Westpac Banking Corporation v Ihl Australia Pty Ltd (in Liquidation) No. Scciv-02-1781

WESTPAC BANKING CORPORATION v IHL AUSTRALIA PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED)
[2003] SASC 302
Civil

DEBELLE J By application dated 23 May 2003, the plaintiff applies pursuant to Rule 25.02 for immediate relief. I will refer to the plaintiff as “Westpac” and to the defendant as “IHL”.
The Relevant Facts
I set out the facts leading to this application. IHL owns land at Broadbeach in Queensland. The land is subject to a mortgage in favour of Westpac as mortgagee. The mortgage secures, among other things, payment of all amounts referred to in any “lender arrangement” which includes any agreement to which IHL and Westpac are parties or under which obligations arise from IHL to Westpac.
By a Deed of Guarantee and Indemnity dated 26 June 2001, IHL has guaranteed that it will pay Westpac all monies owed to Westpac by a company called Quoin Technology Pty Ltd (“Quoin Technology”) which had been demanded by Westpac.
On 26 June 2002 Westpac demanded payment from IHL of the amount of $618,807.27 then due and owing by Quoin Technology to Westpac together with interest and the sum of $300 being the cost incurred by Westpac in connection with the demand. IHL failed to pay the money demanded by Westpac.
Pursuant to clause D2 of the mortgage, IHL is in default under the mortgage if
(a) IHL does not pay any amount due under the guarantees; or
(b) an administrator or liquidator of IHL is appointed.
Pursuant to clause D3 of the mortgage, at any time after IHL is in default, Westpac is entitled to take possession of and sell the land.
On 5 August 2002 Mr G L Stuckey was appointed administrator of IHL. On 2 September 2002 the creditors of IHL resolved that IHL be wound up and that Mr Stuckey be appointed liquidator.
Westpac, therefore, asserts that IHL is in default under the mortgage so that it is entitled to exercise the power of sale under the mortgage. IHL is in default, if for no other reason than that an administrator has been appointed. It was again in default upon the appointment of a liquidator.
Meanwhile, on 14 February 2002, IHL had lodged a caveat forbidding the registration of any interest affecting the land until the caveat is withdrawn. The ground on which IHL lodged the caveat is that
“[IHL] is entitled to restrain an alleged mortgagee, Westpac Banking Corporation from exercising an alleged power of sale under a security which the registered proprietor says it did not execute.”
Since lodging the caveat, IHL has not instituted any action to restrain Westpac from exercising its power of sale pursuant to the mortgage nor has it instituted any other legal proceedings in respect of the alleged forgery. There is no explanation on the part of IHL for its failure to institute any proceedings. However, it is reasonable to infer that it has not done so by reason of the fact that Westpac has not instituted proceedings to remove the caveat and that IHL has been in financial difficulty. No other reason has been advanced.
On 18 September 2002 Westpac asked Mr Stuckey, the liquidator of IHL, to remove the caveat. By letter dated 21 October 2002, Mr Stuckey refused to do so and set out the reasons for his decision. It is unnecessary to examine those reasons. I am satisfied that Mr Stuckey was not acting contumaciously.
Summons to Remove Caveat
Westpac wishes to exercise its power of sale. On 4 December 2002, it commenced this action seeking an order that the Registrar of Titles in Queensland remove the caveat. The statement of claim pleads the facts set out above, that is to say, the mortgage, the alleged default of IHL and the alleged entitlement of Westpac to exercise its rights under the mortgage and to sell the land. The statement of claim pleads that IHL lodged the caveat and the terms of the caveat and asserts that IHL did execute the mortgage and that it was not entitled to lodge the caveat. Beyond that, the statement of claim does not address the issue of the caveat. Wesptac then seeks an order that the caveat be removed.
By notice dated 20 December 2002 Westpac gave notice to IHL and Mr Stuckey as liquidator of the defendant of its intention to sell IHL’s land if the default was not remedied.
No objection has been taken to the jurisdiction of this Court to make that order. Westpac relies on the reasoning in Macks v Emanuele (1998) 196 LSJS 89. The Registrar of Titles in Queensland does not wish to be joined as a defendant and has stated that he will abide the order of the court.
IHL’s Defence
On 20 January 2003, IHL filed a defence in which it alleged that the mortgage was executed in circumstances whereby a fraud was committed upon IHL and that it was executed without the authority of IHL. Briefly stated, the particulars of that allegation are:
• that the mortgage was executed by Messrs C M Clifford and J B Booth;
•that Booth executed the mortgage as the secretary of and as a director of IHL;
•that at no time was Booth either a director or the secretary of IHL and that Booth had no authority to execute documents on IHL’s behalf;
•that Clifford was a director of IHL but he did not have authority to execute any security on behalf of IHL in favour of Westpac; and
•that Clifford fraudulently executed the mortgage for improper purposes and to extinguish or reduce his personal indebtedness or the indebtedness of his companies.
In February 2003 IHL expressed an intention to apply to transfer this action to the Supreme Court of Victoria. On 26 February 2003 it was ordered to issue the application within seven days. It failed to do so. On 14 March, the time to issue the application was extended by a further 14 days. IHL later abandoned the intention to apply to transfer the action.
At a directions hearing on 24 April 2003 IHL gave notice of its intention to apply to join Messrs Clifford and Booth, to amend its defence, and to plead a counterclaim. On the same day, Westpac gave notice of its intention to issue a summons seeking immediate relief. I made orders including the following:
“1The defendant file and serve its amended defence and counterclaim on or before 15 May 2003.
2The plaintiff be at liberty to file and serve a defence to counterclaim on or before 30 May 2003.
3The defendant file and serve on the proposed third parties their application to join the proposed third parties including a copy of any proposed third party statement of claim on or before 21 May 2003.
4That the plaintiff is at liberty to file and serve such application pursuant to section 127 of the Land Titles Act 1994 (Qld) relating to the caveat lodged by the defendant over the whole of the land comprised in Lots 30, 38 and 64 on the Building Unit Plan 102674, being Title Reference numbers 50082904, 50082912 and 50082938.
5That upon the issue by the defendant of the proposed application to join the third parties, the plaintiff be at liberty to serve upon any proposed third parties a copy of its application referred to in paragraph 4 hereof.
6That within 14 days after service of the application referred to in para 4 and the affidavits in support thereof, the defendant shall file and deliver such answering affidavits as it may be advised.”
Summons for Immediate Relief
The next directions hearing was listed for 26 May. By agreement of the parties, it came on for hearing on 27 May. On that occasion the parties reported on some issues. Westpac had on 23 May issued a summons seeking immediate relief pursuant to Rule 25.02. IHL had by then filed its amended defence and counterclaim on 26 May, some eleven days late. IHL had also issued its application to join Messrs Clifford and Booth. That too was late by some five days. The directions hearing was adjourned to 6 June.
IHL’s Amended Defence
In its amended defence, IHL gave more detailed particulars as to the fraudulent conduct and the improper purposes of Clifford. In its counterclaim it sought orders that the guarantee and mortgage be set aside, that both be delivered up to IHL and for an order that the Registrar-General of the Lands Titles Office in Queensland be directed to remove the entry of the mortgage from the relevant Certificates of Title. The proper title of this officer in Queensland is Registrar of Titles but nothing turns on that.
On 6 June I made some orders extending time limits within which IHL could file its defence and counterclaim and issue its third party proceedings. IHL had not by then filed an affidavit in answer to the plaintiff’s claim for immediate relief and I extended the time to do so until 12 June. I ordered the plaintiff’s application for immediate relief to be heard on 3 July.
Westpac’s Reply
On 17 June, Westpac filed its reply to the defence of IHL and its defence to the counterclaim. It pleads, among other things, that the mortgage was granted by Westpac to enable Quoin Technology to obtain an increase in its credit facilities with Westpac so that Quoin Technology could fund the operations of IHL. In answer to the allegation of lack of authority, Westpac relies on s 126 and s 128 of the Corporations Law. It further pleads that IHL is estopped from asserting either fraud or lack of authority. However, it does not directly plead to the allegations that Westpac knew that the mortgage had been executed by a person who had no authority to do so, knew that Clifford had guaranteed the same debt and was insolvent and knew that Quoin Technology was also insolvent or was wilfully blind to all of those facts. In the alternative, it alleges that if Clifford and Booth lacked authority, it is entitled to an equitable mortgage.
A Late Affidavit
IHL did not file any affidavit in answer to Westpac’s claim before 12 June as ordered by me on 6 June. When this application was called on for hearing on 3 July, Mr Slattery, who appeared for IHL, applied to tender an affidavit sworn by an employee of his instructing solicitors which exhibited an affidavit of Mr Israel Herzog sworn on 2 July which had been sent by facsimile transmission to Mr Slattery’s instructing solicitors. The affidavit is in these terms:
“I ISRAEL HERZOG of 203 Ingles Street, Port Melbourne, in the State of Victoria, company director, MAKE OATH AND SAY:
1.I am a director of Quoin (Int) Limited the parent company of the defendant.
2.I swear this affidavit in support of the defendant’s opposition to the plaintiff’s application for summary judgment (by notice for specific directions) dated 23 May 2003.
3.John Berkely Booth (‘Booth’) was never an authorised signatory of the defendant.
4.The defendant never resolved to enter into the mortgage documents with Westpac.
5.Any documentation purporting to contain an authority to authorise Booth to execute mortgage documentation or guarantees on behalf of the Defendant is a forgery and has never been authorised.
6.I know the facts deposed to in my affidavit of my own knowledge.”
I admitted only paragraphs 1, 2, 5 and 6 of the affidavit. Paragraph 5 was admitted to the extent only that it proves the absence of authority of Mr Booth in relation to Quoin (Int) Ltd. It will be recalled that IHL had guaranteed the indebtedness of Quoin Technology. Although Quoin (Int) Ltd is the parent of Quoin Technology, there is no proof that Mr Herzog is a director of Quoin Technology or has any knowledge of its affairs. Thus, the affidavit evidence in support of IHL’s opposition to the application by Westpac for immediate relief is extremely sparse.
It is necessary to note an agreed fact. It is that on 11 June 2003 IHL went into administration and Mr Anthony Robert Cant was appointed administrator. The appointment was made by Mr Starke as liquidator. The appointment of Mr Cant was confirmed at the first meeting of the creditors held on 17 June 2003.
By reason of s 440D of the Corporations Act, Westpac requires leave of the court to proceed with this application. Mr Ross-Smith made an oral application for leave. The application was opposed by Mr Slattery, who appeared for IHL. It is appropriate to grant leave as it is necessary for the purposes of the administration to determine whether Westpac is entitled to enforce the mortgage. However, for the reasons which follow the grant of leave does not affect the outcome of this application.
Substantial Issues of Fact
It is apparent from this recital of the facts and of the pleadings that there are substantial questions of fact to be tried. The questions of fact are neither suitable nor capable of speedy resolution. The allegations made by IHL are very serious and require careful examination. They include allegations that Westpac was aware of the lack of authority of Messrs Booth and Clifford. If IHL proves its case, Westpac will not be able to enforce its mortgage and will not be entitled to an order that the caveat be removed.
The issues of fact are of a kind which will require extensive oral evidence. The nature of the allegations and, in particular, the allegations as to fraud and that Westpac knew of the lack of authority suggests that there will be a number of witnesses and extensive cross-examination. In short, the dispute is substantial and not likely to be readily and speedily resolved.
The Relevant Principles
The circumstances in which an application may be made for immediate relief under Rule 25.02 have been examined in a number of decisions. It is sufficient to refer to Bellas v Kipouros (1974) 8 SASR 418; Wicklow Enterprises Pty Ltd v DoysalPty Ltd (1985) 124 LSJS 225; Settlement Wine Co Pty Ltd v National & General Insurance Co Ltd (1988) 143 LSJS 398; Lawrence v Griffiths (1987) 47 SASR 455 and Addstead Pty Ltd (in liq) v Liddan Pty Ltd (1997) 70 SASR 21. Those cases establish the following principles:
(1)The procedure is available in cases of urgency where the plaintiff must show that the action should not be dealt with in the ordinary trial list: Bellas v Kipouros (supra) at 419; Settlement Wine Co Pty Ltd v National & General Insurance Co Ltd (1988) 146 LSJS 150 at 151 and Lawrence v Griffiths (supra) at 486.
(2)The procedure is suitable for disposing expeditiously of cases in which there is not a substantial dispute or in which the nature of the dispute is such that it can be resolved readily and speedily in chambers: Wicklow Enterprises Pty Ltd v Doysal Pty Ltd (supra); Lawrence v Griffiths (supra) at 486 and Settlement Wine Co Pty Ltd v National & General Insurance Co Ltd (supra) at 152.
(3)The corollary of the second principle is that the procedure is not suitable for the resolution of substantial disputes as to the facts and as to issues of law requiring extensive argument and consideration: Wicklow Enterprises Pty Ltd v Doysal Pty Ltd (supra) at 226; Lawrence v Griffiths at 487; Emanuel Management Pty Ltd v Emanuele; Cowell & Ors (unreported, 26 October 1998, Judgment No. S6924). The various mischiefs in not adhering to the principle were listed by King CJ in Wicklow Enterprises Pty Ltd v Doysal Pty Ltd (supra) at 225 – 226.
(4)The procedure is available as an alternative to Rule 25.01 where the summons has not been endorsed in the manner required by Rule 25.01 but the plaintiff considers there is no serious issue to be tried: Bellas v Kipouros (supra) at 419; Settlement Wine Co Pty Ltd v National & General Insurance Co Ltd (supra) at 152. In those circumstances, it is unnecessary to demonstrate urgency: Lawrence v Griffiths (supra) at 486.
(5)The plaintiff has the onus of demonstrating that there is a lack of a serious issue to be tried: Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd (1985) 121 LSJS 361; Lawrence v Griffiths (supra) at 486.
(6)Where the defendant seeks to raise a ground on which it bears the onus of proof, the defendant must establish that that ground raises an issue to be tried: Settlement Wine Co Pty Ltd v National & General Insurance Co Ltd (supra) per King CJ at 155 and per Legoe J at 166 – 167.
I respectfully agree with the observations of Lander J in Addstead Pty Ltd (in liq) v Liddan Pty Ltd at first instance which on appeal were cited with approval by Perry J at 70 SASR 21 at 52:
“ The procedure is appropriate in circumstances where a party can establish urgency and the court is able, because the issues can be dealt with expeditiously and because of the nature of the case, the issues are neither complex nor lengthy, to give a decision without the necessity for trial. The procedure should not be adopted to give a party an advantage over the other party, nor for the purpose of one party obtaining priority in the hearing of that party’s action over and above the general range of litigants.”
No Urgency
It will be immediately noted that Westpac has not proved that there is any particular urgency. Although the caveat was lodged on 14 February 2002, Westpac did not commence this action until 4 December 2002. It did not issue the application for immediate relief until 23 May 2003, some 15 months after the caveat had been lodged. Counsel for Westpac submitted that it is likely that the land, the subject of the mortgage, will be sold by Bank West Ltd, another secured creditor of IHL. That does not establish urgency. If the land is sold by a secured creditor, Westpac is at liberty to take steps to ensure that the priorities between secured creditors are observed.
No Serious Issue to be Tried?
Westpac does not rely on urgency. Instead, it contends that it is appropriate to order immediate relief as there is no serious issue to be tried. It relies on its entitlement to enforce its mortgage and the failure of IHL to prove that it has a proper defence.
Mr Ross-Smith, who appeared for Westpac, submitted that there could be no serious issue that Westpac was entitled to enforce its mortgage and sell the land by reason of the acts of default on the part of IHL. Certainly, Westpac has established that there was an act of default which would entitle it to enforce its mortgage. However, it could only do so if the mortgage is valid. In other words, Mr Ross-Smith’s submission overlooks the effect of the caveat which was lodged before there was any default on the part of IHL and the allegations made in IHL’s defence. If Westpac is to succeed in this action, it must prove that it is entitled to an order that the caveat should be removed. It must, therefore, establish that there was no proper ground for lodging the caveat, that is to say, it must establish that the case advanced by IHL is without foundation. Once IHL had filed its defence and later its amended defence and counterclaim, Westpac was apprised of the grounds on which IHL relies. If Westpac seeks immediate relief, it must address the issues raised by the defence and counterclaim. This is a different kind of case from Settlement Wine (supra) in that a substantive defence has been filed and the onus of showing why the caveat should be removed remains on Westpac. As Westpac has not adduced one iota of evidence to prove why the caveat should be removed, it has not discharged that onus.
Mr Ross-Smith also contended that the failure of IHL to advance satisfactory affidavit evidence in support of its opposition to Westpac’s application for immediate relief should tell against IHL. The recitation of the events in this action demonstrates that IHL has failed to comply with time limits specified by orders of the court for the filing and delivery of pleadings, affidavits and other documents. The affidavit of Mr Herzog constitutes no more than a bare assertion of the alleged forgery and lack of authority. In no respect does he condescend to particulars. The fact that IHL has failed to prove by affidavit the particulars of its defence is a matter for concern. However, it is Westpac which must establish that it is entitled to immediate relief. However, to refer to the absence of evidence from IHL is to put the cart before the horse. Westpac must first prove why it is entitled to an order to remove the caveat. I repeat, Westpac has failed to prove anything other than that it is entitled to enforce its mortgage. There is not one jot or tittle of evidence as to why the caveat should be removed. Given the terms in which s 127 of the Land Title Act 1994 (Q) is expressed, Westpac had the onus of proof. Thus, despite the fact that IHL has failed to file anything other than an affidavit which asserts the forgery and lack of authority, there is no sufficient ground on which to grant Westpac the relief it seeks.

This application demonstrates that the summons for immediate relief will often be an inappropriate procedure where a defence has been filed and that defence pleads a substantive defence and particularises the grounds of the defence. Unless the plaintiff can demonstrate that he has a prima facie case, the application for immediate relief will, as a general rule, be likely to fail because there will be a substantial dispute to be tried.
In reaching this conclusion, I have also had regard to the principle that the power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99. The effect of that principle was expressed with added emphasis in Webster v Lampard (1993) 177 CLR 598 per Mason CJ and Deane and Dawson JJ at 602 – 603. Their Honours said:
“The power to order summary judgment must be exercised with ‘exceptional caution’: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 and ‘should never be exercised unless it is clear that there is no real question to be tried’: Fancourt v Mercantile Credits Ltd (supra) at 99. … Nowhere is that need for exceptional caution more important than in a case where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact.”
Given the nature of the issues raised in IHL’s defence, the court should be very cautious before granting immediate relief. The inadequate pleading in Westpac’s statement of claim and Westpac’s failure to prove that there is no serious issue to be tried only reinforces that view.
For these reasons, it is not appropriate to resolve this matter by way of a summons for relief and I must dismiss the claim. It is, however, appropriate to bring the action to trial as quickly as possible. I will hear the parties on the necessary orders to achieve that end.

[2003] SASC 302

29 August 2003