Blakeley v National Australia Bank

1. Summary judgment be entered for the respondent against the applicants.
2. The applicants pay the respondent's costs of the application and the proceeding, to be assessed if not otherwise agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BARKER J: 1 On 22 February 2017, Mr Harold Thomas James Blakeley, on his own behalf and purportedly as trustee for HTJB Family Trust and purportedly as trustee for the Harold Thomas James Blakeley Family Trust, respectively the named first applicant, second applicant and third applicant (together, the applicants), commenced this proceeding against the National Australia Bank Limited, in which they claim damages in respect of alleged unconscionable conduct by the Bank and other conduct of the Bank alleged to contravene the Australian Securities and Investments Commission Act 2001 (Cth) and the Australian Consumer Law. 2 In a statement of claim filed 22 March 2017, the applicants relevantly plead as follows: 5. The Respondent concluded a Mortgage agreement with PMHB Pty Ltd ACN 133 032 667 as trustee for the Third Applicant during or about October 2011 In terms of which: a. The Respondent advanced the sum of $900,000 to the third applicant against the registration of a first mortgage over 81 Mandurah Terrace and 62 Sholl Street, Mandurah in the State of Western Australia. 6. The Respondent concluded a Loan agreement on the 12th October 2011with the First Applicant and with the Second Applicant for the development of 81 Mandurah Terrace (the business) and 62 Sholl Street (the Land) Mandurah WA. The material terms of which were that: a. The Respondent advanced the sum of $200,000 to the First and Second Applicants; b. The loan agreement commenced on the 12th October 2011 and its expiry date was the 31 October 2021. (The Applicant will refer to the mortgage and loan agreement at trial for their full terms and effect) 7. The facilities were as follows: a. $900,000 First Mortgage over both properties for the development of the Land and business. b. $200,000 loan to the second Applicant for the construction of the business (restaurant). 8. The Mortgage and loan: a. The Registered Mortgage No. L787783 over Certificate of Title 1026 Folio 688, being the property known as 81 Mandurah Terrace Mandurah WA 6210. (The business). b. Guarantee and indemnity given by First Applicant to secure the loan and mortgage. c. At all times material hereto the First Applicant was the trustee of the Second Applicant and currently the Trustee of the Third Applicant, the former trustee, PMHB Pty Ltd, having been deregistered. d. The third applicant leased the business to the second applicant in terms of a written agreement of lease for a period of ten (10) years. 9. During or about June 2012 the Applicant and the Second Applicant asked the Respondent for permission to sell the business. The request was made in the ' no default' period of the mortgage and loan agreement. 10. At the time of the request referred to in paragraph 9 above, (June 2012) the business (excluding the land upon which it was built) was valued at approximately $600,000 plus plant and stock, less the loan of $200,000. 11. The Respondent verbally refused to permit the sale of the business in June 2012 or at all and in writing through their solicitors confirmed such refusal on 20 December 2013 some 18 months later 12. The First Applicant is the current Trustee of the Third Applicant that was the registered owner of the properties at 81 Mandurah Terrace and 62 Sholl Street Mandurah Western Australia 6210. 13. Between June and December 2012 the Respondent verbally refused to allow the assignment of the lease of the property, and in writing acknowledged this refusal on the 20 Dec 2013 some 18 months later. 14. The restaurant business closed its doors and ceased trading at the end of December 2012 and the applicants were unable to minimise their losses by either assigning the lease or selling the business of the restaurant. 15. The Respondent by its refusals referred to above kept the applicants in a state of hiatus for 12 months before taking action to foreclose and thereby exacerbated the financial losses suffered by the applicants. 3 In the statement of claim, the applicants then identify two specific claims. The first claim is pleaded in the following terms: 16. The refusals on the part of the Respondent: a. Prevented the First and Third Applicants from securing the assignment of the lease over the business and thereby preventing the eventual foreclosure by the Respondent; b. Prevented the Second Applicant from assigning the lease and thereby the repayment of the loan agreement and the release from the 10 year lease agreement. c. Resulted in the loss of opportunity for all the applicants to extricate themselves from a foreseeable financial crisis. d. Resulted in the First, Second and Third Applicants suffering financial loss. e. Resulted in the Respondent accruing penalty interest and other compound interest on both the mortgage and the loan agreement. 17. The Respondent foreclosed on the mortgage and loan agreement on the 20th August 2013 with the result that: a. First Applicant was declared bankrupt; b. Second Applicant lost all its assets; and c. The Third Applicant lost the land. 18. The refusals of the Respondent referred to above were: a. Outside the ambit of the mortgage and loan agreement in as much as the said agreements provided for the prohibition of the sale of the land and not the assignment of the lease over the land; b. Tantamount to the unilateral imposition by the Respondent of a condition into the mortgage and loan agreement that neither the First nor Third Applicants had agreed to or had contemplated. c. Unconscionable. 19. But for the refusals of the Respondent to permit the Second Applicant from assigning the lease over the business, it would not have been necessary for the Respondent to foreclose as aforesaid. 20. The mortgage was fully paid until the end of January 2013. 21. Further and /or alternatively, the Respondent's refusals above coupled with the Respondent's inaction for a period of 18 months after being alerted by the First Applicant to the foreseeable financial catastrophe resulted in the Applicants suffering heavy financial losses that could and should have been avoided or mitigated. 4 The second claim is pleaded in the following terms: 22. The Respondent sold the properties at gross under value without adequate promotion thereby contravening 420 A of the Corporations Act 2001 (Cth). 23. The land was valued at $1.8million prior to its improvement and valued at $3m after being improved. The Respondent sold the land duly improved for $1.25 million. a. The difference between the market value of the improved land and the value realised by the Respondent on foreclosure was the sum of $1,750,000. 24. The Respondent: a. As mortgagee in possession failed to take reasonable care to ensure that the properties were sold at market value b. Failed to act in good faith; c. Failed to exercise the power of sale with reasonable care and with the objective of not selling the subject property below its market value or in the absence of a known market value, at the best price which was reasonably obtainable, having regard to the prevailing circumstances at the time of sale 5 The applicants then provide what are referred to as "Details of Claim" as follows: 26. I rely on the Australian Consumer Legislation s.2o, s.21, s.22 and sections 12CA, 12CC, and 12CB of the ASIC Act with regard to unconscionable conduct. 27. I also rely on section 18(1) and Division 1Part 3-1 of the Australian Consumer Legislation. 28. I also rely on s12DA and/or s12DF of the Australian Securities and Investment Commission Act 2001, for deceptive and misleading conduct. 29. I also rely on 420A (1) (a) of the ACL. 30. I also rely on the law for failure to abide by the law relating to quiet enjoyment identified in the Western Australian Torrens Legislation Section S 116 of the Transfer of Land Act 1893-1978 (WA). 6 The applicants finally specify claims for damages, costs and interest in the following terms: a. General damages of $1.5m for the First Applicant; b. Special Damages of $1.5m for the Second Applicant; c. Special Damages of $1,750,000 for the Third Applicant being the difference between the market value and the sale price of the property; d. Costs and interest at the legal rate of Judgement to the date of payment. e. Aggravated damages of $3m by reason of the contumelious conduct of the Respondents unconscionable, misleading and deceptive conduct by failing to take into consideration: • the relative bargaining strength of the parties • the conditions imposed on the weaker party that were not reasonably necessary to protect the legitimate interests of the stronger party • the use of undue influence, pressure or unfair tactics by the stronger party • the requirements of applicable industry codes • the willingness of the stronger party to negotiate the extent to which the Respondent should have acted in good faith. • lack of explanation and assistance when necessary • whether the Respondent had the right to unilaterally change contract terms. 7 While the applicants in the statement of claim do refer to Mr Blakeley having been declared bankrupt, they do not refer to the fact that the applicants and the Bank executed a forbearance deed on or about 5 March 2013, as varied by a variation letter dated 11 April 2013 and further varied by a variation letter dated 27 May 2013 - which collectively may be referred to as the forbearance deed; and that by the forbearance deed the Bank was released from any claims that any of the applicants had or may have had against it. 8 It is in these circumstances that the Bank now seeks summary judgment against the applicants pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) (FCA) and/or R 26.01 of the Federal Court Rules 2011 (Cth). 9 For the purpose of s 31A(2), the Bank submits that none of the applicants has a reasonable prospect of successfully prosecuting the proceeding against the Bank. 10 The issues that arise in dealing with the Bank's application for summary judgment are as follows: (1) Whether in light of the forbearance deed and release by the applicants of any claims they had or may have had against the Bank, the applicants can now maintain this proceeding. (2) Whether Mr Blakeley has standing to pursue any claims in his own right given he is a discharged bankrupt who claims against the Bank before his bankruptcy vested in the Official Trustee. (3) Whether any claims PMHB Pty Ltd ACN 133 032 667 has against the Bank on its own behalf vested in the Commonwealth, and any claims on behalf of the Blakeley Family Trust vested in the Australian Securities and Investments Commission (ASIC), upon its deregistration and so cannot be pursued by Mr Blakeley, if he is now the trustee of the Blakeley Family Trust.