant, submitted that the appropriate order was for each party to bear its/his own costs.

3    In support of its application the Bank read the affidavits of Ilona Maria Teremi sworn on 19 October 2000, 14 December 2000 and 5 October 2000 respectively, Kim Rogers sworn on 30 November 2000, Maree Callum sworn on 13 December 2000 and Paul Cameron sworn on 30 April 2001. The defendant relied on three affidavits sworn by him on 1 December 2000, 15 December 2000 and 1 February 2001.

4    It is necessary to briefly recite the background to the parties’ dispute in order to understand the competing submissions which were advanced on the question of costs.

5    On or about 2 August 1994 the defendant executed a mortgage in favour of the Bank over premises located in Leichhardt Street and Mackenzie Street, Leichhardt in order to secure a loan in the amount of $260,000. There was some issue as between the Bank and the defendant concerning the term of that loan. It would appear to have been an “interest only” loan for a term of five years. Interest was to be capped at a fixed rate for the first twelve months. Thereafter the loan was to convert to a variable rate. At the expiration of the initial twelve month period the defendant applied to the Bank to change the variable rate to a fixed rate for a further term. In March 1996 the Bank agreed to this variation and fixed interest payments at the rate of 9.25 percent per annum for a twelve month period commencing on 29 February 1996.

6    It would seem that those associated with the administration of the loan on the Bank’s behalf considered that the defendant’s loan expired on or about 28 February 1997. Mr Brogan accepted that the Bank may well have been wrong in this respect and that the loan contract may not have expired until a date in or about August 1999. In his submission, which I accept, nothing of substance turns on this fact.

7    In March 1997 the Bank sought to have the defendant enter a fresh loan contract. An application for home loan was sent to him at that time. In June 1997 the defendant returned the application having made a number of handwritten alterations to it. There followed telephone discussions between the defendant and officers of the Bank and further correspondence between the two. It was the defendant’s case that he believed the Bank to have accepted the alterations which he had made to the home loan application and that a fresh loan contract had come into existence at that time. In support of this contention a letter signed by the Loans Administration Manager of the Bank, dated 26 December 1997, was tendered in the defendant’s case. That letter recited that the defendant’s loan had been approved on 23 October 1997.

8    It is to be noted that by letter dated 16 October 1997 Mr Cameron, the Bank’s Senior Lending Manager submitted a further home loan offer to the plaintiff for his approval and set out the Bank’s response to the defendant’s concerns as to various of the charges attaching to the new loan. In that letter Mr Cameron noted that “the original contract has now expired a new contract is required”.

9    The defendant denied receipt of Mr Cameron’s letter. This provides some explanation for the circumstance that the parties appear to have been at cross purposes in late 1997 as to whether there existed a current loan contract between them. This does not seem to me to materially bear on the issues raised by the litigation.

10    The application for home loan signed by the defendant and submitted to the Bank in 1997 was for a term of twelve months. The original loan contract (accepting for present purposes that it was for a term of five years) had expired around August 1999.

11 The Bank served a notice expressed to be in conformity with s57(2)(b) of the Real Property Act 1900, dated 26 November 1999, on the defendant. That notice stated the sum of $263,675.26 was owing to the Bank as at 24 November 1999. The notice recited that the loan had expired and that the said sum was then owing to the Bank. The notice gave the defendant a period of three months after service of the same, in which all outstanding payments (together with a sum of $100.00 being the fee for serving the notice) were to be paid to the Bank.

12    By its statement of claim the Bank pleaded that the terms of the mortgage provided for monthly payments to it by the defendant. In paragraph 6 the Bank claimed: “for a long time the defendant has made default in the making of the said monthly payments”. The claim was not better particularised than that. By his defence filed on 31 May 2000 the defendant admitted the mortgage but denied being in arrears as alleged.

13 By notice of motion filed on 9 October 2000 the Bank sought orders including that the defendant’s defence be struck out pursuant to Pt 15 r 26(1) of the Supreme Court Rules 1970 (“the SCR”) or, in the alternative, that there be judgment for the plaintiff pursuant to Pt 13 r 2(1) of the SCR. The matter came on before Greg James J on 1 December 2000. His Honour stood it over part heard until 15 December 2000. It appears from a reading of his Honour’s reasons given on that date that the plaintiff submitted that the defendant was in default by reason that the loan contract had expired and the principal sum had not been repaid. It also appears that the defendant admitted that, as at the date of service of the statement of claim upon him, monies were outstanding but that he had bought his monthly payments up to date by the time of filing his defence. His Honour noted the following in the course of his reasons:

“In the numerous mentions before me and most notably on the last occasion when he filed a hand written statement of issues the defendant has contended that a subsequent mortgage rolling over the mortgage debt has occurred, as expressed it, either by implication from the facts or by dint of his having signed and sent back to the plaintiff a memorandum accepting their offer of a renewal of the mortgage, by way of some estoppel by conduct or by way of some holding over type clause. There assertions are challenged by the plaintiff.

……
When queried about the nature of the mortgage he says he has, the defendant informed me that he was unable to say for how long the mortgage was. Indeed he indicated that it was not possible to do more than have the Court stipulate some sort of term to the mortgage arising from consideration of the parties’ conduct.”

14    His Honour granted the defendant leave to amend his defence and reserved the costs of the motion.

15 On 1 February 2001 the defendant filed an amended defence. Paragraphs 4 to 12 of the amended defence raise issues concerning the validity the s57(2)(b) notice. None of the matters raised therein are relevant to the relief sought by the plaintiff by its statement of claim. So much was conceded by Mr Mendel during the course of submissions.

16    By paragraphs 15 to 19 the defendant pleaded that at all times from February 1997 the Bank had acted as “a normal lender having a current loan agreement rather than as a lender having an expired loan”. Generally it was asserted that the defendant acted upon the assumption that the Bank had renewed his loan contract. Put shortly, it is the Bank’s submission that there was no substance to this defence.

17 It was Mr Brogan’s submission that the defendant must be taken to have known that the Bank was asserting (rightly or wrongly) from May 1997 that the loan between it and the defendant had expired. Mr Brogan pointed to the defendant’s qualifications as outlined in his affidavit of 1 February 2000. The defendant has been a solicitor for 17 years and has acted on a few thousand mortgages for both mortgagee and mortgagor. He was a panel solicitor for the Bank for two years and has also acted on behalf of the Advance Bank, ING Bank, State Building Society, Custom Credit and CitiBank. For the defendant to entertain a view, having regard to this experience, that the Bank had accepted his counter-offer (being the loan offer as unilaterally altered by him) was improbable. On any view, even had the Bank accepted the defendant’s counter-offer, the resulting loan contract had expired as at the date of the s57(2)(b) notice. The terms of that notice brought to the attention of the defendant the Bank’s assertion that the contract had expired. I accept the force of those submissions.

18    Paragraphs 20 to 23 of the amended defence take up the question of the arrears in monthly payments. The statement of claim pleaded default in the making of the monthly payments. It appears that by the time the notice of motion was heard by Greg James J the Bank was contending that it relied on the expiry of the loan contract for the relief it sought. The parties would seem to have conducted themselves thereafter upon an understanding that, on the Bank’s behalf, it was contended that it was entitled to an order for possession by reason of the expiry of the loan contract.

19    In Mr Brogan’s submission the Bank had at all times been willing to settle these proceedings upon the defendant executing a fresh loan contract with it in order to protect its interests. It had achieved so much by the settlement. In these circumstances the proper exercise of my discretion, it was submitted, would be to order the defendant to pay the plaintiff’s costs.

20    It should be noted that Mr Mendel did not concede that the defendant had been aware that the Bank was at all times willing to enter a fresh loan contract with him. Mr Mendel came into the matter at a relatively late stage. The defendant had earlier appeared for himself. I note that in written submissions prepared on behalf of the Bank in support of its notice of motion before Greg James J the following assertion was made:

“The defendant has taken no steps whatsoever to either re-finance with St George, re-finance with someone else or sell the property. Clearly he does not want to do any of this and displays no intention of repaying the loan amount in full to the plaintiff.”

21    Such a submission to my mind lends weight to the Bank’s assertion that its position had at all times been that it sought to have the defendant enter into a fresh loan contract with it.

22    My attention was drawn to two occasions when the defendant made offers to settle the proceedings. The terms of these offers were in evidence before me. I accept Mr Brogan’s submission that it was reasonable for the Bank to reject both offers. The first sought merely to delay the proceedings by six months and the second was uncertain and carried the real risk that the proceedings would simply be further delayed. In both instances the defendant insisted that the sum debited to his loan account with the Bank being the fee paid on filing the statement of claim be refunded. The Bank was entitled to recoup costs incurred by it in enforcing its security pursuant to cl 5.2(g) of the Memorandum of Mortgage.

23    I am satisfied that the Bank has achieved that which it sought by the subject proceedings. I am persuaded that there was no substance to the matters agitated by the defendant by his amended defence. In these circumstances I am of the view that the proper exercise of discretion favours an order that the defendant pay the plaintiff’s costs of the proceedings including the costs reserved by Greg James J on 15 December 2000.

Order

24    The defendant pay the plaintiff’s costs of the proceedings, including costs reserved on 15 December 2000 by Greg James J, as agreed or assessed.

*******

Last Modified: 05/28/2001