Stern, Ilana Elenka v National Australia Bank

[1996] FCA 151

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )      No. NG188 of 1996
  )
GENERAL DIVISION                 )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
  OF AUSTRALIA

BETWEEN:ILANA ELENKA STERN AND JOSEPH POLLAK

Appellants

AND:NATIONAL AUSTRALIA BANK

Respondent

CORAM:    BEAUMONT, SUNDBERG AND LEHANE JJ.

PLACE:    SYDNEY

DATE:     12 MARCH 1996

MINUTES OF ORDER

THE COURT ORDERS:

Leave to appeal rescinded, with costs.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )      No. NG188 of 1996
  )
GENERAL DIVISION                 )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
  OF AUSTRALIA

BETWEEN:ILANA ELENKA STERN AND JOSEPH POLLAK

Appellants

AND:NATIONAL AUSTRALIA BANK

Respondent

CORAM:    BEAUMONT, SUNDBERG AND LEHANE JJ.

DATE:     12 MARCH 1996

REASONS FOR JUDGMENT

THE COURT:
         This is an appeal brought by the leave of the trial Judge, Tamberlin J, from the dismissal of an application for interlocutory relief.  That relief was sought in connection with the prosecution by the respondent of proceedings in the Superior Court of California to enforce a security held by the respondent. 

The history of the dispute, described by Tamberlin J in his reasons, is not in contention and we adopt it. 

As appears from that history, on 23 February 1996 the appellants sought in this Court, as principal relief, a permanent injunction restraining the respondent from taking any step to enforce against them any judgment, either as to liability only, or for any specific sum claimed to be due under certain agreements executed by them in 1988 and in 1992.
In their application and statement of claim, the appellants sought final orders setting aside those agreements so far as they imposed any personal liability on the appellants.  On the same day (23 February) the appellants filed a notice of motion seeking the interlocutory relief now in contention; that is, an order restraining the respondent from continuing the proceedings in California to enforce the agreements and a mandatory order that the respondent apply to the Californian court for an adjournment of those proceedings.

As the primary Judge observed, on 1 February 1994 the respondent instituted proceedings against the appellants in the Californian court (a) seeking judicial foreclosure of the appellant's interest in certain land in Los Angeles under a trust deed, and also (b) for moneys payable under a promissory note.  On 25 May 1995, the appellants consented to judgment being entered for the respondent in the Californian proceedings, being a judgment that the appellants were indebted to the respondent in certain sums, including an amount of $US3,580,083 being the principal, together with interest due under the promissory note, together with an order that the land be sold.  The consent judgment further provided that each of the appellants was to remain personally liable for payment of the sum secured by the deed of trust and it was ordered that a "deficiency judgment" might be sought from the court under the laws of California.
         (By way of further background, it should be noted that the premises erected on the subject lands had been severely affected by an earthquake which occurred in California in January 1994, and the value of the property, which was not insured, was, consequently, seriously depreciated.) 

On 20 December 1995 the land was sold by an officer of the Californian court for the sum of $US153,500.  According to allegations made in the statement of claim filed in this Court, under Californian law the fair value of the land as at the date of the order for foreclosure is to be fixed by the Californian court; and, as there claimed, when this is done, the appellants will be personally liable for the moneys payable under the mortgage, less the fair value of the land.
It is contemplated that the Californian court will then enter judgment against them personally for the deficiency. 

Although not before the learned primary Judge, there was tendered and received into evidence before us a note of a judgment given by a Judge of the Californian court entered on 5 March 1996 on a motion in those proceedings brought by the present respondent for summary adjudication on the defences relied on by the present appellants to the "deficiency award".

That judgment is in the following terms:

"Motion for summary adjudication denied.  An action for foreclosure of a mortgage contemplates a two-stage proceeding.  The first stage pertains to the decree of foreclosure, the sale of the property and the determination of whether the defendant is personally liable for a deficiency judgment.  In the second stage of the proceeding the sole issue remaining for determination is the amount of the deficiency based upon fair value of the property sold ...  

The fair value hearing must take into consideration all circumstances affecting the underlying worth of the property at the time of the sale ... 

Therefore, defendant is entitled to submit evidence that directly impacts the value of the property.  Plaintiff's attempt to exclude fair value evidence under the guise of a motion for summary adjudication [is] improper.

Plaintiff may, however, file appropriate motions in limine to exclude evidence submitted by defendant that does not directly impact the value of the property."

Tamberlin J heard the application for interlocutory relief over a period of three days commencing on 26 February.  On 29 February his Honour made an order dismissing that application.  His Honour published his reasons for that order on 6 March 1996.  In essence, his Honour relied on discretionary considerations, going to the balance of convenience in particular, as reasons for refusing the relief sought. 

On the publication of reasons for that refusal, the applicants (the present appellants) sought from his Honour leave to appeal from the dismissal of the interlocutory application.  That leave was granted by Tamberlin J.  In his reasons for granting leave, his Honour referred to the
principle stated in Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 and went on to say:

"In relation to the first test the trial judge is in a somewhat invidious position in relation to determining the question whether there is sufficient doubt and in many instances it is more appropriate for a Full Court to determine this question.  However, in my view there are arguments open of sufficient force, in relation to the correctness of the decision to warrant it being considered by the Full Court.

Minds may well differ on this and I make appropriate allowance for the fact that I have heard the matter and formed a definite view on it, but nevertheless, it is a situation in which I think it is open to other minds to be persuaded by arguments to the contrary.  As a result, it is my view that there is enough doubt to warrant consideration by the Full Court.

The second matter is whether substantial injustice would result if leave were refused in the event that the decision is later overturned.  On the assumption that the decision is incorrect the situation which arises is that the Californian court would ;proceed to give judgment and it may well be, although I do not of course make a decision in this regard that any rights which the applicants might have had under the Trade Practices Act 1974 (Cth) in Australia arguably, might merge and be lost.

Although, in nature an anti-suit injunction is interlocutory, in the sense that it does not resolve the dispute on a final basis its practical effect may, in this case, have the result that the proceeding to judgment in California could affect the substantive rights of the applicants.  Accordingly, I am of the view that there is a real possibility of substantial injustice resulting if leave were refused, on the assumption that the decision is later held to be wrong.

Accordingly, I propose to grant leave in this matter to appeal to the Full Court.  I bear in mind particularly the fact that there is a very substantial sum of money involved, which on its face would have the capacity to cause enormous detriment to the applicants and I think that they should be given a chance to air their arguments, such as they are, before the Full Court."

On 8 March an application for the expedition of this appeal was made by the appellants to Beaumont J.  The application was resisted by the present respondent, but expedition was granted on the footing that liberty was reserved to the respondent to move, without formal notice, for the rescission of the grant of leave. 

We have now had the benefit of full written and oral submissions from Senior Counsel on all aspects of the appeal.  Having considered their submissions and looking at the matter as if the application for leave had been made directly to us, we are bound to say that we would not have granted leave to appeal.  We are not satisfied that the refusal of the interim relief sought was attended with sufficient doubt to warrant the intervention of an appellate court in such a discretionary area and on such limited material.  We have in mind, particularly, his Honour's reliance on the significant delay involved and on the absence of material with respect to the position of the parties under the law of California.

In the circumstances, the order of the Court will be that leave to appeal is rescinded, with costs.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of their Honours Justice Beaumont, Justice Sundberg and Justice Lehane

Associate

Dated:       12 March 1996

Counsel and Solicitors      Mr. C.R. Einstein QC with

for Appellants:              Mr. V.R. Gray instructed by
  Denes Ebner

Counsel and Solicitors      Mr. M.H. Tobias QC with

for Respondent:             Mr. S.M.P. Reeves instructed

by Mallesons Stephen Jaques

Date of hearing:            12 March 1996

Date Judgment delivered:         12 March 1996