Wilby v St George Bank Limited No. Scgrg-97-588, Scgrg-99-635 Judgment No. S495

WILBY v ST GEORGE BANK LIMITED
[1999] SASC 495

Civil

WICKS J In this matter the defendant, Lancelot Edgerton Wilby seeks orders against the plaintiff, St George Bank Limited, in Action No 588 of 1997:
That the order for possession of Mr Wilby’s dwelling house at 39 Whyte Street, Somerton Park, South Australia be set aside.
That the warrant of possession of this property be set aside.
That there be a stay of the order for possession and warrant of possession in respect of the property.
Also, in Action No 635 of 1999, Mr Wilby, as plaintiff, seeks an order pursuant to r 60.01(1)(b) of the Supreme Court Rules against St George Bank Limited (“the Bank”) as defendant that the Bank make disclosure of and produce all documents in its possession, power or control relating to its dealings with Mr Wilby and his son Christopher Lancelot Wilby and in particular, but not limited to, documents relating to four housing loans, particulars of which are given.

Proceedings for possession

On 21 April 1997, the Bank issued a summons in this Court to obtain possession as mortgagee of various properties mortgaged by Mr Wilby to the Bank as security for advances made to Mr Wilby and Christopher Wilby. The properties mortgaged included Mr Wilby’s dwelling house situated at 39 Whyte Street, Somerton Park, being the whole of the land comprised in Certificates of Title Register Book Volume 5226 Folios 752 and 753.
On 2 March 1998, the Court made an order requiring Mr Wilby to deliver up possession of his dwelling house to the Bank. So far as this property is concerned, there are two titles. A warrant of possession was issued in relation to the land contained in each title on 15 March 1999.
Mr Wilby’s advisers are in the process of investigating his prospects of having the mortgage over the dwelling house granted by Mr Wilby to the Bank set aside in consequence of unconscionable conduct on its part.
Although in the present application before me Mr Wilby has sought orders that the order for possession of the property be set aside and that the warrant of possession be set aside, these claims were abandoned shortly before the hearing. Mr Wilby maintained his application for a stay of the order for possession and warrant of possession in respect of the property concerned.

Jurisdiction to grant a stay

The Court has inherent jurisdiction to grant a stay of proceedings. It also has inherent jurisdiction to grant a stay of an order as distinct from a stay merely of proceedings. In Re Marks; Ex parte Australian Building Construction Employees and Builders Labourers’ Federation (1981) 34 ALR 208, Mason J said at p 211:
"It has been accepted that the court has inherent jurisdiction to grant a stay of proceedings to preserve the subject matter of litigation, though it is a jurisdiction which is seldom invoked and rarely exercised."

He proceeded by saying that the distinction between a stay of proceedings and a stay of an order is perhaps not altogether clear and referred to discussion on the topic in Allanson v Midland Credit Ltd (1977) 30 FLR 108 at p 113. In that case the Court held that a stay of a judgment or order could be understood in one of two ways. First, it operated to block the judgment or order at source so as to render it completely ineffective for all purposes, except the hearing of an appeal. Secondly, the effect of the stay would not prevent the judgment remaining as a fact but that no step which depended for its effectiveness on the order could be taken. It seems that this difference has yet to be resolved by the Courts. In the present case, either meaning would suffice.
In Re Marks (supra), Mason J recognised at p 212 that there could be a stay of an order as distinct from a stay of proceedings when he said “that the grant of a stay of an order in the exercise of the inherent jurisdiction is an exceptional course”. While exceptional, it was nevertheless held to exist. The inherent power in the Court to grant a stay of an order, as distinct from a stay of proceedings was recognised by Dawson J in Re Moore; Ex parte Pillar (1991) 103 ALR 11 at p 14.
Also, the inherent power to grant a stay of proceedings is recognised in r 3.01 of the Supreme Court Rules. So far as is material, this rule provides as follows:
"Nothing in this rule affects:
(a) ...
(b).... the power of the Court to grant a stay of proceedings where the justice of the case so requires."

For present purposes, this rule does not create any power but recognises the power of the court in its inherent jurisdiction. “Proceedings” is defined widely in r 5. It would, in my view, include all manner of proceedings arising in consequence of the making of an order. While nothing is said in r 3.01 about the stay of an order, the power to grant such a stay clearly appears to exist.
Rule 88.09 of the Supreme Court Rules confers a specific power to stay the execution of a warrant. So far as is material, this rule provides as follows:
"(1).... Any interested person may apply to the Court either by application under Rule 67 or orally during the hearing of other matters in the proceedings in which the judgment was obtained for a stay of a warrant.
(2)... Either before or after the issue of a warrant the Court may either absolutely or subject to conditions make such order for the stay of the warrant as the justice of the case requires.
(3)... ..."

Also, s 17 of the Enforcement of Judgments Act 1991 provides:
"17. A party against whom a judgment has been given may apply to the court for a stay of execution, and the court may, if satisfied that there is a proper reason for granting the stay, grant the stay on such terms as it considers appropriate."

For the purposes of that Act, “judgment” includes “order”. The section is limited in its operation to “a stay of execution”.

The facts

Mr Wilby is now aged 87 years. He was 83 years of age when the transactions the subject of these proceedings were entered into. He was a farmer at Victor Harbor and early in his life he was a toolmaker. He retired from farming and carried on a shop and post office business with his wife who, he says, handled the financial side of the business. He said that he did not have a good head for business.
He inherited his home from his father but arranged that it be transferred into his name and the name of his wife. On her death, she left her one-half interest in the home as to half to Mr Wilby and the other half to the three children equally. Each child therefore acquired a one-twelfth share in the home. Mr Wilby obtained a loan from a financial institution, probably the ANZ Bank, of approximately $125000 to enable the three children to be paid out in respect of their interest in the home.
From money which he inherited or obtained from the sale of his farm and business, Mr Wilby invested in the construction of a block of flats at Somerton Park adjacent to his dwelling. His son, Christopher, assisted him in the construction of the flats and Mr Wilby said that he came to rely on his son in connection with their management.
In the late 1970s Christopher Wilby built a house at Pasadena and requested that Mr Wilby make his home available as security in respect of a loan from Esanda Finance to be used to defray the cost of constructing the property at Pasadena for Christopher Wilby.
In 1994, Christopher Wilby told Mr Wilby of a plan to purchase a helicopter and said that he needed the money urgently in order to make good money from the deal. He asked his father to mortgage the flats at Somerton Park through a financier, Advocate Nominees Pty Ltd for $415000 even thought he deal in question did not concern him. The monies were not repaid and the mortgagee sold the flats, the sale and purchase being completed in April of 1998. The price of the flats was $526000 and the whole of those monies were paid to the mortgagee. Mr Wilby lost the flats. He has no idea what happened to the $415000 ostensibly borrowed for the purchase of a helicopter. Christopher Wilby did tell him that the helicopter was not purchased and that the money had been invested interstate.
Christopher Wilby told his father from time to time that the monies borrowed on the flats had been invested. Mr Wilby believed his son until recently. He has made further enquiries and now believes that his son was lying to him.
The borrowings from the Bank secured by mortgage commenced late in 1995 and continued through 1996. All borrowings were arranged by Christopher Wilby. He would take his father to see the Manager of the Bank at the North Adelaide Branch. Mr Wilby provided no information to the Bank. He did not know what financial details were given to the Bank for the purposes of the borrowings. All he knew was that Christopher Wilby would ask him to attend the Bank and sign documents saying that he had purchased a property. Christopher Wilby told Mr Wilby that the property would go into Mr Wilby’s name. Mr Wilby trusted his son. He did not participate in the business except to sign documents when asked. Mr Wilby did nothing without Christopher who handled all the money. Mr Wilby was aware that properties were purchased at Clovelly Park, Rosewater, Aberfoyle Park and Georgetown and that in these purchases, Christopher was involved with a man by the name of John Griggs. It appears that Mr Griggs may have since been made bankrupt.
Mr Wilby and Christopher Wilby jointly borrowed substantial sums of money from the Bank. These borrowings were secured by various mortgages in favour of the Bank as mortgagee. All of the mortgages were in Mr Wilby’s name as mortgagor as the properties in question were in his sole name. Payments under the mortgages were not maintained and the Bank took possession of and sold each of the properties with the exception of Mr Wilby’s home. As I have said, in the case of that property the Bank has obtained an order for possession from this Court and a warrant for possession has been issued in respect of each title. The Bank has agreed not to take any steps to enforce the warrants of possession pending the determination of this current application.
The first of the loan agreements between Mr Wilby, Christopher Wilby and the Bank was dated 30 November 1995. The amount of the loan was $330000 and the loan was for a period of one year with interest only being payable in monthly instalments. Mr Wilby does not remember the purpose of the loan or where the monies were applied except to satisfy a prior mortgage over Mr Wilby’s dwelling, possibly in favour of the ANZ Bank, as referred to earlier in these reasons. Mr Wilby does not remember giving the Bank particulars of his financial position. The loan was secured by registered mortgage over his dwelling house. He cannot recall signing the mortgage. He was unable to recall the name of the person witnessing his signature. The mortgage appears to be signed by a solicitor, Mr Walter Mesiti. Mr Wilby said that he has never engaged a lawyer of that name to give him advice on any matter. He said that he did not know Mr Mesiti but that he did not doubt that Mr Mesiti witnessed his signature. He said that he could not recall signing the documents anywhere else other than at the North Adelaide Branch of the Bank. His son arranged for him to sign the mortgage.
The next loan agreement was dated 8 December 1995 and was for $100000 repayable over 15 years with interest on a monthly basis. This loan related to a property at Clovelly Park. It was secured by mortgage in favour of the Bank. Recently, the Bank took possession of this property and sold it as mortgagee in possession. Christopher Wilby arranged the loan for the purchase of the property. He said that they could put units on it and make money from the units. Mr Wilby has no knowledge of the details of the transaction and had no knowledge of the loan arrangements. He said that he did not invest any monies in the property in addition to those monies lent by the Bank. This property was registered in Mr Wilby’s name and the mortgage over it was granted solely by Mr Wilby as mortgagor. The mortgage appears to have been witnessed by Mr Mesiti. Mr Wilby maintained that he did not retain Mr Mesiti for advice and had no recollection of any advice being given. He said that he would have signed the mortgage if requested to do so by his son Christopher.
The next loan agreement was dated 21 December 1995 and related to a loan of $120000 repayable over a period of five years. This loan related to the purchase of a property at Rosewater. Mr Wilby maintained that he has no knowledge of the financial arrangements relating to that property except that his son Christopher told him that they would make money from the dealings with it. The loan was secured by mortgage executed by Mr Wilby as mortgagor. Mr Wilby said that he did not put money into the purchase of that property other than the money borrowed from the Bank. He did not know his financial position at the time. Mr Mesiti witnessed the execution of the mortgage. Mr Wilby said that he has not recollection of Mr Mesiti giving him any advice. He would sign any document if so requested by his son.
The next loan agreement was between Mr Wilby and Christopher Wilby as borrowers and the Bank as lender. It was dated 13 February 1996 and related to a loan of $40000 repayable over five years. Reference is made in the loan agreement to a loan for renovations on the home. Mr Wilby maintained that he had no knowledge of any such renovations.
The next loan agreement was dated 25 July 1996 and was for a loan of $25000 over a period of 20 years. The loan was secured by mortgage over a property situated at Georgetown. This property had been found by Christopher Wilby who suggested to Mr Wilby that he should reside with him at the Georgetown property so that his property at Somerton Park could be let to tenants. Mr Wilby executed a mortgage over the property. His signature was again witnessed by Mr Mesiti. Mr Wilby maintained that he did not retain Mr Mesiti for advice and had no recollection of Mr Mesiti giving any advice. He said that he would have signed the documents at his son’s request. Mr Wilby did not invest any money other than the amount borrowed from the Bank in the purchase of the property.
The last loan agreement was dated 16 September 1996 and was in connection with a loan of $75000 repayable over a period of 20 years. In order to secure the loan, a mortgage was given over a property at Aberfoyle Park. Mr Wilby remembers his son saying that the property was a bargain and that they would make money out of transactions relating to it. Mr Wilby has no knowledge of the financial arrangements relating to the transaction. The mortgage over the property was executed by Mr Wilby in order to secure the loan and interest. He maintained that he did not invest any money in this purchase other than the money lent to him by the Bank. The execution of this mortgage was witnessed by Mr Phillip McGovern. Mr Wilby was unable to recall his name or the circumstances of signing the mortgage. From enquiries made subsequently, it would appear that Mr McGovern was a solicitor. Mr Wilby claims that he has no recollection of giving Mr McGovern any instructions to advise him in relation to the mortgage but that if such a solicitor was consulted, the arrangements would have been made by his son Christopher or the Bank Manager at North Adelaide. Mr Wilby said that he would not sign any document of this kind unless his son Christopher had told him to do so.

The effect of bank merger legislation

The loan agreements were made between Mr Wilby and Christopher Wilby as borrowers and Bank of South Australia Limited as lender. The mortgages were each granted by Mr Wilby in favour of the same bank. Subsequently, Bank of South Australia Limited was taken over by Advance Bank Australia Limited. Following the takeover, the undertaking of the Bank of South Australia Limited merged with the undertaking of Advance Bank Australia Limited. This was achieved by the operation of the Bank Merger (Bank SA and Advance Bank) Act 1996 and corresponding legislation in other States and Territories.
Subsequently, there was a merger of the undertakings of Advance Bank Australia Limited and St George Bank Limited effective as of 19 March 1998 achieved by bank merger legislation in the various States and Territories. The assets and liabilities in South Australia of Advance Bank of Australia Limited were merged with the assets and liabilities of St George Bank Limited by the operation of the Bank Mergers (South Australia) (St George/Advance) Regulations 1998 made under the Bank Mergers (South Australia)) Act 1997. Assets and liabilities in other States and Territories are merged by the operation of regulations made under corresponding merger Acts.
For present purposes, the effect of the merger legislation (including the regulations) in South Australia is to enable St George Bank Limited to have vested in it the assets and liabilities of the other two banks so that St George Bank Limited becomes the correct plaintiff in the possession proceedings. The vesting of assets and liabilities as between Advance Bank Australia Limited and St George Bank Limited took place before 4 June 1999 (the date of the issue of the summons in the discovery proceedings) so that these proceedings were correctly issued in the name of St George Bank Limited in the first place.
In the present case, the Bank Merger (Bank SA and Advance Bank) Act 1996 and the Bank Mergers (South Australia) (St George/Advance) Regulations 1998 have the effect that St George Bank Limited replaces Bank of South Australia Limited in the Wilby loan agreements and the mortgages granted by Mr Wilby to Bank of South Australia Limited.
So far as the proceedings for possession are concerned, it appears that the heading used on documents has been changed from Advance Bank Australia Limited to St George Bank Limited earlier this year without the leave of the Court to amend the heading. I consider that an application should be made to the Court rectifying this matter.

Disappearance of Christopher Wilby

In or about December 1998 Christopher Wilby disappeared. Mr Wilby informed the police at about that time that the whereabouts of his son was unknown.

Mr Wilby consults a solicitor

Mr Wilby consulted Mr Ivan Margitich, a solicitor at Glenelg, in relation to his predicament and the moneys that he appeared to have lost. On instructions from Mr Wilby, Mr Margitich wrote to the Bank stating that Mr Wilby considered, on Mr Margitich’s advice, that the Bank was acting improperly and unreasonably in forcing him to repay all monies by the sale of his properties. Mr Margitich continued by saying that he would further consider the matter and what action Mr Wilby might take. He requested the Bank to make available to him his files on each of the loan applications giving rise to the loans the subject matter of this dispute. The request was not complied with.
In a letter dated 8 March 1999 written by Mr Margitich to Ms Kate Sullivan of Kelly & Co, solicitors for the Bank in this matter, Mr Margitich said that briefly Mr Wilby’s complaint against the bank was as follows:
"(1).... At the time of the loans my client was approximately 83 years old.
(2)... All loans originated from the North Adelaide Branch of Bank SA and the dealings made with the Manager Mr Barry Henningson who either approved or recommended approval of the loans.
(3)... The loans were obtained in the names of my client and his son, C L Wilby, but in all instances security was taken over property in my client’s name alone.
(4)... Your Bank Manager knew Mr Christopher Wilby and ought to have known his poor financial record, his unreliability and the relationship between he and his father.
(5)... Each of the loans was made as a result of the negotiations between Christopher Wilby and Mr Henningson.
(6)... On every occasion my client was taken to the Bank by his son. Mr Henningson for some reason saw fit to have mortgage documents witnessed by a Solicitor.
(7)... In all but one instance the witnessing solicitor to the mortgage was a Mr Walter Mesiti Solicitor who was known to Mr Henningson.
(8)... Mr Mesiti was reluctant to witness documents and told that to Mr Henningson.
(9)... All but one of the mortgages was signed in the presence of Mr Mesiti at the office of the bank.
(10). On the only occasion when the mortgage document was witnessed by a solicitor other than Mr Mesiti the bank gave the documents to Mr Christopher Wilby.
(11). Mr Henningson must have known as a result of talking to my client that my client had difficulty understanding each loan transaction.
(12). That Mr Henningson for the bank must have known the inability of my client to repay the loans."

Unconscionable conduct

Mr Wilby’s solicitors are investigating whether the Bank has acted unconscionably towards their client in such a way as to invoke the equitable doctrine of unconscionable conduct. In Commercial Bank of Australia Limited v Amadio (1982-83) 151 CLR 447 Mason J said at p 462:
"It is made plain enough, especially by Fullagar J., that the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis-a-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. I qualify the word “disadvantage” by the adjective “special” in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party."

At p 467, Mason J said:
"As we have seen, if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A’s) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same."

Basis for ordering a stay

In my opinion, based on the material contained in the affidavits filed in these proceedings, Mr Wilby’s solicitors have insufficient information at this stage to ground the case against the Bank based on the equitable principle of unconscionable conduct. Nevertheless, I am of opinion that there is sufficient material here to warrant preliminary investigation of the matter. This may include pre-action discovery at the instance of Mr Wilby so that an opinion can be obtained on the question of whether or not he has a cause of action against the Bank and whether his case is of sufficient strength to warrant proceeding.
Apart from his dwelling house, Mr Wilby does not have any assets of significance and is in no position to pay out the mortgage on the property. He will plainly suffer very seriously if he is required to vacate his dwelling to enable the Bank to sell it and recoup the amount owing.
In the circumstances I am prepared to order a stay in such form as will prevent the Bank from proceeding against Mr Wilby with the object of obtaining possession of his property comprised in Certificates of Title Register Book Volume 5226 Folios 752 and 753. At this stage I am only prepared to order a stay on an interim basis pending the carrying out of investigations, including pre-action discovery and the preparation of a statement of claim. I have in mind that I should not order a stay other than for a fixed limited period until the stage is reached where a properly particularised statement of claim has been filed. I have in mind limiting the order for a stay for a period of three months with the right to extend the operation of the stay for an additional period or periods if circumstances warrant. As a stay will be detrimental to the Bank, it will be necessary for Mr Wilby’s advisers to proceed with the utmost diligence. If there is any unreasonable delay, the Bank should be at liberty to make application for an order that the stay be vacated.
I will hear counsel on the form that the order for a stay might take and, in particular, on whether the stay is of the order for possession or of proceedings under it.

Pre-action discovery

In separate proceedings in this court in Action No 635 of 1999, Mr Wilby has made application for an order pursuant to r 60.01(1)(b) of the Supreme Court Rules for pre-action discovery against the Bank.
In relation to a predecessor rule to the existing r 60.01(1)(b), White J in Gerard Industries Pty Ltd v Wee (1985) 131 LSJS 185 said at p 191:
"There must be some grounds for making the application; there must be some foundation for the belief that discovery is necessary; speculation and hope and unwarranted suspicion are not enough; and busybodies on fishing expeditions ought to be discouraged. But as Lord Denning said, it is not necessary to show as a condition precedent to an order, that one has a good cause of action already, that is, without the benefit of the information which is sought by the discovery. Such a view would defeat the object of the legislation in England and of the rules here."

As I have said, the circumstances between Mr Wilby and his son and the Manager of the North Adelaide Bank of the Bank of South Australia Limited warrant further investigation and may well bring forth evidence in respect of the Bank’s relationship with Mr Wilby and his son which would justify the taking of proceedings against the Bank. I am satisfied that Mr Wilby has sufficient grounds at the present time for an order under the above rule to be made to obtain pre-action discovery against the Bank.
I will hear counsel on the form the order for pre-action discovery should take.

[1999] SASC 495

23 November 1999