Van Rheeden, R.T. v Westpac Savings Bank Ltd

[1993] FCA 41

IN THE FEDERAL COURT OF AUSTRALIA )

! , . )

NEW SOUTH WALES DISTRICT REGISTRY ) NO G939 of 1992

)

GENERAL DIVISION )

BETWEEN:  RICHARD THOMAS VAN RHEEDEN
First Applicant
ROBYN LESLEY VAN RHEEDEN
Second Applicant

AND	'
_.

Respondent

CORAM	:	HILL J
PLACE	:	SYDNEY
DATED	:	2 0 JANUARY 1993

EX TEMPORE REASONS FOR JUDGMENT

The applicants in the proceedings, Mr and Mrs van Rheeden, move the court for a stay of the judgment of his Honour Mr Justice Gummow delivered on 27 November 1992, and orders made pursuant thereto for leave to issue a writ of possession in respect of a property at 158 Prince Alfred Parade, Newport. The applicants in the proceedings had alleged, lnter alia, that the respondent Westpac Savings Bank Limited ("the bank") had been guilty of misleading and deceptive conduct within the meaning of s.52 of the Trade Practices Act 1974, or alternatively, was liable to the applicants for damages for negligent advice in respect of overdraft or other financial accommodation given by the bank to the applicants, inter alia, in connection with the purchase

by Mr Van Rheeden of properties at Surfers Paradise. A	further alternative count alleged that the bank was liable to
the applicants in damages for a breach of a statutory duty, that statutory duty said to arlse out of the provisions of s.24A of the Valuers Realstratlon Act 1975.
The applicants were unsuccessful in their application. In the result, Gummow J was of the view that the bank should have judgment for possession and leave to issue a writ of possession in terms of paras.1 and 2 of the prayers for relief brought by them in para.18 of a cross-claim flled in the Court.
The writ of possession related to a mortgage which Mr Van Rheeden had given over the Newport property to the bank. Although that property was registered in the name of Mr Van Rheeden, Mrs Van Rheeden claimed to have an interest in it as a beneficiary under a constructive trust. In the result, Gummow J found it unnecessary to decide the nature, if any, of Mrs Van Rheeden's beneficial interest.
The Newport property is the family home of Mr and Mrs Van Rheeden. Mrs Van Rheeden says in an affidavit read in the proceedings that to permit the bank to take possession of the home at the present time would cause quite undue disruption, inconvenience and hardship to herself, her husband and their two children. She says that the home is a unique and exceptional residence which would be irreplaceable in value, character, location and sentimental value, and points
to the fact that it would be impossible for the bank to effect restitution in the event that the bank were to take possession of the property and dispose of it and, thereafter, the appeal, which has been lodged by the applicants to this Court, turn out to be successful. The question of a stay was anticipated by his Honour who indicated at the conclusion of his judgment that he was at present mlnded to order that execution of the writ of possession be stayed until 18 January 1993.
Subsequently, an application for stay having been made, the matter came before Wllcox J, and by consent the partles agreed to a stay until today. No evidence was adduced by the applicants of their financial status, save that Mrs Van Rheeden says in her affidavit that other than a home unit on the Gold Coast which was the subject in part of the
proceedings and which is presently mortgaged to the bank, she
and her husband have no other real estate. It seems relatively clear from the judgment that the unit on the Gold
unlikely to realise anything like the amount presently owing Coast which was purchased for $330,000 (Unit 13), would be
to the bank, whlch according to a certificate tendered in evidence, amounted to $1,334,253.03.
Under the provisions of the bank's mortgage, the bank is entitled not only to repayment of that amount on the assumption that the judgment of Gummov? J remains, but also to its costs of enforcing its security. Counsel for the bank dld not directly oppose the making of a stay. Rather, it was
submitted that any stay to be granted should be made subject
to conditions. The conditions suggested were:

1.   That the whole of the amount presently secured and outstanding be paid by the applicants into court.

2.   That amounts which the applicants are required to pay under the mortgage to maintain the security, such as insurance and rates and the like, be paid by the applicants.

3.   That the applicants bring into court additionally an amount equal to the interest that would be payable on the security in the period durlng which the appeal is pending and until it is ultimately decided.

4.   That it be a further condition that the applicants provide to the bank security for the bank's costs, consistent with the covenant contained in the mortgage by the applicants that they will bear the costs of the bank in enforcing the bank's security.

I shall deal with each of these conditions primary position was that no conditions at all be imposed.	separately. Suffice it to say here that the applicants'
The applicants' counsel submitted that because the present was a case where the appeal could be rendered nugatory by the sale of the property, an unconditional stay should be ordered.
Towards the end of the argument, counsel for the applicants offered an undertaking on the part of his clients not only to pay rates, insurance etc, an undertaking which was
initially accepted, but also to pay an amount of $250 per week, that sum being offered as, in effect, rent for the occupation by the applicants of the Newport property pendlng the determlnatlon of the appeal. Counsel for the applicants conceded that his clients could neither pay in the interim period into court an amount equivalent to interest at the current rate applicable under the mortgage of 11.25 per cent, on a figure whlch the parties appeared to accept as the value of the property for the purposes of these proceedings of $750,000, nor, a fortlori, to pay into court the whole of the capital sum.
The first condition was suggested by analogy to the prlnclple applied in cases such as Inalis v Commonwealth Tradina Bank of Australia (1972) 126 CLR 161. That principle, applicable in circumstances where interlocutory relief restraining the exercise of a mortgagee's power of sale is sought, is that such relief will not be granted unless the
mortgage debt be paid into court or held in an account pending the outcome of the proceedings. That principle is not an
invariable one as the cases, quite particularly those in this court, indicate, where the claim of an applicant goes to the root of the title to exercise the rlght, as for example in the case where relief is sought under s.87 of the Trade Practices
Act 1974 to vary or set aside a mortgage.
The normal principle may be dispensed with l£ the case so warrants, and it seems relatively clear that in other cases the court mlght mould its order so as to require payment of only so much as will suffice to give adequate protection to the mortgagee. Examples of such orders may be found in Harvev v McWatters (1948) 49 SR NSW 173; Glandore Pty Llmlted v Elders Flnance and Investment CO Llmlted (1984) 4 FCR 130; Mainbanner Ptv Limited v Dadincraft Ptv Limited (1988) 10 ATPR 40-896 and Muffinarove Pty Limited v Melridae Mining and Exploration Ptv Limited (unreported, 26 September 1991). The judgment in the latter case was ultimately upheld on appeal. The most recent decision on the principle in Inalis of which I am aware is the decision of Neaves J in Re Longworth Pty Ltd & Lindsay James Thompson v Metwav Bank Ltd (unreported, 14 August 1992). In that case, a submission that the jurisdiction to restrain the exerclse of mortgagees' powers without requiring the mortgagor to bring into court the amount claimed by the mortgagee as due under the mortgage, was
attacks the validity of the mortgage itself, was doubted by limited to cases in which the mortgagor sets up a claim which
Drummond J on appeal (unreported, 11 September 1992).
The present, of course, is not a case where an interlocutory injunction is sought. However, counsel for the bank submits that by analogy the same principle should be applied here. He submitted that, indeed, the application of that principle was made more relevant by the fact that the application to set aside the mortgage had failed at first instance. That first instance decision was not one which was prima facie or provisionally correct, it was a decision of thls court, and the consequence was that unless and untll an appeal against that -judgment was upheld, the mortgage should be seen to be valid and subsisting. Put another way, the rlght of the mortgage to possession and obviously ultimately to exercise the power of sale, has been established by the court and in essence what the applicants were seeklng to do was to restrain the exercise of a right found to be valid.
There is much to be said for the argument advanced. However, it seems to me that I should approach the matter by reference to the normal principles relevant to the grant of a stay to an unsuccessful applicant. Those principles are set out, inter alia, in the decisions of the New South Wales Court of Appeal in Alexander v Cambridae Credit Corporation Limlted (1985) 2 NSWLR 685 at 693-5 and John Fairfax & Sons Limited v
Kellv (No 2 ) (1987) 8 NSWLR 510 at 511-12. The approach adopted in these cases has been generally accepted in this and
in other courts, where the issue has been the stay of an order of a slngle judge pendlng an appeal being brought against that decision. Reference may be made by way of example to the decisions in Griffiths v Australian Postal Cornmlssion (1987) 87 FLR 139 per Mlles CJ in the Supreme Court of the Australian Capital Territory; Re Browbank; Ex parte Loni~lus Ptv Ltd (1985) 12 FCR 254 at 255 per Beaumont J; Water Industrv
Salaried Officers' Unlon v Professional Officers Association
W (1987) 22 IR 178 at 183 (Industrial Commlsslon of New
South Wales) and Westaflex [Aust) Pty Limited v Wood [l9901 AIPC 36227 per Gray J in this Court at 36228-229. The general
principle is that the court has a discretion whether or not to
grant a stay, and if so, as to the terms that would be fair. As the Supreme Court of New South Wales said in Alexander (at
694) :

"In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it: Attorney-General v Emerson (1889) 24 QBD 56. Where there is a risk that if a stay is granted, the assets of the applicant will be disposed of, the Court may, in the exercise of its discretion, refuse to grant a stay: cf Clyne v Deputy Commissloner of Taxatlon (1982) 56 ALJR

857. "

As the Court of Appeal's judgment indicates, it is

not necessary for an applicant per se to show exceptional

clrcumstances. I t is sufficient if the applicant demonstrates

the present is an appropriate case to warrant the exercise of discretion in its favour. Ultimately, the Court, in the exercise of its judicial discretion, is seeking to do justice as between the partles.

If the present be an appropriate case at all for a stay to be granted, then in my view it would be most unjust to require the applicant to bring into court the whole of the

capltal outstanding presently of $1,334,253, where, in the event of an appeal succeeding, the mortgage in question may ultimately be held to be void. I would not, in the exercise of my discretion, therefore, impose a condition such as the flrst condition sought by the bank.

Before turning to deal with the other conditions, I should deal with the matter of the applicants' chances of success. Clearly, that is a relevant matter to be taken Into account in deciding whether a stay should be granted. There is no doubt, as the Court of Appeal suggested in the John Fairfax case, that where an appeal would be plainly hopeless, a stay would not be granted ordinarily, or at all. On the other hand, there is inevitably a considerable dlfflculty in a judge exercising the court's power to stay a judgment, seeking to formulate an assessment of the chances of success of an appeal which is ultimately to be argued before the Full Court. It seems to me that there is a delicate task imposed upon a

the strength of the applicant's case, in determining whether	judge, in a case such as the present, in seeking to determine
or not a stay should be granted.
Counsel for the bank took me to the judgment of Gummow J. I do not propose here to set out in detail passages from that judgment. Suffice it to say that on all matters, save that of the breach of statutory duty where a pure question of law arose, his Honour's judgment depended upon factual findings based upon views as to the credit of Mr and Mrs Van Rheeden on the one hand, and a Mr Anderson, a bank manager, on the other, where those findings, which are dealt with in some detail in the judgment, were specific. Counsel for the bank referred me, inter alia, to Abalos v Australian Postal Commission (1988) 171 CLR 167, where the role of the trlal ludge in reaching factual conclusions, which may depend upon assessments made as to the demeanour of witnesses, is discussed in some detail in the judgment of McHugh J.
As his Honour pointed out, the subtle influence of demeanour or credibility on the trial ]udgels determination is something not to be overlooked, and the Court of Appeal will normally not overrule decisions of fact made, having regard to that advantage, unless it may be found that the trial judge failed to use or palpably misused the advantage which he had of seeing and hearing witnesses. Counsel for the bank took me as well to the notice of appeal. Except in one respect, that
Gummow J on fact, on matters which do depend upon credit, notice as it presently stands seeks to challenge findings of
without suggesting that his Honour in any way misused the advantage open to him of seeing the witnesses.
There is one possible ground of appeal which may go to that last mentioned matter, namely ground three, which is in the following terms:

"His Honour was in error in finding Mrs Van Rheeden's evidence to be unacceptable and in wrongfully assuming she suffered from mental illness."

There is no doubt that his Honour formed the vlew that Mrs Van Rheeden suffered from a mental condition. According to counsel for the bank, hls Honour did so on evidence that had been adduced from a psychiatrist. Whether what his Honour did was or was not wrong is a matter obviously to be determined by the appeal court. Sufflce it to say for present purposes, however, that this ground of appeal does at least challenge the foundation of hls Honour's non-acceptance of Mrs Van Rheeden's evidence.

Counsel for the applicants indicated that he was presently considering a formulation of an additional ground of

appeal challenging the purely legal point. No application has

at this stage been made for additional grounds to be added to

the notlce of appeal, but I am prepared for the purposes of the present proceedings to take into account the possibility	that such a ground may be added to the grounds of appeal.	I
say nothlng about the legal merits of the argument.

Certainly without it, the comment of counsel for the bank that the appeal, while not necessarily hopeless was approaching that state, was not an overly pessimistic assessment. However, it may well be that the legal issue may be arguable, and perhaps it is sufficient to say, for present

purposes, that the applicants' chances of success in an
ultimate appeal whlle not hopeless are certainly not strong.

However, while taking this into account adversely to the appllcants, I would not go so far as to say that it should disentltle the appllcants to a stay, at least subject to appropriate conditions. However, the fact that the chances of success of the appeal are not strong does suggest that I should take some account of the position of the bank in the event that the appeal, having been argued, turns out to be unsuccessful. Put another way, I would take some account of / the rlsk to the bank by virtue of a grant of a stay.

Apart from the question of costs, it does seem to me that the ultlmate damage that the bank mlght suffer, by virtue of a stay continuing until the ultimate appeal is decided, is limited to a maximum of the interest which it would be entitled to derive in the event that it not only took

possession but also exercised its power of sale.

Whether the bank, having taken possession, would in fact exercise its power of sale no doubt would be a matter for the bank to determine, having regard to the commercial considerations at the time. If the applicants were to seek an injunction restraining the bank from exercising the power of sale, then an undertaking as to damages v~ould ordinarily be required before such an injunction was granted. Again a

measure of damages under that undertaking would ordinarily be related to any interest which the bank might forgo in the perlod while it was out of possession and while it was unable to exercise its power of sale.

The applicants did not seek, at the initial hearing of the application, to adduce evidence as to a fair rental value of the property. After evidence had been completed and argument had continued for some time, the applicants' counsel sought leave to reopen his case to adduce evidence of the fair market value. I took the view that the application was made at a point in time too late and that I should not accede to it. I am therefore left with the only evidence that is before me, namely that the property was worth, at some time in 1989, $750,000 and that the bank's current rate of interest is 11.25 per cent.

Having regard to what presently appeared to be the merits of the case, and the fact that the bank might well be	out of pocket for some time pending an appeal, it seems to me
that it is not inappropriate to impose as a condition of any stay that the applicants either pay into court or provide security for an amount which would take into account to some extent at least the loss of interest which the bank may suffer for a period of time commensurate with the estimate of time for an appeal.
I agree, and it appears to be accepted by the applicants, that the applicants should, as a further condltlon of the appeal, give undertakings that they will, while a stay continues, pay promptly all amounts which they are obliged to pay to persons other than the mortgagee under the terms of the mortgage; that is to say, local council rates, water rates, insurance and the like. As I understand it, each of Mr and Mrs Van Rheeden agree to giving such an undertaking.
I do not think that it would be appropriate to impose, as a condition of the stay, an obligation upon Mr and Mrs Van Rheeden to provide additional security, being security for costs. The bank has filed and served in the court a separate motion seeking security for costs of the appeal. That motion has not, at this stage, been dealt wlth. It is to be adlourned to a date not yet fixed for evidence to be adduced, if any, by the applicants, and ultimate argument.
It is, of course, a matter for the exercise of discretion whether such an application for security should be granted, although it must be said to be relatively unusual for an application to succeed where the applicants are individuals. I do not think that the mere fact that the mortgage provides a covenant on the part of the applicants to pay the bank's costs of recovery warrants the imposition by this court of a condition to be imposed upon the applicants that they pay into court some amount estimated as belng the costs of the appeal, suggested in the present case to be $20,000.
There is, of course, a difficulty in determining how much should be paid into court to cover the potential loss of interest since, at thls stage, it cannot be determined how long it will be before the appeal is heard and declded. Given the indication from counsel that his clients will be unable in any event to comply with such a condition, it may be merely an academic matter. However, since the matter cannot be heard until the second Full Court sittings in Sydney, which are in May, it seems to me that the appropriate thing to do would be impose as a condition of a stay the provision of an amount calculated as say five months1 interest on the figure of $750,000 calculated at 11.25 per cent.
That amount, or security for it in a form acceptable to the bank, should be provided, if it is to be provided,
wlthin say four weeks from today. Accordingly, I would grant a stay for that period of four weeks in any event, that is to
say until 17 February 1993 and conditionally upon the applicants paylng into court or providing security in the sum
nominated and in a form acceptable to the bank on or before 17
February 1993. I would stay the orders made by Gummow J for possession pending the determination of the applicants' appeal. I would additionally require as a condition the giving of an undertaking by each of the applicants, in a form
acceptable to the bank, dealing with such matters as rates and Insurance.
I would propose to have the matter relisted before me on 17 February 1993 when any dlfflculties as to the form of undertakings or security can be resolved if they arise. I give leave to both parties to apply on seven days' notice.

I will reserve costs in both motions.

I certify that this and the
preceding fifteen (15) pages
are a true copy of the Reasons
for Judgment herein of his Honour

Mr Justice Hill.

Date: 16 February 1993

Counsel and Solicitors Mr P Kintominas instructed by

for Applicants:  Benjamin Khoury

Counsel and Solicitors	Mr B W Walker instructed by
for Respondent:	Corrs Chambers Westgarth
Date of Hearing:	20 January 1993
Date Judgment Delivered:	20 January 1993