Westpac Banking Corporation v Clayton
[2012] NSWSC 283
•16 April 2012
Supreme Court
New South Wales
Medium Neutral Citation: Westpac Banking Corporation v Clayton [2012] NSWSC 283 Hearing dates: 07/03/12; 16/03/12; 04/04/12 Decision date: 16 April 2012 Before: Garling J Decision: 1. Judgment for the plaintiff against the first and second defendants for possession for properties identified in [149].
2. Judgment for the plaintiff against the first defendant in sum of $2,580,445.40.
3. Judgment for plaintiff against the second defendant in sum of $800,000.00
4. Leave granted to the plaintiff to issue a writ of possession forthwith in relation to each of the properties.
5. Judgment for the cross defendant on the cross-claim filed 17 November 2011.
6. Defendants/cross claimants pay plaintiff/cross defendant's costs of the whole proceedings, including any reserved costs.
Catchwords: REAL PROPERTY - Claim for possession of land - Mortgage default - Order for possession made - Judgment against mortgagor and guarantor - No issue of principle Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth)
Civil Procedure Act 2005
Real Property Act 1900
Trade Practices Act 1974 (Cth)Cases Cited: Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 Category: Principal judgment Parties: Westpac Banking Corporation (plaintiff)
Erwin John Clayton (first defendant)
Mary Patricia Clayton (second defendant)Representation: Counsel;
R I Bellamy (plaintiff)
In person (first defendant)
No appearance (second defendant)
Solicitors:
Gadens Lawyers (plaintiff)
Self represented (first and second defendant)
File Number(s): 09/295510 Publication restriction: Nil
Judgment
Introduction
Over nearly thirty years, perhaps more, Mr and Mrs Clayton, the defendants in these proceedings, have been customers of the Westpac Banking Corporation, the plaintiff in these proceedings.
During that time, assisted by funding from Westpac, Mr Clayton has acquired and retained a significant property portfolio consisting of six investment properties, of which five were in his name alone, and one was owned jointly with his wife.
Each of the properties was encumbered by a mortgage to Westpac. Each of the mortgages secured the entirety of the monies loaned by Westpac to Mr Clayton.
So far as can be ascertained from the evidence and submissions, it seems to have been the long term intention of, at least, Mr Clayton that by subdividing and developing one of the investment properties which was located at West Pennant Hills, he would be able to make a sufficient profit to enable the entirety of the borrowings to Westpac to be discharged and thereby retain as unencumbered assets, the remaining five properties which were located at Stanmore, Cabramatta, Lewisham, Ashfield and Meadowbank.
However, the property at West Pennant Hills has not been redeveloped, the loans have not been repaid, Mr Clayton has not managed to refinance the indebtedness and Westpac has called up the loans.
In 2009, Westpac commenced proceedings seeking possession of all of the properties and, as well, a monetary judgment against each of Mr and Mrs Clayton.
The proceedings have now been heard and this judgment deals with Westpac's claim.
Procedural Background
Westpac commenced the proceedings by filing a statement of claim on 22 July 2009. This statement of claim was amended, in a relatively minor way, with the leave of the Court on 10 December 2009. Westpac has since then proceeded upon the basis of that amended statement of claim.
On 16 October 2009, Fox & Staniland, Lawyers, filed a defence on behalf of Mr and Mrs Clayton to the original statement of claim. That defence put in issue whether there was any default with respect to the loans and whether the failure of either or both of Mr and Mrs Clayton to remedy any claimed default, constituted a breach of the loan agreements.
The defence pleaded that the demands made by Westpac were invalid and ineffective because Westpac first had to give a notice terminating the various overdraft and loan facilities.
The defence further pleaded that there was unconscionable conduct on the part of Westpac because it sought to resile from representations which it was alleged had been made by officers of Westpac to Mr and Mrs Clayton to the effect that the defendants could draw down the loan funds, were not obliged to pay interest or other charges upon those loan funds for so long as the value of the security properties exceeded the sum borrowed and that the loans would not be called up, but if they were, the defendants would have a sufficient opportunity to reorganise their affairs.
At that time, no cross-claim was filed by Mr or Mrs Clayton against Westpac. But shortly thereafter, on 17 November 2009, a cross-claim was filed which sought declarations about the effect and consequences of Westpac's conduct, and, as well, declarations of contraventions of the Australian Securities and Investments Commission Act 2001 (Cth) and the Trade Practices Act 1974 (Cth).
The facts, matters and circumstances referred to in the cross-claim seemed to mirror the matters contained in each of the defences.
On 25 January 2010, Fox & Staniland ceased to act for Mr and Mrs Clayton.
On 15 February 2010, the proceedings came before the Registrar, who, amongst other orders, ordered that Mr and Mrs Clayton serve the evidence upon which they proposed to rely, in respect of the principal proceedings and the cross-claim on or before 7 June 2010.
Prior to that date arriving, Westpac filed a notice of motion returnable on 6 May 2010 seeking orders that the defendants' defence and cross-claim be struck out and that Westpac have leave to file default judgment against each of them.
That motion came before the Court on 6 May 2010, and it was ultimately fixed for hearing on 2 June 2010.
On 2 June 2010, at a time when the defendants were unrepresented, Justice McCallum made a series of orders with respect to the pleadings and the provision of particulars, and referred the proceedings for mediation under s 26 of the Civil Procedure Act 2005.
Thereafter, on 9 June 2010, Mr and Mrs Clayton, in compliance with McCallum J's orders, filed an amended defence to the amended statement of claim. The amended defence was in almost identical form to that which had been originally filed.
It is convenient to note here that each of the filed defences included a pleading that it was unconscionable conduct on the part of Westpac to:
"resile from its representations, enforce the strict terms of the Agreements and Securities, make demands for payment, serve statutory notices, sue the Defendants and attempt to enforce any of the Securities without first affording the Defendants a reasonable opportunity to reorganise their financial affairs in an orderly fashion ..."
Each defence went on to plead that a reasonable period of time within which to enable the defendants to reorganise their financial affairs in an orderly fashion, was six months.
Because the parties were unable to agree on the identity of a mediator, the President of the Law Society of NSW was invited to, and did, appoint a mediator.
That mediation was ultimately conducted in December 2010, but the parties did not resolve their disputes in the course of that mediation, or within the few weeks afterwards.
The proceedings returned to the list before the Registrar on 4 February 2011 when, amongst other orders, the Registrar ordered that Mr and Mrs Clayton serve their evidence in chief in respect of both the principal proceedings against them and the cross-claim which they wished to propound, on or before 15 April 2011.
The matter came before Justice Davies in the Possession List on 21 April 2011, when his Honour noted that a new firm of solicitors had been appointed to act for the defendants. For a third time, orders were made requiring Mr and Mrs Clayton to serve the evidence upon which they proposed to rely on or before 27 May 2011.
On 24 June 2011, the matter returned before Justice Davies. It was clear that the defendants had not complied with the orders of the Court to file their evidence. Accordingly, his Honour granted the parties liberty to approach the List Clerk for a hearing date and ordered that no further evidence be filed by any party without the leave of the Court. The proceedings were fixed for hearing on 7 and 8 March 2012.
This period of almost eight months, during much of which solicitors acted for Mr and Mrs Clayton, was a lengthy one, during which, Mr and Mrs Clayton were in a position, should they have sought so to do, to have prepared evidence to support the allegations made in their defence and cross-claim and then to have sought the leave of the Court to rely upon that evidence. They did not do so.
At the request of Westpac, for a reason which does not appear in the evidence, the matter was restored to the list before Justice Davies on 8 December 2011.
The solicitors who had formerly acted for Mr and Mrs Clayton appeared at Court to indicate that they were soon to cease to act for Mr and Mrs Clayton in circumstances where, as his Honour was told, the solicitors had been unable to obtain any instructions on numerous occasions in relation to the matter.
His Honour then gave these directions:
"I direct that the defendants, in light of their failure to serve any evidence in the matter, are to file and serve any amended defence and cross-claim they wish to rely on, on or before 4pm 30 January 2012. If no such pleadings are filed by that date and time, the defendants will be confined at the hearing of the matter to presenting legal argument only in relation to whether the plaintiff's facility documents secured the amounts alleged to be owing to the plaintiff.
Alternatively, any application the defendants wish to make in respect of their pleadings is to be made returnable before me on 1 February 2012 at 9.30am by a duly filed notice of motion.
In addition, the first and second defendants are to serve any written submissions in support of any defence and cross-claim by 8 February 2012."
On 11 January 2012, as had been foreshadowed to Justice Davies, the solicitors then acting for Mr and Mrs Clayton ceased to act.
On 1 February 2012 the matter was again before Justice Davies for further directions. There was no appearance by either of the defendants. No amended pleadings had been filed. Unsurprisingly, in light of the many defaults of Mr and Mrs Clayton in compliance with orders of the Court, his Honour gave a further direction in the following terms:
"I can also indicate that subject to the trial judge's ruling, my direction is that the defendants are to be confined to the legal argument that the plaintiff's facility agreements do not secure the amounts said to be owing to the plaintiffs as envisaged in my order made on the last occasion."
The defendants again failed to comply with the Court's order that they file their written submissions by 8 February 2012. In this state, the matter came on for hearing on 7 March 2012.
On 7 March 2012, when the matter was called on for hearing, Mr Clayton appeared and informed the Court that he would present argument for himself and his wife. He informed the Court that his wife would not be in attendance at Court. On that day, after some discussion, Mr Clayton formulated an application on behalf of himself and his wife for the proceedings to be adjourned for a period of six months, which he anticipated would be sufficient time to enable him to commence his subdivision proposal for the land at West Pennant Hills. He submitted that within that period, and having commenced to obtain the subdivision approval, he ought be able either to refinance the loans with Westpac, or else, renegotiate his arrangements with them.
He did not suggest that the adjournment was necessary to enable him to gather and file any evidence upon which he wished to rely.
The application was opposed by Westpac. For the reasons that I gave at the time, I refused the application, and declined to adjourn the matter as had been requested by Mr Clayton.
The proceedings continued for the balance of 7 March 2012 and were then stood over part-heard to Friday 16 March 2012. On that day, Mr Clayton again appeared, and Mrs Clayton did not appear. Mr Clayton cross-examined two of the witnesses upon whose affidavits Westpac had relied.
At the conclusion of that hearing, in light of the cross-examination about some fees and charges on the various facilities, I directed that Westpac provide some further evidence dealing with those costs and charges to which attention had been directed in the course of the cross-examination. As well, I directed that Mr and Mrs Clayton were to file and serve an outline of all submissions upon which they intended to rely in resisting Westpac's claim.
The matter was adjourned to resume on 4 April 2012. On 4 April 2012, Mr Clayton again appeared for himself. His wife did not attend. He addressed the Court on behalf of himself and his wife.
No written submissions have been filed in accordance with the directions of the Court, The matter proceeded by way of the tender, without objection, of the additional evidence provided by Westpac, to which Mr Clayton did not object, and the provision of an opportunity for Mr Clayton to put any oral submissions which he wished. Mr Clayton did not put any oral submissions of substance.
Westpac Loans to Mr Clayton
There were five loans made at different times by Westpac to Mr Clayton. No loans were made to Mrs Clayton, although she executed a mortgage to secure one loan and also provided a guarantee. I will return to those matters in due course.
Overdraft
By a letter dated 10 June 1997, Westpac made available to Mr Clayton, an overdraft facility with a variable interest rate. The facility limit was $200,000. The terms of the overdraft were made plain in that letter. It noted the following:
"PURPOSE: This facility will be used by you wholly or predominantly for business or investment purposes, namely, Working Capital.
TERM: To be reviewed annually by 31 December, and may be reviewed by the Bank at any time.
The amount owing from time to time on this Overdraft is repayable upon demand. Please note that this facility may be cancelled at any time by the Bank."
On 26 May 2000, the limit on the overdraft was increased to $300,000. The other features of the overdraft remained the same. As at May 2009, the overdraft had an outstanding balance of $317,086.42.
On 13 May 2009, Gadens Lawyers acting for Westpac, wrote to Mr Clayton enclosing a Letter of Demand from Westpac demanding that he repay within seven days, all of the principal, interest, fees and charges outstanding to the Bank with respect to the overdraft facility.
With the exception of four payments totalling a little under $1,000, no monies have been deposited to the credit of the overdraft account since the Letter of Demand was sent.
As at 4 April 2012, with accumulated interest, the overdraft account balance is $724,781.54.
I am satisfied that this amount is the correct sum owing by Mr Clayton to Westpac with respect to this overdraft account.
Business Loan No. 1
On 26 May 2000, at the same time as the overdraft limit was increased, Westpac made available to Mr Clayton a "Business Development Loan - Residential Property" the purpose of which was to assist with residential property development. This loan, called Business Loan No.1, was for the sum of $500,000 for a period of five years, expiring on 23 June 2005.
The commencing interest rate was 7.9 per cent, but that rate was variable. As well, various charges applied. The interest, together with all fees and charges, were debited to the overdraft account.
As at May 2009, the Business Loan No.1 had an outstanding balance of $500,815.34.
On 13 May 2009, Gadens Lawyers acting for Westpac, wrote to Mr Clayton enclosing a Letter of Demand from Westpac demanding that he repay within seven days, all of the principal, interest, fees and charges outstanding to the Bank with respect to this Business Loan.
After the Letter of Demand was served, Mr Clayton did not make any payments by way of a credit against this loan.
As at 4 April 2012, the total amount due and owing on this account, including principal, interest, fees and charges, is $717,242.24.
I am satisfied that this amount is the correct sum owing by Mr Clayton to the Westpac with respect to this loan account.
Investment Loan No. 1
In September 2001, Westpac lent to Mr Clayton a sum of $280,000 for a term of five years with interest to accumulate at Westpac's "Investment Property Rate" from time to time, which was subject to an adjustment of 0.70 per cent in favour of Mr Clayton.
The interest payments which were due monthly and any other fees and charges were, by arrangement with the Bank, debited to the overdraft account.
As at May 2009, this loan had an outstanding balance of $283,708.92. No payments had been made to reduce this loan from the time it had been advanced until that time.
On 13 May 2009, Gadens Lawyers acting for Westpac, wrote to Mr Clayton enclosing a Letter of Demand from Westpac demanding that he repay within seven days, all of the principal, interest, fees and charges outstanding to the Bank with respect to this Investment Loan.
After the Letter of Demand was served, Mr Clayton did not make any payments by way of a credit against this loan.
As at 4 April 2012, the total amount due and owing on this account, including principal, interest, fees and charges, is $347,057.77.
I am satisfied that this amount is the correct sum owing by Mr Clayton to the Westpac with respect to this loan account.
Investment Loan No. 2
On 20 March 2002, Westpac lent $250,000 to Mr Clayton for a period of one year.
The interest was the same as in the previous loan, namely, interest at Westpac's Investment Property Rate from time to time less a 0.70 per cent adjustment in favour of Mr Clayton. As well, fees and charges were to apply. The monthly interest payments, together with fees and charges, were to be debited to the overdraft account.
As at May 2009, Investment Loan No.2 had an outstanding balance of $253,101.48.
On 13 May 2009, Gadens Lawyers acting for Westpac, wrote to Mr Clayton enclosing a Letter of Demand from Westpac demanding that he repay within seven days, all of the principal, interest, fees and charges outstanding to the Bank with respect to this Investment Loan.
After the Letter of Demand was served, Mr Clayton did not make any payments by way of a credit against this loan.
As at 4 April 2012, the total amount due and owing on this account, including principal, interest, fees and charges, is $308,664.95
I am satisfied that this amount is the correct sum owing by Mr Clayton to the Westpac with respect to this loan account
Business Loan No. 2
On 17 January 2005, in the course of the rearrangement of an existing facility, Westpac made available a "Business Development Loan with respect to Residential Property" in a total sum of $360,000.
The loan was made available for a period of six months to expire in July 2005 and at the variable interest rate, known as the Business Development Rate.
It was an interest only loan in which interest charges were debited monthly. They were, together with fees and charges, debited to the overdraft account.
As at May 2009, Business Loan No. 2 had an outstanding balance of $359,856.98.
At no time after the loan was advanced until then, had any moneys been repaid.
On 13 May 2009, Gadens Lawyers acting for Westpac, wrote to Mr Clayton enclosing a Letter of Demand from Westpac demanding that he repay within seven days, all of the principal, interest, fees and charges outstanding to the Bank with respect to this Business Loan.
After the Letter of Demand was served, Mr Clayton did not make any payments by way of a credit against this loan.
As at 4 April 2012, the total amount due and owing on this account, including principal, interest, fees and charges, is $482,698.90.
I am satisfied that this amount is the correct sum owing by Mr Clayton to the Westpac with respect to this loan account
Summary
In summary, a total of $1.69M was advanced (or provided by overdraft accommodation) by Westpac to Mr Clayton. As at May 2009, a total of $1.714 million was due and owing. Proper demand was made on Westpac's behalf for these sums.
Mr Clayton's response was to stop the usual payments which were being deposited to the overdraft account, such as those representing rental income received from the investment properties. Less than $1,000, consisting of dividends paid in respect of shares apparently held by Mr Clayton, has been deposited to the credit of the overdraft account since that time.
As at 4 April 2012, a total of $2,580,445.40 is due and owing.
It is appropriate that I note that this total has been adjusted in favour of Mr Clayton to remove a number of fees and charges made to the various accounts, which were the subject of cross-examination of the bank officers by Mr Clayton. Westpac made the adjustments voluntarily. Having regard to their minor nature and small sums involved, the making of these adjustments seems a sensible commercial approach. The details of these adjustments, which are unnecessary to recount in this judgment, are to be found in the affidavit of Mr Lindsay Davidson, a senior manager of Westpac, sworn 30 March 2012.
Securities
Cabramatta Property
On 8 September 1983, Mr Clayton gave Westpac a mortgage over the property at 27/53 McBurney Road, Cabramatta for various advances to him. The mortgage was registered by the Land Titles Office (as it is now called) as dealing number 7005362K and is the only mortgage on the title of the property.
The mortgage was given in consideration for, at least,
"...at any time or from time to time hereafter granting or affording advances or accommodation and in each such case whether such advances or accommodation are at the discretion and during the pleasure of the Bank or otherwise ..."
The parties to that mortgage, Mr Clayton and Westpac, agreed to observe the provisions of Memorandum T201897 which was filed in the Land Titles Office.
That Memorandum included the following in the definition of secured monies:
"All moneys ... hereafter advanced or paid by the Bank to for or for the accommodation of or on behalf of the Debtor and the Mortgagor or either of them alone or jointly with any other person ... "
and
"Also all moneys which the Bank is or shall be entitled to debit and charge to any account of the Debtor and the Mortgagor or either of them either alone or jointly with any other person ..."
The Memorandum also included this clause:
"And for the consideration stated in the schedule to the said Mortgage, the Mortgagor hereby covenants with the Bank and it is hereby agreed and declared as follows:
1A That the Mortgagor will pay to the Bank on demand which demand may be made at any time or from time to time the moneys hereby secured or such part or parts of the moneys hereby secured as may be specified in each such demand unless there is an agreement in writing to the contrary between the Mortgagor and the Debtor or either of them and the Bank in which case the Mortgagor will pay the moneys hereby secured to the Bank at such time or times and in such manner as has been so agreed in writing or as may at any time or from time to time be agreed in writing between the Mortgagor and the Debtor or either of them and the Bank ..."
There were many other clauses in the Memorandum in the conventional form. The clauses permitted Westpac to make demand where default existed in any of the obligations created by the loan documents or the security documents, such as the mortgage, and that in the event of such demand being made, then all of the monies due and owing secured by the mortgage become due and payable.
It is unnecessary for this last provision to be relied upon by Westpac in this case.
On 29 May 2009, Gadens Lawyers wrote to Mr Clayton pointing out that he was in default under the terms of the mortgage with respect to the Cabramatta and Ashfield properties because he had failed to comply with the demand dated 13 May 2009, to which I have earlier referred.
The later letter went on to say:
"The mortgagee demands from you the immediate payment of $1,714,569.14.
We enclose, by way of service, notices under section 57(2)(b) of the Real Property Act 1900. Read the notices carefully. Consequences of not complying with the notices are serious.
The amount stated in the notices is not the total amount due under the mortgages. The mortgagee reserves its rights in respect of any other event of default which may have occurred or may occur in the future whether known to the mortgagee or not.
The notice is given without prejudice to the mortgagee's rights to rely on any non-monetary default with which the mortgages dispense the necessity to give notice."
Accompanying that letter was a notice pursuant to s 57(2)(b) of the Real Property Act 1900 from Gadens Lawyers on behalf of Westpac to Mr Clayton indicating that unless the requisite monies were repaid, then the Bank proposed to exercise its power of sale granted by the mortgage.
There is no challenge to the fact that this letter was sent and received, nor was there any challenge to the fact that it was sufficient to activate the mortgagee's power of sale.
I am satisfied that the mortgage over this property secured each of the loans (or overdraft facility) to which I have earlier made reference at [42], [48], [55], [62] and [69].
Lewisham Property
On 8 September 1983, Mr Clayton mortgaged the property at 15/34-36 Gould Avenue, Lewisham to Westpac. The mortgage was registered by the Land Titles Office (as it is now called) as dealing number 7005363H and is the only mortgage on the title of the property.
The mortgage was in identical terms to that given with respect to the Cabramatta property to which I have just made reference. The Memorandum incorporated in the mortgage was identical with that for the Cabramatta property. There is no need to repeat those provisions with respect to this property.
On 29 May 2009, Gadens Lawyers on behalf of the Bank wrote to Mr Clayton notifying him of the default in the terms of this mortgage because of his failure to comply with the demand for each of the advances to which I have earlier referred. The demand and notification with respect to the exercise of powers of sale under the Real Property Act, were made in identical terms to that with respect to Cabramatta property. There were no issues raised by Mr Clayton with respect to these demands.
I am satisfied that the mortgage over this property secured each of the loans (or overdraft facility) to which I have earlier made reference at [42]. [48], [55], [62] and [69].
Ashfield Property
On 8 September 1983, Mr Clayton mortgaged the property at 1/52 Bland Street, Ashfield to Westpac. The mortgage was registered by the Land Titles Office (as it is now called) as dealing number 7005362K and is the only mortgage on the title of the property. This one mortgage covered both this property and the Cabramatta property. There is no need to repeat, here, the details of the paragraphs referring to the Cabramatta property. They also apply to this property.
Accordingly, I am satisfied that the mortgage over this property secured each of the loans (or overdraft facility) to which I have earlier made reference at [42], [48], [55], [62] and [69].
Pennant Hills Property
This property which is at 21 Cherrybrook Road, West Pennant Hills was owned by Mr and Mrs Clayton as joint tenants.
On 9 July 1986, both Mr and Mrs Clayton signed a mortgage which was in the same form as those described above, in which they mortgaged the Pennant Hills property to the Bank. The mortgage was registered by the Land Titles Office (as it is now called) as dealing number W441661 and is the only mortgage on the title of the property.
The Memorandum filed and incorporated into the mortgage was V581853. Although this was a different memorandum from that to which I have earlier referred, there is no significant difference in the content of it, or in the obligations created by it.
This mortgage, unlike the previous mortgages to which I have referred, specifically secured the overdraft loan and Business Loan No.1.
Demand was made upon Mr Clayton with respect to default in the mortgage and service of a Notice of Exercise of Power of Sale occurred in an identical manner to the letter of 29 May 2009 described above.
So far as Mrs Clayton was concerned, a letter was sent to her by Gadens Lawyers, on behalf of Westpac on 1 June 2009. It was relevantly in the following terms:
"The mortgagee demands from you the immediate payment of $800,000.00.
We enclose, by way of service, notice under section 57(2)(b) of the Real Property Act 1900. Read the notice carefully. Consequences of not complying with the notices are serious.
The amount stated in the notice is not the total amount due under the mortgages. The mortgagee reserves its rights in respect of any other event of default which may have occurred or may occur in the future whether known to the mortgagee or not.
The notice is given without prejudice to the mortgagee's rights to rely on any non-monetary default with which the mortgage dispenses the necessity to give notice.
If you have any concerns about your legal position, you should get independent legal advice."
I am satisfied that the mortgage over this property secured specifically the overdraft loan and Business Loan No. 1. As well, by application of the clauses in the Memorandum, Westpac is entitled to apply the proceeds of sale of this property in reduction of any amounts outstanding on any of the loans (or overdraft facility) by Mr Clayton.
Stanmore Property
On 22 October 2001, Mr Clayton mortgaged the property at 87 Salisbury Road, Stanmore to Westpac. The mortgage was registered by the Land Titles Office (as it is now called) as dealing number 8117401C and is the only mortgage on the title of the property.
The terms of that mortgage were that he mortgaged:
"... to the mortgagee all the mortgagor's estate and interest in the land specified above, and covenants with the mortgagee that the provisions set out in the Memorandum No. 6214565 ... are incorporated in this mortgage. This mortgage is given for value, including the Lender, as you have requested, giving or continuing credit or not exercising rights or agreeing to do so (even conditionally)."
The Memorandum to which this mortgage made reference included relevantly the following terms:
"B1. WHAT YOU MUST PAY
If there is only one of you, you promise to pay the following amounts to the Lender. ...
(a) All money which you owe the Lender under the Secured Arrangements, now or in the future, alone or with others.
For example, this may include:
- the principal amount of a loan or loans;
- interest;
- any fees and charges, including government charges and duties;
...
- amounts to reimburse or indemnify the Lender.
(b) All reasonable amounts which the Lender reasonably spends or incurs:
in relation to the enforcement of this mortgage; or
in preserving or maintaining the property after a breach occurs."
The Memorandum goes on to note that in the event of a default under the loans or under the mortgage which continues for at least seven days, Westpac is entitled to serve a notice on the mortgagor, and if the failure continues for at least 31 days after service of the notice, then the lender is entitled to:
"do any one or more of the following, but it need not do so.
Require you to pay to the Lender all monies secured by this mortgage. Each of you will then pay immediately all principal and all other amounts which you promise to pay under clause B1, even if they are not yet otherwise payable.
Take possession of the property. ...
Sell the property in one or more lots or with other property.
Do anything you could do in relation to all or part of the property."
On 29 May 2009, by letter from Gadens Lawyers, Westpac demanded from Mr Clayton immediate payment of the sums outstanding and gave notice that it would exercise its power of sale under s 57(2)(b) of the Real Property Act if repayment was not made.
The terms in which such demand was made are identical to those to which I have earlier made reference.
I am satisfied that the mortgage over this property secured each of the loans to which I have earlier made reference in paragraphs [42], [48], [55], [62] and [69].
Meadowbank Property
On 22 April 2005, Mr Clayton mortgaged the property at 10/7 Meadow Crescent, Meadowbank to Westpac. The mortgage was registered by the Land Titles Office as dealing number AB467449R and is the only mortgage on the title of the property.
The mortgage was in the same terms as that entered into with respect to the Stanmore property but incorporated a different Memorandum being that numbered 9488920.
That Memorandum had clauses to the same effect as those to which I have referred with respect to the Stanmore property.
On 29 May 2009, as with all other mortgages entered into by Mr Clayton, demand was made of him with respect to default under this mortgage, and notice was give of intention to exercise a power of sale. The terms upon which that demand was made were identical to those to which I have previously made reference.
As with the other mortgages, I am satisfied that the mortgage over this property secured each of the loans to which I have earlier made reference in paragraphs [42], [48], [55], [62] and [69].
Guarantee
On 14 July 2000, Mrs Clayton, as guarantor, entered into a Guarantee and Indemnity by which she guaranteed
"...all liabilities and obligations of [Erwin John Clayton] now or in the future under or in respect of any of the following or any amendment or replacement for them.
Business Finance Agreement dated 26/05/2000; or any other arrangement or obligation you agree is covered by this Guarantee
on the terms set out in the Memorandum of Common Provisions referred to below.
There is a limit on the amount to be paid under this guarantee and indemnity. It is $800,000.00 (or any other amount agreed in writing).
In enforcing this Guarantee, the Lender will only have recourse to its security over 21 Cherrybrook Road West Pennant Hills NSW 2125. Your liability is restricted to the proceeds of realisation of that security. However for the purposes of enforcement of the security and the steps necessary to enforce that security (including making demands) this restriction will be disregarded."
It is necessary to refer briefly to the Memorandum of Common Provisions.
The terms included the following:
"B1. WHAT YOU MUST PAY
You promise to pay the following amounts to the Lender.
All money ...
if you give or have given a Guarantee, all money which the Customer owes to the Lender for any reason, under or in relation to the guaranteed Obligations."
Guaranteed Obligations are defined in the Memorandum as follows:
" 'Guaranteed Obligation' in relation to a Guarantee, means any Guaranteed Obligation described in the Guarantee. It includes:
anything which now or in the future would have been a Guaranteed Obligation ...;
obligations of any one or more of the Customer owed to the Lender alone or with others now or in the future; and
at any time, obligations which may arise after that time."
The Guarantee included a form of acknowledgement in which Mrs Clayton acknowledged that prior to signing the Guarantee and Indemnity, she had read it and the Memorandum of Common Provisions carefully, that she had made her own decision to sign the Guarantee, that she had received advice from her own lawyer and that she was not looking to the Bank to advise her whether or not she should be signing the Guarantee.
She accepted that she understood, amongst other things, that if she signed the Guarantee and Indemnity, she may have to pay Westpac a "considerable sum of money" to repay the debts of Mr Clayton and that if Mr Clayton did not pay on time the monies which he owed to the Bank, she may be obliged to pay those monies.
She also acknowledged that it was a matter for her to find out whether Mr Clayton would be able to pay his debts, and that it was her task to ensure that her interests were protected.
She acknowledged the existence of a clause which indicated that the Guarantee
"... covers all money which the Customer owes to the Bank ... with a limit of $800,000.00."
Her signature on the Guarantee was witnessed by Mr John Rickard, a solicitor in practice at Pymble.
There is nothing in the evidence, or any other fact, matter or circumstance, which has been drawn to my attention which would suggest that this Guarantee ought not be interpreted in accordance with its terms.
As I have earlier indicated at [105], demand was made upon Mrs Clayton pursuant to the Guarantee and that demand has not been met.
The Guarantee is enforceable.
Discernment
Over time, Mr Clayton borrowed a significant sum of money from the Westpac Banking Corporation.
In order to secure that indebtedness, Mr Clayton mortgaged the six properties to Westpac, and his wife, Mrs Clayton, joined with him in mortgaging the Pennant Hills property.
As well, she executed a Guarantee which provided security, to a limited extent, namely $800,000, with respect to Mr Clayton's borrowings. That Guarantee also had a limited recourse to the proceeds of sale of the Pennant Hills property.
For reasons which do not appear in the evidence, the expectations of Westpac Banking Corporation with respect to the repayments of their loans were not met by Mr Clayton. Notwithstanding various demands extending over many years, a mediation, and many opportunities to file evidence in this Court justifying any defence which he might have, Mr Clayton has not done so. Nor has Mrs Clayton filed any evidence in the proceedings.
Although a defence and cross claim has been pleaded by Mr and Mrs Clayton, it has not been established on any of the evidence. Mr and Mrs Clayton have been ordered by the Court to file any evidence which they have upon which they intend to rely on three occasions over a twelve month period, and have failed so to do. The only conclusion which can be drawn from this failure is that they do not have any evidence to substantiate that which has been asserted in their pleadings.
Instead, Mr Clayton seemed to want to advance arguments to the Court which did not address the legal entitlements of Westpac, but which were more appropriate to a commercial negotiation. Although the defences contained a pleading that he ought to have been permitted a six month period to re-order his affairs, nearly three years has passed since Westpac made a demand upon him to repay the loans, and nearly two years since proceedings were commenced. Yet he has not made any arrangements to re-order his affairs. Although apparently in receipt of income from the investment properties, he has not paid any of that income to Westpac as ordinary commercial conduct would suggest is appropriate.
Even on the last day of hearing, having failed to comply with an order that he set out in writing any submissions which he may have in opposition to the orders sought by Westpac, Mr Clayton addressed the Court as though there was a current contractual negotiation taking place between him and the Court. He offered to commence the subdivision process on the West Pennant Hills property and put the other properties on the market. He proffered assurances to the Court that the process would continue and that he would be able if necessary to report back to the Court on the progress of the process, and that he would during that process attempt to make an ill-defined refinance arrangement. He suggested that it would be fair to him for the Court to stay the proceedings to enable him to undertake this process.
But Mr Clayton, as he seemingly has done for over three years, failed to address the real issues which were before the Court. Nor did he address the relief which Westpac sought.
Upon the basis of all of the facts to which I have earlier made reference, this case is an absolutely clear one. Westpac Bank is entitled to recover its funds and to enforce the securities which it holds. There is no good reason advanced, either of fact or law, in this case which would indicate that it was not so entitled.
It ought to have the various judgments and orders which it seeks.
In addition, Westpac is entitled to its costs of the proceedings, including any reserved costs.
Conduct of the Proceedings by the Defendants
It is appropriate, before formulating the precise orders to be made to pass comment on the conduct of the proceedings by the defendants.
I start by noting that all civil proceedings in this Court must be conducted to further the overriding purpose provided in the Civil Procedure Act in these terms:
"56 Overriding purpose
(1) The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
...
(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court."
As is plain from the legislation, the obligation to assist the Court falls onto the parties themselves as well as any lawyers they may retain.
In addition to the statute, the High Court of Australia has stated in the clearest possible terms what the obligations are for parties to litigation: Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175. The conduct of this matter by the defendants does not demonstrate attention to the principles discussed by the High Court of Australia, nor to the obligations set out in the legislation.
All that has been achieved by the delay in this case, and the failure by the defendants to address the real issues, is that the monies owed have been significantly increased when compared with the sum which would otherwise have been owing if the debt was crystallised, and the rights of Westpac addressed at a much earlier point in time.
This case demonstrates that the provisions of s56 of the Civil Procedure Act, require careful attention at all stages of proceedings. If this important provision is ignored as appears to have happened in this matter, then the Court will be left in a position where it is very difficult for it to fulfil the legislated purpose which underlies the exercise of its civil jurisdiction.
Although the issue was not argued in this case, the Court has the ability to impose costs orders which reflect the failure of parties, or their lawyers, to attend to their obligations to the Court.
Orders
I make the following orders:
(1) Judgment for the plaintiff against the first defendant for possession of the land contained in:
(a) Certificate of Title Folio Identifier 27/SP10539 and known as 27/53 McBurney Road, Cabramatta NSW;
(b) Certificate of Title Folio Identifier 1/SP7377 and known as 1/52 Bland St, Ashfield NSW;
(c) Certificate of Title Folio Identifier 15/SP7690 and known as 15/34-36 Gould Ave, Lewisham NSW;
(d) Certificate of Title Folio Identifier Auto Consol 14905-182 and known as 87 Salisbury Road, Stanmore NSW; and
(e) Certificate of Title Folio Identifier 10/SP6646 and known as 10/7 Meadow Crescent, Meadowbank NSW.
(2) Judgment for the plaintiff against the first and second defendants for possession of the land contained in Certificate of Title Folio Identifier 13/31118 and known as 21 Cherrybrook Road, West Pennant Hills, NSW
(3) Judgment for the plaintiff against the first defendant in the sum of $2,580,445.40 as at 2 April 2012.
(4) Judgment for the plaintiff against the second defendant in the sum of $800,000.00 as at 2 April 2012.
(5) Leave granted to the plaintiff to issue a writ of possession forthwith in relation to each of the premises described in Order (1) and Order (2).
(6) Judgment for the cross defendant on the cross-claim filed 17 November 2009.
(7) Order that the defendants/cross claimants pay the plaintiff/cross defendant's costs of the whole proceedings, including any reserved costs.
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Decision last updated: 16 April 2012
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