ANZ Banking Group Ltd v Capper & Anor

Robyn Grace Capper (Second Defendant) JUDGMENT OF : Master Harrison

Mr J Johnson (Plaintiff) COUNSEL : Mr R Killalea (Defendants) Middletons Moore & Bevins (Plaintiff) SOLICITORS : D J Chapmans Solicitors (Defendants) CATCHWORDS : Summary judgment - possession LEGISLATION CITED : Supreme Court Rules - Part 13 r 2 Contract Review Act 1980 (NSW) Agar v Hyde [2000] HCA 41 Air Services Australia v Zarb(NSWSC unreported, 26 August 1998) Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 CASES CITED : Webster & Anor v Lampard (1993) 177 CLR 598 Crackenback Investment Pty Ltd v Wywsik (unreported, NSWSC 25 August 1983, 14402/81) Bunbury Foods Pty Limited v NAB & Anor (1983-84) 153 CLR 491 Henderson v Henderson [1843-60] All ER 378 Port Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 Hogan & Anor v Howard Finance Limited & Anor (1987) ASC 55-594 DECISION : (1) The plaintiff's notice of motion filed 26 July 2001 is dismissed; (2) The defendants are to file and serve amended defences and cross claims within 14 days; (3) Each party to pay their own costs of the plaintiff's motion; (4) The defendants are to pay the costs thrown away by the amendments to the defences.

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

12957/2000 - AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD v TERRY CAPPER & ANOR Judgment (Summary judgment; possession)

1 MASTER: By notice of motion filed 26 July 2001 the plaintiff seeks firstly that the defence of the first and second defendants be struck out and summary judgment be entered for the plaintiff; and secondly that leave be granted to the plaintiff to issue a writ of possession forthwith pursuant to Part 13 r 2 of the Supreme Court Rules (SCR). The plaintiff relied on a large number of affidavits.

2 By notice of motion filed 2 October 2001 the defendants seeks that leave be granted to file and serve an amended defence. The first defendant relied on his affidavits affirmed 24 September 2001 and 1 October 2001. The second defendant, Robyn Grace Capper, relied on her affidavits affirmed 24 September 2001 and 1 October 2001. (1) Statement of claim and defence 3 On 30 April 1994 the defendants provided an unlimited all moneys guarantee in respect of all amounts that may be owing by Samphire Pty Limited to the plaintiff (the guarantee). On 30 November 1994 the defendants entered into three mortgages with the plaintiff in respect of four properties in Broken Hill, one of which is the defendants' home.

4 On 6 July 1998 the plaintiff provided to Samphire Pty Limited (the company) an overdraft facility and a fully drawn advance (fixed rate) facility (the facilities). The facilities were effected by a letter of offer by the plaintiff dated 6 July 1998, which offer was accepted by the defendants as directors of Samphire. The overdraft facility expired on 17 February 1999. The loan account facility was for six years and six months, with monthly repayments of $6,145.80. Samphire failed to repay the amount outstanding on the overdraft facility as at 17 February 1999.

5 On 7 July 2000 the plaintiff issued a notice of demand to the company demanding repayment of the amounts owing under the facilities. The amounts were not repaid by the due date, namely 12 July 2000. It should be noted that the company was given only five days in which to repay the whole amount due under both facilities. It is alleged that by reason of the company failure to comply with the notice of demand, the defendants as guarantors became liable to pay the amount due by the company.

6 On 19 July 2000 the plaintiff served the defendants with a written demand seeking to have the guarantors of the company's debts pay to the plaintiff within one day of service the sum of $323,953.57 together with interest. On 23 August 2000 a written demand was served on the defendants pursuant to the guarantee and mortgages. The plaintiff alleges that the defendant has failed to repay the full amount and seeks possession of the defendants' properties.

7 The proposed amended defences allege that the overdraft facility was at all times an account held by the first and second defendants not the company and hence the plaintiff had incorrectly demanded the sum of $6,154.88. This account was styled "T & R.G. Capper". At (para 16(a)) the defendants say that the guarantee is invalid for being misleading, as it is not a guarantee, but is an indemnity.

8 Paragraph 38 alleges that the mortgages and guarantees were unjust because: (a) at the time the first defendant executed the mortgages and the guarantee, he did not properly understand their nature and effect; (b) by reason of the plaintiff misleading the first defendant as to the true nature of the guarantee, he was at a disadvantage at the time he executed the mortgages and guarantee; (c) by reason of the plaintiff now drawing the first defendant's attention to the memorandum of mortgage E390927, and not providing the first defendant with a copy of that memorandum of mortgage, he was at a disadvantage at the time he executed the mortgages and guarantee. (e) the first defendant was not given an opportunity to obtain any advice as to the nature and effect of the mortgages and guarantee, and did not obtain any such advice. (f) by reason of, inter alia, the first defendant's trust in the effect of the documents prepared by the plaintiff, the first defendant was at a disadvantage at the time he executed the mortgages and guarantee; (g) the plaintiff did not recommend to the first defendant that he obtain any advice as to the nature and effect of the mortgages and guarantee; (h) the plaintiff abused the trust placed in it by the first defendant in not giving the first defendant the opportunity to obtain any advice as to the nature and effect of the mortgages and guarantee, and by not recommending to the first defendant that he obtain any advice as to the nature and effect of the mortgages and guarantee, when that guarantee and those mortgages might be called in as they were, and for the reasons that they were, in or about July 2000.

9 It is pleaded that the mortgages and guarantee are unenforceable against the defendants pursuant to s 7 of the Contract Review Act 1980 (NSW) (CRA) and alternatively to enforce compliance with these documents is unconscionable. The second defendant similarly pleads these allegations in her proposed defence.

10 The plaintiff submitted that the defendants' case as pleaded in the proposed amended defences is hopeless and that leave should not be granted to file these documents, as it is futile. The plaintiff submitted that firstly, the first defendant is bankrupt and cannot maintain these proceedings; secondly, the issue in relation to the notices has already been argued in the Supreme Court of South Australia and is subject to issue estoppel; thirdly, the defendants are precluded from relying on the CRA due to s 6(2) of that Act; and fourthly, there is not enough evidence to allow the CRA defence to go to trial. (1) The law in relation to summary judgment 11 The relevant parts of Pt 13 r 2 (SCR) says: "2(1)Where, on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff - (a) there is evidence of the facts on which the claim or part is based; and

(b) there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed, the Court may, by order, on terms, give such judgment for the plaintiff on that claim or part as the nature of the case requires. 12 In Agar v Hyde [2000] HCA 41 the High Court held at 57 that: "Ordinarily a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formula which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were to go to trial in the ordinary way." 13 According to their Honours, this is because: "It would be wrong to deny a plaintiff resort to the ordinary processes of a court on the basis of a prediction made at the outset of a proceeding if that prediction is to be made simply on the preponderance of probabilities." 14 Similarly, in Air Services Australia v Zarb (NSWSC unreported, 26 August 1998) Rolfe AJA found it useful to remind himself of the highly demanding test imposed on a party seeking summary judgment. His Honour referred to Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 and Webster & Anor v Lampard (1993) 177 CLR 598. I have reproduced some of the passages quoted in Zarb. 15 In General Steel Barwick CJ, who heard the application alone stated: "Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed." 16 Barwick CJ also said: "It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of cause of action - if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; be manifest that to allow them' (the pleadings) 'to stand would involve useless expense." 17 In Webster Mason CJ, Deane and Dawson JJ reinforced the rigorous testing stating, at p 602: "The power to order summary judgment must be exercised with 'exceptional caution' and 'should never be exercised unless it is clear that there is no real question to be tried."' 18 According to Rolfe AJA in Zarb: "The demanding nature of the test is in no way lessened in circumstances where there are the potential for difficult factual and legal issues to arise. Rather, as the decision in Webster made clear, it is heightened: see also Wickstead & Ors v Browne (1992) 30 NSWLR 1 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241." (3) First defendant's bankruptcy

19 The plaintiff submitted that as the first defendant is bankrupt he cannot maintain and continue proceedings. On 12 September 2001, the first defendant was declared bankrupt. The first defendant is a registered owner of the four properties. In a recent land titles office search he is still recorded as being a legal owner jointly with the second defendant. On 8 October 2001 S Nichols, the trustee in bankruptcy advised that he has withdrawn from the proceedings insofar as the estate of Terry Capper is concerned (Ex A).

20 In Crackenback Investments Pty Ltd v Wywsik (unreported, NSWSC 25 August 1983, 14402/81) Master Greenwood opined that while the bankrupt remains registered as a proprietor on the title, he or she continues to hold the legal interest in the property and the bankrupt in these circumstances has standing to defend an action affecting his or her position as registered proprietor. Hence it is arguable that the first defendant can, at this stage, maintain and continue these proceedings. (4) Are the unreasonableness of the time to comply with the notices argument and the claim of unconscionability arguments subject to issue estoppel?

21 The plaintiff submitted that Judge Bowen Pain in the Supreme Court of South Australia has already dealt with the issue of the reasonableness of the time to comply with the notices on 8 December 2000, and the issue of unconscionability could have been ventilated at that hearing. According to the plaintiff the defendants are estopped from arguing these issues.

22 One of the properties over which the plaintiff had a mortgage securing the guarantee was in South Australia. In the South Australian proceedings the defendant argued that the notice that was not given was not effective because the notice was not reasonable. As previously stated by a notice dated 7 July 2000, the plaintiff gave notice of the expiry of the overdraft facility and the breach of loan account terms. That notice was sent by facsimile by the plaintiff's solicitors. The notice required payment of all amounts by 5.00 pm on 12 July 2000.

23 Judge Bowen Pain referred to the High Court decision of Bunbury Foods Pty Limited v NAB & Anor (1983-84) 153 CLR 491 at 502 and held that "In the present case, although the notice requested payment by 13 July 2000, it was not enforced in any way until September. The defendants, at that time, taking steps to meet some but not all of the liability. Applying the High Court's words, I do not think that the notice was unreasonable." The reasonableness of the notice to the defendants in relation to the guarantee, giving them one day (even less than the time period given to the company) to repay the whole of the amount due under both facilities was not ventilated. 24 In Henderson v Henderson [1843-60] All ER 378, Wigram VC said at 382: "I believe I state the rule of the Court correctly when I say that, where a given matter becomes the subject of litigation in, and of adjudication that litigation to bring forward their whole case and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The pleas of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time." 25 In Port Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589, Gibbs CJ, Mason and Aickin JJ said: "The distinction between res judicata (in England called 'cause of action estoppel') and issue estoppel was expressed by Dixon J in Blair v Curran (20) in these terms: "in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.'

The distinction was restated by Fullagar J in his dissenting judgment in Jackson v Goldsmith (21). His Honour expressed the rule as to res judicata by saying: 'where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. This rule is not, to my mind, correctly classified under the heading of estoppel at all. It is a broad rule of public policy based on the principles expressed in the maxims "interest reipublicae ut sit finis litium" and "nemo debet bis vexari pro eadem causa".' His Honour went on to discuss issue estoppel, citing the comment of Dixon J in Blair v Curran (22 ): 'A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies.'

The rule as to res judicata comes into operation whenever a party attempts in a second proceeding to litigate a cause of action which has merged into judgment in a prior proceeding."

26 The facilities referred to in the South Australian court are the identical ones that are the subject of litigation in this court. Likewise, the notice is the same notice of demand referred to in these proceedings. However, the South Australian legislation does not have the equivalent of the Contract Review Act 1980 (NSW). It is in this context that unconscionability will be argued as well as the common law doctrine of unconscionability. Further, the notices may be relevant in a CRA context because the guarantee provides no time period for the defendants to make good the company's debt. It is my view that it is arguable that the notice issue and unconscionability are not subject to issue estoppel. (5) Contract Review Act

27 The plaintiff submitted that s 6(2) CRA precludes the defendants from invoking the CRA. Section 6(2) of the CRA states: "(2) A person may not be granted relied under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by him or proposed to be carried on by him, other than a farming undertaking (including, but not limited to, an agricultural, pastoral, horticultural, orcharding or viticultural undertaking) carried on by him or proposed to be carried on by him wholly or principally in New South Wales."

28 The overdraft account was in the name of T & R.G. Capper not the company account. It is at least arguable that the account being styled "T & R.G. Capper" was not for the purpose of business. The first defendant has agreed that he was in breach of one amount of about $6,200.

29 The plaintiff referred to Hogan & Anor v Howard Finance Limited & Anor (1987) ASC 55-594 at 57,539, the Court of Appeal stated that the mere fact that a party to a contract can point to circumstances that fall within the words of one or more paragraphs in s 9(2) of the CRA does not mean that there is an arguable case for relief under that Act. If it did, it would follow, for example, that every time a bank lent money to a customer there would be an arguable case for relief under the Act.

30 The first defendant has deposed that in 1994 when he signed the guarantee he was not asked by the bank officer whether he understood the documents; whether he had received legal advice about taking out the loan; if he wished to have time to get legal advice about the documents; nor did the bank officer suggest or recommend that he get legal advice about the documents; he was not told that he was liable as guarantor for more than the $480,000 initial advance if Samphire increased its borrowings; that he was liable as guarantor for any borrowings of Samphire even if Samphire was sold and/or was no longer a director and/or shareholder; was not told that the defendant could call in Samphire's debts coming directly to the first defendant without first seeking payment and could do so whether or not Samphire was due to pay those debts at that time; and that he was not told that the first clause of the guarantee on the third pay of the small type, which was ruled out and which he was asked to initial, was a clause in which he could have limited the extent of his liability.

31 Mrs Capper has deposed that she left all her business dealings to her husband and that on or about 30 September 2001 she was shown a copy of the memorandum of common provision No E390927 and this was the first time she had ever seen that documents. At no time did the plaintiff inform her of the meaning of the memorandum. Mrs Capper also deposed that at no time did the defendant tell her that the mortgages could be called in even though there might have been only a limited number of breaches of the loan repayment obligations otherwise covered by the mortgages. Nor did the defendant tell her that the mortgage could be called in even though a loan to the company would be covered by the mortgages even if she did not have an interest in the company. The first defendant put the properties up for mortgages and she presumed that the plaintiff knew that one of the mortgages covered her home at 168 Gaffney Street Broken Hill. Mrs Capper says that had she had known that the defendant could call in the mortgages in any or all of the above circumstances, or in like circumstances, she would not have let her husband put up the properties for mortgage. I might add that the guarantee is in tiny print, and for example, the wording of paragraphs (1) is unintelligible. The document is illegible.

32 It is my view that the defendants, particularly the second defendant, have arguable cases for relief under the CRA. It cannot be said that their cases are hopeless. In their defences the defendants have sought that the mortgages and guarantees not be entered. A cross claim has not been filed and should have been. However, the substance of the defendants' claim has been pleaded.

33 There are two other discretionary factors to be considered. Firstly, the company is now two months ahead in its repayments; and secondly, an application for summary judgment is unnecessary where there is no delay in obtaining a hearing date in a possession matter.

34 Costs are discretionary. The plaintiff was unsuccessful in its quest for summary judgment. However, because the defendants were tardy in filing their affidavits which referred to facts and circumstances relevant to their CRA claim it is my view that the appropriate order for costs is that each party pay their own costs of the summary judgment, but the defendants are pay the costs thrown away by the amendments to the defences.

35 The orders I make are: (1) The plaintiff's notice of motion filed 26 July 2001 is dismissed. (2) The defendants are to file and serve amended defences and cross claims within 14 days.

(3) Each party to pay their own costs of the plaintiff's motion. (4) The defendants are to pay the costs thrown away by the amendments to the defences. **********

Last Modified: 10/29/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.