Van der Kooij v Mystate Financial Limited
[2014] FCA 350
FEDERAL COURT OF AUSTRALIA
Van der Kooij v Mystate Financial Limited [2014] FCA 350
Citation: Van der Kooij v Mystate Financial Limited [2014] FCA 350 Parties: ALEXANDER VAN DER KOOIJ, JEANNE ADA VAN DER KOOIJ and DAVID TATANA v MYSTATE FINANCIAL LIMITED ABN 89 067 729 195 File number: VID 1083 of 2013 Judge: TRACEY J Date of judgment: 7 April 2014 Catchwords: CONTRACT – default on loan agreement – whether promissory note constituted payment – mortgagee’s duty to obtain best price reasonably possible on sale of property
PRACTICE AND PROCEDURE – application for summary judgment of originating application and cross-claim – whether applicant has reasonable prospects of successfully prosecuting or defending whole or part of the proceeding – whether prospect of success more than fanciful
Legislation: Federal Court of Australia Act 1976 (Cth) ss 31A, 52
Federal Court Rules 2011 (Cth) r 26.01Cases cited: Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 – cited
Brien v Dwyer (1978) 141 CLR 378 – applied
Commercial and General Acceptance Limited v Nixon (1981) 152 CLR 491 – considered
Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 – cited
Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd (2000) 9 Tas R 444 – cited
Spencer v The Commonwealth (2010) 241 CLR 118 – considered
Upton v Tasmanian Perpetual Trustees Ltd (2007)158 FCR 118 – consideredDate of hearing: 7 April 2014 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 28 Counsel for the Applicants: Mr I Hone Solicitor for the Applicants: Ian G Hone Counsel for the Respondent: Mr N Wallace Solicitor for the Respondent: Page Seager Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 1083 of 2013
BETWEEN: ALEXANDER VAN DER KOOIJ
First Applicant/First Cross-RespondentJEANNE ADA VAN DER KOOIJ
Second Applicant/Second Cross-RespondentDAVID TATANA
Third ApplicantAND: MYSTATE FINANCIAL LIMITED ABN 89 067 729 195
Respondent/Cross-Claimant
JUDGE:
TRACEY J
DATE OF ORDER:
7 APRIL 2014
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.Pursuant to Rule 26.01 of the Federal Court Rules 2011 (Cth) and s 31A of the Federal Court of Australia Act 1976 (Cth) judgment be entered for the respondent on the applicants’ originating application dated 14 October 2013.
2.Pursuant to Rule 26.01 of the Federal Court Rules 2011 (Cth) and s 31A of the Federal Court of Australia Act 1976 (Cth) judgment be entered for the respondent against the first and second applicants on the cross-claim dated 20 November 2013 in the sum of $107,658.03.
3.The first and second applicants pay to the respondent interest on the sum of $107,658.03 from 20 November 2013 pursuant to s 52 of the Federal Court of Australia Act 1976 (Cth).
4.The applicants pay the respondent’s costs of the proceeding including all reserved costs such costs to be taxed failing agreement.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 1083 of 2013
BETWEEN: ALEXANDER VAN DER KOOIJ
First Applicant/First Cross-RespondentJEANNE ADA VAN DER KOOIJ
Second Applicant/Second Cross-RespondentDAVID TATANA
Third ApplicantAND: MYSTATE FINANCIAL LIMITED ABN 89 067 729 195
Respondent/Cross-Claimant
JUDGE:
TRACEY J
DATE:
7 APRIL 2014
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
This proceeding was commenced by originating application filed on 14 October 2013. The first and second applicants seek damages for detention and conversion of their real and personal property. The third applicant (“Mr Tatana”) seeks damages arising from the respondent’s refusal to accept a promissory note which had been tendered to the respondent by an agent.
By notice of cross-claim filed on 20 November 2013 the respondent cross-claimed for debt or, alternatively, damages against the applicants.
The respondent filed a defence to the applicants’ claim. The applicants have not filed a defence to the respondent’s cross-claim.
By interlocutory application dated 21 February 2014 the respondent moved the Court for an order for summary judgment to be entered on both the originating application and its cross-claim. The orders were sought pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth). Argument on the application took place this morning. I have determined to grant the application.
SUMMARY JUDGMENT
Section 31A relevantly provides that a party to a proceeding may obtain summary judgment by satisfying the Court that the other party has “no reasonable prospect” of successfully prosecuting or defending the whole proceeding or any relevant part of the proceeding. The purpose of the provision was to strengthen “… the power of the court to deal with unmeritorious matters by broadening the grounds on which federal courts can summarily dispose of unsustainable cases”: see Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720, 731 (Rares J); Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 at 392, 406.
The exercise of the power summarily to terminate a proceeding must be exercised with caution: see Spencer v The Commonwealth (2010) 241 CLR 118 at 131, 141. In Spencer, Hayne, Crennan, Kiefel and Bell JJ said (at 141) that:
“… full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is ‘no reasonable prospect’ of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to ‘no reasonable prospect’ can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase ‘just and equitable’ when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.”
Their Honour’s had earlier observed (at 140) that:
“Because s 31A(3) provides that certainty of failure (‘hopeless’ or ‘bound to fail’) need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different inquiry from that which had to be made under earlier procedural regimes.”
What is required, according to French CJ and Gummow J (at 132), is that the Court brings to bear “a practical judgment …. as to whether the applicant has more than a ‘fanciful’ prospect of success”. That judgment may be informed by issues of law or fact and be influenced by the extent to which factual issues may be in dispute.
THE FACTUAL BACKGROUND
The respondent filed five affidavits in support of its summary judgment application. No material has been filed by the applicants. The relevant facts are undisputed and are drawn from the respondent’s affidavits.
In 2005 and, again, in 2010 the respondent bank provided the first and second applicants with loan facilities. The first was for $279,340 and the second for $121,000.
The first and second applicants defaulted on their obligations pursuant to both of the loan facilities. Both loan contracts provided that the first and second applicants were to repay the loans by making repayments in accordance with a schedule. Both provided that the borrower was in default under the loan contract if he or she did not make a repayment in full by the date it fell due. Each prescribed that, in the event of default, the respondent was to tell the borrowers what they were required to remedy the default. Each stipulated that, if the borrower did not comply with the default notice, he or she became liable to pay the respondent the balance of the loan immediately.
On 1 November 2010 a default notice requiring that default under one of the loan contracts be remedied by the payment of $2,367.98 by 6 December 2010. A similar notice in relation to the other loan was issued on 22 November 2010 and required payment of $1,087.98 by 27 December 2010. Both default notices advised the relevant applicant that a failure to make the payments rendered him or her liable to the respondent to pay out the contract. Each was advised that repossession of the property subject to the mortgage was an option available to the respondent in the event of non-compliance.
The property was located at 30 Cleburne Street, Kingston in Tasmania. On 3 August 2012 the respondent obtained a writ of possession from the Supreme Court of Tasmania. On 24 August 2012 the respondent obtained possession of the property. Various chattels belonging to the first and second applicants remained on the premises.
The respondent proposed to sell the property. Following representations on behalf of the applicants the respondent advised them, on 6 November 2012, that it would suspend the listing of the property for sale for a period of 28 days subject to the discharge of the first and second applicants’ debts. Settlement of the debts was fixed to occur at the respondent’s offices on 30 November 2012. In anticipation of the settlement the respondent advised the applicants by e-mail, on 28 November 2012, that settlement was to be effected by bank cheque.
On 30 November 2012 an agent of Mr Tatana’s attended the respondent’s premises and tendered a promissory note. A representative of the respondent advised the agent that the respondent would only accept a bank cheque and returned the promissory note to the agent.
On 20 December 2012 the respondent received a further copy of the promissory note by registered post. The envelope also contained a document which the applicants described as a “contract”. The note and accompanying documents were returned.
On 2 February 2013 the property was sold at auction for $380,000. This sale had been sanctioned by Supreme Court order and the sale price was within the range stated by independent valuers.
On 25 February 2013 settlement was effected on the property and the funds obtained were applied to the first and second applicants’ loan accounts.
In order to provide vacant possession of the property the respondent moved the chattels left in the property into a storage facility. On 3 June 2013 the respondent obtained an order from the Tasmanian Magistrates’ Court which authorised the sale of the chattels. On 27 September 2013 the chattels were sold at auction. The proceeds were applied to the first and second applicants’ loan account.
THE APPLICANTS’ CLAIM
The applicants’ amended statement of claim accepts that the first and second applicants were in arrears and had defaulted on their obligations to the respondent under the loan agreements. They, nonetheless, alleged that the sale of the residential property was unlawful because the respondent had failed to accept the tender of the promissory note in settlement of the applicants’ outstanding obligations and because the property was sold for “less than the best price reasonably obtainable”. They further claimed that the sale of the chattels was unlawful because the respondent had failed to obtain the best price reasonably obtainable for them. Mr Tatana claimed to be entitled to $2 million in damages pursuant to what he described as terms and conditions set out in the “Default & Liabilities Clause and Notice within the contract attached to the [promissory] Note.”
THE PROMISSORY NOTE
The promissory note which was tendered to, but not accepted by, the respondent promised payment of $500,000. This amount was to be paid by Mr Tatana to the respondent upon presentation of the note at an office address in Melbourne at 10:10 am on 7 December 2014. The applicants pleaded that the tender of the promissory note constituted a “payment” which “effected a discharge of the liabilities of the first and second applicants to the respondent.” The note had not been presented for payment. The consequence was, so it was contended, that the liability of Mr Tatana, as maker of the note, to the respondent was discharged.
These contentions lack substance. What was required to satisfy the first and second applicants’ obligations under their respective loan contracts was that they “pay” to the respondent the balance of each of the loans. What the contracts contemplated was an immediate payment (or payment on or before a fixed date) on demand. The respondent required that payment be made by bank cheque and required that payment be made at settlement on 30 November 2012. The presentation of a promissory note did not satisfy either of these requirements. The note did not promise immediate payment on presentation. Rather it provided for payment upon presentation in another State and then not for over two years. The note may be likened to a post-dated cheque. In Brien v Dwyer (1978) 141 CLR 378 Gibbs J held that a purported payment by a post-dated cheque does not constitute “payment of a cheque which is capable of being honoured immediately on presentation”: see at 394. The language and context of the loan contracts make it clear that the respondent was entitled to be put in funds sufficient immediately to satisfy the first and second applicants’ obligations to it. They were required to “pay” the necessary amount at settlement on 30 November 2012. Even if a promissory note had been acceptable to the respondent, despite its earlier intimation that it required payment by bank cheque, the promissory note did not satisfy the requirement of immediate payment. It would, indeed, have been “fanciful” to expect the respondent to accept a promise by Mr Tatana to make a payment at a precise time and a precise place over two years on from the date of the proposed settlement.
Mr Tatana’s claim for damages is said to arise from a contract attached to the promissory note which was posted to the respondent and received by it on 20 December 2012. The respondent immediately returned these documents to the sender. There is no evidence to suggest that the respondent entered into any contractual arrangements with Mr Tatana or anybody else which would have obligated it to pay him $2 million. The suggestion that the respondent became party to a contract which was sent to it but which it rejected is wholly lacking in substance. The fact that the promissory note was not presented for payment is hardly surprising given that it would have been pointless for the respondent to have done so: the maker of the note was under no obligation to make payment under it until 7 December 2014.
“BEST PRICE REASONABLY OBTAINABLE”
The second basis upon which the first and second applicants press their claim in relation to the property and the sole basis for their claim in relation to the chattels is that the respondent is liable to them for the shortfall between the price obtained for the property and chattels and what is described in the amended statement of claim as “the best price reasonably obtainable” for the property and the chattels.
The applicants did not point to any authority which established a liability of the kind pleaded. Although some dicta could have been cited for this proposition (see, for example, Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd (2000) 9 Tas R 444 at [17]), the Full Court of this Court, having reviewed the authorities, concluded, in Upton v Tasmanian Perpetual Trustees Ltd (2007) 158 FCR 118 at 126 that:
“In our view the Land Titles Act states the law as it is generally accepted to be in Australia. It does not extend a mortgagee’s duty to obtain the best price reasonably possible or to act in such a way as to advance the interests of the mortgagor.”
Per Kiefel and Besanko JJ; see also per Graham J at 134-144.
The competing formulations of the duty which falls on the mortgagee were explained by Brennan J in Commercial and General Acceptance Limited v Nixon (1981) 152 CLR 491 at 522-3 in these terms:
“The balance of opinion in this Court accepts that a duty to take reasonable precautions to obtain a proper price imposes a more onerous duty upon a mortgagee than a duty to act in good faith, the duty to act in good faith requiring the mortgagee to act without fraud and without wilfully or recklessly sacrificing the interests of the mortgagor but stopping short of exposing the mortgagee to liability for mere negligence or carelessness …”
It was the latter formulation which the Full Court favoured in Upton. Although the High Court is yet to rule definitively on the competing contentions, the Full Court’s decision in Upton, preferring as it does the less onerous formulation, binds me to hold that the basis for liability on which the applicants seek to rely could not be sustained at trial as a matter of law.
For these reasons I consider that the respondents have established a proper basis for the making of orders under s 31A of the Federal Court of Australia Act 1976 (Cth) and Rule 26.01 of the Federal Court Rules 2011 (Cth). Judgment should be entered for the respondent on the applicants’ originating application.
THE CROSS-CLAIM
The funds realised by the sale of the property and the chattels were applied to the first and second applicants’ loan accounts. After this was done there remained a shortfall in the amount required to satisfy the applicants’ debts to the respondent. The respondent cross‑claimed for this sum.
As already noted no defence has been filed by the applicants (as cross-respondents) to the cross-claim.
Counsel for the applicants accepted that they would only have a defence to the cross‑claim if they were able to make good their principal claims. No other possible defence to the cross-claim was suggested. In these circumstances there should also be judgment for the respondent (as cross-claimant) on the cross-claim.
I certify that the preceding twenty- eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. Associate:
Dated: 7 April 2014
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