Westpac Banking Corporation v Rodale Pty Ltd
[2004] VSC 226
•2 July 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 8165 of 2003
BETWEEN:
| WESTPAC BANKING CORPORATION (ABN 33 007 457 141) | Plaintiff |
| v | |
| RODALE PTY LTD (ACN 006 174 269) (In Liquidation) AND OTHERS | Defendant |
AND BETWEEN:
| DALE HOWARD ROBERTSON | Plaintiff by Counterclaim |
| v | |
| WESTPAC BANKING CORPORATION (ABN 33 007 457 141) AND ORS | Defendants by Counterclaim |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 21 and 22 June 2004 | |
DATE OF JUDGMENT: | 2 July 2004 | |
CASE MAY BE CITED AS: | Westpac Banking Corporation v Rodale Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 226 | |
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Equity – summary judgment application – whether triable issue - wife guarantor and mortgagor as security for loan to husband's company – whether a volunteer – whether wife did not understand meaning and effect of transaction – whether lender may rely on solicitor's certificate.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr Daniel Christie | Minter Ellison |
| For the Firstnamed Defendant | Mr I.W. Upjohn | John Matthies & Co |
| For the Secondnamed Defendant | Mr R.L. Berglund QC | Mitrakas, Savas & Co |
| For the Thirdnamed Defendant | Ms M Rozner | Stephen Peter Byrne |
HIS HONOUR:
The plaintiff, Westpac Banking Corporation ("the Bank") applies by summons filed on 10 March 2004 for summary judgment against the three defendants. The firstnamed defendant, Rodale Pty Ltd, went into liquidation by order made on 6 August 2003 upon a creditors' application filed on 27 June 2003. The thirdnamed defendant, Dale Howard Robertson, is and at all material times was the sole director of Rodale. The secondnamed defendant, Kellie Rae Robertson, his wife is the proprietor of part of the land at 89-91 Union Road, Surrey Hills upon which there is erected their matrimonial home.
The claim of the Bank, as it appears in its amended statement of claim filed on 8 April 2004, is that each of Mr and Mrs Robertson is liable for the indebtedness of Rodale to the Bank under a guarantee given by each of them on 11 July 2001. Against Mrs Robertson the Bank also seeks possession of the land standing in her name under an all moneys mortgage granted by her on 26 July 2001. Against Rodale, its customer, the Bank seeks the amount of the loan and possession of its interest in the land.
On 27 May 2004, Master Evans made orders in favour of the Bank against Rodale for payment of $1,308,145.48 and for possession of the land and costs; against Mrs Robertson for payment of $1,457,229.51 and for possession of the land and costs. The Master gave Mr Robertson leave to defend. Both the Bank and Mrs Robertson appeal against these orders, in the case of the Bank, only insofar as the Master ordered that Mr Robertson have leave to defend. The Bank's proofs were not challenged before me except for a contention that it had not successfully called upon the guarantees. The evidence showed that the Bank on 22 July 2003 made a demand on Rodale for immediate payment of $1,369,912.79.
This sum comprised three separate advances to that company:
Commercial Bills Facility $1,120,000.00 Business Loan $206,010.16 Overdraft Account $43,902.63 $1,369,912.79 Two days later, on 24 July, the Bank called upon each of the guarantors to pay immediately the outstanding amount which then stood at a total of $1,370,077.95.
The point taken was that the time given to Rodale to satisfy the demand was insufficient so that it should not at the time of the guarantor's demands be treated as being in default. It is not necessary for me to express any view on this point.
The point taken by Mr Robertson which was successful before the Master was that the Bank had released him from his guarantee. Putting to one side his inadmissible assertion that he believed that he was released, the evidence on this point was sparse. In essence, it is a letter from the Bank of Melbourne, a division of the Bank, addressed to him in his capacity as a director of Rodale, dated 24 July 2001 and sent to Rodale's address. The letter is in these terms:
"Dear Mr Robertson,
We refer to the guarantee dated 11 July 2001 given by Dale Howard Robertson, Kellie Rae Robertson and Rodale Pty Ltd ACN 006 174 269 in respect of money owed to the Bank by the Customer, Rodale Pty Ltd ACN 006 174 269 as trustee for the Dale Robertson Family Trust.
Subject to the conditions of the guarantee you are released from your obligations under the guarantee.
The guarantee may be revived in the circumstances described in the guarantee, for example, if because of a law about bankruptcy or receivership of a corporation the Bank has to refund any money which the Customer or anyone else has paid to it, or which it has recovered in any way."
The Bank says that this was in fact, not to Mr Robertson, but a release given to Rodale which was, after all, liable as the customer. I am not confident that the terms of the letter must lead to this conclusion. I consider that this issue should go to trial where the circumstances of the release can be fully explored.
In answer to the Bank's claim against her, Mrs Robertson raises the equity expounded by the High Court in Garcia v NAB Ltd[1]. In summary, it is said that it would be unconscionable for the Bank to enforce against her, as wife of the thirdnamed defendant, the guarantee or the mortgage security which she signed when it appears that she was a volunteer, in the sense that she took no direct benefit under the transaction, who did not understand its purport and effect and where the Bank "took no steps itself to explain the purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent independent and disinterested stranger".
[1](1998) 194 CLR 395
I bear in mind that it is for her to raise the factual basis for such a defence and, further, that, for present purposes, she does so if she demonstrates that there is a triable issue as to such basis.
I am satisfied that the Bank knew that she was the wife of Mr Robertson who was the sole director of Rodale, the customer of the Bank.
It was put on her behalf, and challenged on behalf of the Bank, that she failed to raise an issue that she did not understand the purport and effect of the transaction.
It is convenient that I say something at this point about the land at 89 - 91 Union Road, Surrey Hills, which is the subject of the mortgage. It is a residential property with a frontage of 39.48 metres to the east side of Union Road, a little to the south of Canterbury Road. It has a depth of 65.53 metres on the south side. On its north side it runs in an easterly direction for 31.6 metres and then widens to the north by 21.6 metres. Its title particulars are Lot 1 on plan of subdivision 415668A and being the whole of the land more particularly described in Certificate of Title Vol. 10539 Folio 902. This title was created on 24 August 2000 from two titles, Certificate of Title Vol. 5864 Folio 669 and Certificate of Title Vol. 6584 Folio 703. Prior to this date, the former titles, each of which was in respect of a different portion of the land, stood in the name of Rodale (Vol. 5864 Folio 669) and Mrs Robertson (Vol. 6584 Folio 703) respectively. What is surprising is that, notwithstanding that the two pieces of land have been consolidated in the one title, each of the two owners remains the sole proprietor of its or her previously owned portion of the land. In short, each of them remains the sole proprietor of a part of the land shown on Certificate of Title Vol. 10539 Folio 902, but the title does not on its face show what that part is. In order to determine the identity of each part it is necessary to examine each of the parent titles.
I return to the issues raised by Mrs Robertson. She says that she is a volunteer within the meaning of that term in this area of law. She guaranteed the indebtedness of Rodale to the Bank and she mortgaged her part of the land to secure the loan made by the Bank to Rodale. She is not a director or a shareholder of Rodale. Rodale is described in the loan documents as the trustee for the Dale Robertson Family Trust. The Trust Deed dated 1 July 1983 in evidence shows that the trustee was in fact Rodale Constructions Pty Ltd. This may have been the earlier name of Rodale for its present name dates only from 31 March 1994. The matter is a little more confusing since the earlier transactions with respect to the land as spoken of by John Stuart Potts, the liquidator of Rodale, show that on 21 October 1999 the trustee of the trust was Rodale Constructions Pty Ltd, whereas documents which pre-date and post-date that document describe the trustee as Rodale Pty Ltd. I suspect that this is merely an error but the position is certainly unclear.
In any event, the trust deed shows that it is a discretionary trust and that Mrs Robertson is a beneficiary under that trust together with other family members. It was contended that, in these circumstances, she has a sufficient interest in the loans granted by the Bank to the trust to take her out of the class of volunteers. I am not prepared to accept this submission for the purposes of a summary judgment application.
Next, it was said that she has a relevant interest in the loans because they, in part at least, funded the part of the land which she owns. Bearing in mind that she bears the burden of establishing a triable issue as to her standing as a volunteer, the contention presently under consideration was advanced by counsel on behalf of the Bank. She did not adduce any evidence against the conclusion contended for by the Bank.
The evidence showed that the land at 89 Union Road was purchased some seven years ago in her name. The cost of the purchase was contributed to by the proceeds of sale of the former matrimonial home which also stood in her name. Finance for the purchase was provided on 19 December 1997 by Sunway-Metway Ltd by a 12 month loan of $796,000. The borrower of this loan is shown as Rodale in its own capacity and as trustee for the Kelly Robertson Family Trust. Mrs Robertson and her husband guaranteed the loan which was secured by a mortgage over the land described in Certificate of Title Vol. 6584 Folio 703 and referred to as 89 Union Road.
Twelve months later the loan was refinanced by Metway Business Bank by a loan of $615,000 made to Rodale in its own capacity and as trustee for the Dale Robertson Family Trust. Mr and Mrs Robertson again provided joint and several personal guarantees. At the same time, Metway lent a further $613,000 to Strethway Pty Ltd for a development project. Again, Mr and Mrs Robertson provided guarantees.
A year later, in October 1999, the loans were refinanced by the National Australia Bank. In all, this bank advanced a little more than $2.7M to interests associated with Mr Robertson. Of particular interest is a bill facility granted to Rodale Constructions Pty Ltd as trustee for the Dale Robertson Family Trust for a period of seven months expiring on 31 May 2000. The stated purpose of this facility was "to refinance Metway Bank $1,450,000 and balance to assist own contribution towards various building projects". It was put, and not challenged, that about one-half of this was for the purchase of the land. This facility was secured by a first debenture charge and a first mortgage over 89-91 Union Road.
It will be noted that this is a first mention in these loan documents of 91 Union Road. There are in evidence two mortgages in favour of the National Bank. The first, given by Mrs Robertson dated 11 November 1999 is over the land in Certificate of Title Vol. 6584 Folio 703; the second dated 9 November 1999, by Rodale is over the land in Certificate of Title Vol. 5864 Folio 669.
Nothing is known of the financing arrangements from May 2000 until July 2001 when the Westpac Bank undertook to provide finance. An examination of the ASIC return for Rodale, however, shows that a charge was lodged after November 1999 by Trenwick International Ltd on 22 November 1999, and by the ANZ Bank on 30 March 2000. There are also discharges of securities shown but it is not possible to know more from the return.
The financial accommodation granted by the Westpac Bank comprised three facilities. The first was a commercial bill line of $1,120,000 given to Rodale as trustee of the Dale Robertson Family Trust on 17 July 2001 for six months for the stated purpose, "to refinance NAB facility, prepay six months interest and pay property management/consulting fees". Securities included a guarantee by Mrs Robertson and a mortgage by her and Rodale over 89 Union Road. It appears from a letter from the National Bank dated 24 July 2001 that the value of the bills was applied by it as to $1M to pay out floating bills, as to $14,106 to pay instalments under a home loan account in the name of Mr and Mrs Robertson and the balance for sundry purposes. Nothing further is known of this home loan account. The second facility was a business access loan of $200,000 dated 6 August 2001 to expire in August 2002, again given to Rodale as trustee of the Dale Robertson Family Trust. Security was a National Bank guarantee. The third facility was a bank overdraft which commenced on 29 November 2002.
What is made of all of this on behalf of the Bank was that an indeterminate part of the $1,120,000 advanced under the commercial bill arrangement comprised money for the purchase of Mrs Robertson's part of the land. This may be so, but I am not prepared to treat it as having been so clearly established that I should refuse her a trial of this issue.
It was next contended on behalf of the Bank that Mrs Robertson did not, in terms, assert that she did not at the time of signing the mortgage and the guarantee understand their purport and effect. In paragraph 9 of her affidavit, sworn 30 April 2004, she describes the circumstances in which the mortgage was executed by her. She concludes by stating that she did not read the documents which were offered to her by the Bank officer for signature; she was not told what they were and she was not aware of their nature or effect. I accept that this raises a triable issue as to her understanding. I acknowledge that powerful arguments were offered that I should reject her bald statement of ignorance. Nevertheless there are matters for trial and not for summary judgment.
Her evidence with respect to the guarantee is less comprehensive. This document is supported by a certificate given by a solicitor, Joseph Katz, dated 19 July 2001. Mrs Robertson acknowledges in paragraph 14 of her affidavit her signature on the guarantee but says "at no time did Katz explain to me the general nature and effect of either of [the guarantee or the common provisions] or the risks associated therein". This is repeated in general terms in paragraph 18 of her same affidavit. Again, for present purposes, her oath raises a triable issue as to these matters. It was put on behalf of the Bank that, even so, she does not in terms assert a want of the necessary understanding.
This raises the interesting legal question as to what she must be shown not to understand. Is it merely the nature and effect of a guarantee? Is it the nature and effect of this guarantee including the amount of the guaranteed debt? Is it the whole financial transaction of which the guarantee is part? To my mind this question is best resolved in a real factual matrix which will be known only upon trial. I am not satisfied that this issue is so clear that a trial should be denied Mrs Robertson.
Finally, it was put on behalf of the Bank that it had discharged its obligation to explain the transaction to her or that it had belief that this had been done. This argument applied only to the guarantee, for it was put that the Bank was entitled to act upon Mr Katz's certificate which applied only to this document. If it should appear that the Katz certificate was erroneous, as Mrs Robertson says, she might have her remedy against him. On the other hand, the Bank could not be accused of unconscionable conduct by acting upon the certificate. Reliance was place on the observations of Hayne J in this Court in St George Bank v Dunstan[2].
[2]Unreported, 10 November 1994, BC 9405866 at p. 20
Again, the certificate will not avail the Bank if its obligation extends further than an explanation of the nature of a guarantee. I am not sufficiently persuaded that this is the limit of its obligation in this area.
I granted leave to counsel for the liquidator to address me on the appeal notwithstanding that he was not a party. On his behalf it was put that I should have regard to the fact that the mortgage in favour of the Bank was registered so that the Bank's title was indefeasible and would be set aside only when the Bank had been shown to be guilty of fraudulent conduct.
My initial impression is that, if the Bank's unconscionable conduct was made out, it would not be heard to assert the indefeasibility of its title obtained in that way. At least I am not persuaded that such a proposition, when fully developed in the context of the facts found at trial, is so unlikely to succeed that I should at this stage prevent it being presented.
It follows from all of this that I should grant both Mr and Mrs Robertson leave to defend. Mr Upjohn then suggested that I should grant this leave subject to terms. He reminded me of Mr Potts' affidavit which showed what appears to be conduct by Mr and Mrs Robertson in flagrant disregard of their responsibilities to the creditors of the company. He described the defences raised on their behalf as shadowy, tenuous and unmeritorious. It is not for me to venture into this territory. It is sufficient that a triable issue has been raised in each case.
I will allow the appeal of the secondnamed defendant and grant unconditional leave to defend. The Bank's appeal will be dismissed.
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