Australia and New Zealand Banking Group Ltd v Donnelly

PROCEDURAL HISTORY 18Proceedings were first commenced by Statement of Claim filed by ANZ on 22 September 2011. 19On 6 December 2011, ANZ obtained default judgment against Mr Donnelly. This gave ANZ a monetary judgment against Mr Donnelly in the sum of $800,552.48. As well, ANZ obtained an order for the possession of the property but only as against Mr Donnelly. 20Mrs Donnelly has attempted to defend the proceedings. To that end, she has filed an Amended Defence and a Cross-claim. These substantive proceedings have not yet been fixed for hearing. For the purpose of the hearing of this motion only and reserving its rights for later argument, ANZ accepted that so long as the Defence and Cross-claim remained on foot and had not been struck out, the Court ought act on the basis that Mrs Donnelly had an arguable defence. ANZ made plain, as did its motion, that at some later point in the proceedings it wished to move to strike out Mrs Donnelly's pleadings.

ORDERS SOUGHT 21The ANZ sought the following orders in its amended notice of motion: (1)An order that leave be granted to it to issue a writ of possession for the Bardwell Valley property and/or in the alternative, an order for the judicial sale of the Bardwell Valley property together with an order for the appointment of trustees to take possession of and sell the land. 22Other relief was sought dealing with the pleadings. This relief was not proceeded with in the argument before me but may need to be considered in due course.

ANZ SUBMISSIONS 23ANZ argued that by reason of the judgment which it had obtained against Mr Donnelly for possession of the property, it was entitled to possession of the property as a whole and that it was entitled as of right to an order for the judicial sale of the property. 24ANZ submitted that as a judgment creditor of one joint tenant, namely Mr Donnelly, it was entitled to execute against that joint tenant's aliquot share with the result that a "severance of the jointure must be effected": see Guthrie v ANZ Banking Group Limited (1991) 23 NSWLR 672 at 680B per Meagher JA. 25ANZ also sought to rely on Van den Heuvel v Perpetual Trustees Victoria Limited [2010] NSWCA 171 as authority for the proposition that, in this case, Mrs Donnelly's title as joint tenant was affected by the mortgage given by Mr Donnelly, such that ANZ was entitled to exercise its rights over the whole property. It argued that it was in the same position as against Mrs Donnelly as an equitable mortgagee because it was only seeking to rely on the rights arising from the judgment against Mr Donnelly. 26Relying on its position as an equitable mortgagee or chargee, ANZ then submitted that where default was established, it was entitled as of right to an order for judicial sale. In support of this contention ANZ drew attention to the decision of Brereton J in Sood v Christianos [2008] NSWSC 1087 at [16] where his Honour said: "[j]udicial sale is the standard remedy of an equitable chargee. Upon default, an equitable chargee is entitled as of right to an order for sale; this is not regarded as a matter of discretion. Sykes and Walker say as much (at 198): 'The chargee on default has the right to apply to the Court for an order for sale. Such order is of right and not regarded as a matter of discretion'. In this field, where it is a remedy of an equitable chargee, judicial sale is not a remedy of last resort but the standard remedy ...". 27The reference to Sykes and Walker in this extract is to Edward Sykes and Sally Walker, The Law of Securities, 5th ed (1993) Law Book Co. An examination of the text book does not suggest that the learned authors have cited any authorities to support the statements which Brereton J has extracted. It seems to me that the context for the remarks of Brereton J was that a judicial sale at the suit of an equitable chargee is a standard remedy rather than a last resort remedy, in accordance with remarks to the effect that an order for judicial sale is a remedy which was to be only applied as "a last resort" see Yarrangah Pty Limited v National Australia Bank Limited [1999] NSWSC 97 at [27] per Young J (as his Honour then was). 28It seems to me that Brereton J took a great deal of care to emphasise that where a default exists, an order for judicial sale is a standard remedy available to an equitable chargee. I do not with respect take Brereton J's statement that an equitable chargee is entitled to have a Court make an order for judicial sale, to be an automatic entitlement to the relief regardless of any submissions which the Court may receive as to whether it is appropriate to make such an order. 29So, it seems to me that in order to obtain an order for judicial sale, an equitable chargee does not have to demonstrate what, if any, other steps have been taken to enforce the charge. Nor does an equitable chargee have to prove any special or exceptional entitlement to the order. It is sufficient that the equitable chargee can show that the charge exists and is enforceable and that default has occurred. That said, it seems to me that before a Court makes an order for judicial sale, it is and must be entitled to have regard to the position of those who will be affected adversely by the making of the order. 30I find it difficult to accept that a Court would grant an equitable remedy where the remedy itself would become an instrument of injustice. Although an equitable chargee may have an entitlement upon default to seek an order for judicial sale, the Court retains a discretion to determine whether, in all the circumstances, such an order ought to be made. To the extent that ANZ contended that Brereton J's judgment expressed some other principle which had the effect of removing all discretion from the Court as to whether it would make such an order, and that the order would in effect automatically be made in every case, I reject that submission. That is not how I understand the principle to which his Honour refers.

SHOULD AN ORDER FOR JUDICIAL SALE BE MADE? 31The end point of a grant of relief in accordance with the orders which ANZ seeks would be that Mrs Donnelly and her children would be required to hand over possession of the property to ANZ, leave the property and find alternative accommodation. The property would then be sold. After sale, ANZ accepts that some part of the sale price would need to be set aside as representing Mrs Donnelly's share pending the resolution of the current proceedings between Mrs Donnelly and the ANZ. 32Mrs Donnelly argues that this result would have the practical effect of defeating the real aim of the litigation namely, to retain the house. It is to be recalled that it is her case that had ANZ not converted the loan into Australian dollars, no default would have occurred on the loan. In other words, no occasion has as yet arisen for the exercise of any powers under the mortgage let alone the obtaining of judgment against Mrs Donnelly. 33ANZ does not agree with that submission. It contended that default can be established on a number of bases including the undoubted fact that Mrs Donnelly, as one of the joint borrowers, has returned to Australia thus allowing ANZ to convert the loan to Australian dollars. Hence, ANZ submits there is no reason to think that the orders it seeks would have the effect of stifling the litigation. 34I do not propose to resolve this dispute as to whether there has been a default. The evidence dealing with it is far from complete. No cross-examination of the relevant witnesses has happened. It is sufficient for present purposes to note the nature of the dispute. 35I do not regard Mrs Donnelly's arguments on the material before me as completely hopeless or wholly without merit. That is not to say that I have been persuaded by them. On the contrary, my impression is that she will need compelling evidence to make out her contentions. The short point is that to accept ANZ's arguments at this stage of the proceedings would be analogous to the entry of summary judgment. This is not an appropriate case in which to take such a course, at least, indirectly by holding that default has occurred. 36I am satisfied that to make the orders sought by ANZ would be unjust to Mrs Donnelly. So far as I am concerned she presently has an arguable defence which may result in her being able to remain in the house which she owned as a joint tenant before the ANZ loan was made. The fact that four school-aged children for whom Mrs Donnelly has the day-to-day care also reside in the house which is their home also assists in understanding any potential detrimental effect of allowing ANZ's motion. 37If ultimately Mrs Donnelly is successful, she and her children would not be able to be restored to their current position if the orders ANZ requests were made because in the ordinary course of such events the house would have been sold by ANZ. In all of the circumstances, assuming in ANZ's favour that it is proper to equate its position to that of equitable chargee as it has sought to do, I would nevertheless not be prepared to make the orders sought. 38I make the following orders: (1)Orders 1 and 2 of the Amended Notice of Motion filed 24 September 2004 are dismissed. (2)The Amended Notice of Motion is otherwise adjourned to 9.30am on 7 December 2012. (3)I order ANZ to pay Mrs Donnelly's costs of the hearing of this part of the amended notice of motion.

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