C2C Investments Pty Limited & Ors v Commonwealth Bank of Australia

Supreme Court of NSW|2013-05-08|Before: Slattery J

Judgment 1The defendant Bank in these proceedings has moved the Courts to vary the stay orders made in paragraph [75(4)] of the Court's 27 March 2013 judgment: C2C Investments Pty Ltd & Ors v Commonwealth Bank of Australia [2013] NSWSC 256 ("the Principal Judgment"). That order was to "stay the consent judgments until the final determination of the plaintiff's present motion". This judgment should be read together with the Court's Principal Judgment. Events, persons and things are referred to in both judgments using the same terminology. 2It was clear from paragraph [64] of the Principal Judgment that the stay imposed was being imposed on an interim basis only. As paragraph [64] explains, the Court proposed to examine the terms of the stay more closely, once other procedural events had taken place:- But I will not resolve the full terms of the stay, until the Shannon parties' amended pleading is available. The parties are at issue on the calculations as to whether on the Shannon parties' best case some money will still be owed to the Bank. The Bank needs an opportunity to respond to the Shannon parties' latest calculations of this amount. I will consider what amount, if any, should be paid into Court as a term of the stay when an amended pleading is served. 3Events have now moved on since the Principal Judgment: the Shannon parties have filed an amended pleading; and the parties have provided competing calculations as to what monies might still be owed to the Bank on the Shannon parties' best case. This judgment considers, as Principal Judgment paragraph [64] foreshadows, what amount, if any, should be paid into Court as a term of the continuation of the stay already granted. 4This issue is considered now although all the issues on the motion are not finally resolved. There may still be a contest about the pleaded form of the Amended Statement of Claim that has been served. That contest is still in progress with particulars having been requested and yet to be answered and examined. But in the meantime the Bank has asked for a resolution of the terms of the stay. There seems to be no prejudice to either side from considering that issue now. The issue can be considered upon the footing that the remaining plaintiffs, Developments and Mr Shannon, will proceed with the Amended Statement of Claim in the form now served and filed. 5As a result of the helpful submissions lodged on both sides, the issues relating to the terms of the stay have been considerably narrowed. At the last directions hearing on Friday, 3 May 2013, the Court made directions for the filing of brief written submissions on this issue by close of business on Monday, 6 May 2013, with a view to the Court giving judgment today, Wednesday, 8 May 2013. The parties complied with the Court's orders, and through their submissions defined the three main issues set out under the headings below.

Should there be a stay in the Investments Proceedings? 6As my Principal Judgment indicates (see paragraphs [13], [14] and [15]), the two relevant Consent Judgments totalling $1,571,958.88 were entered in each of the Investments Proceedings and the Developments Proceedings. The Consent Judgment in the Investments Proceedings was in the sum of $419,386.46. But as the Principal Judgment recorded (at [23]) the plaintiffs in the Account Proceedings concede the claims in relation to the property in the Investments Proceedings are no longer pressed. They now only press claims of misconduct in the selling the properties in the Developments Proceedings. That concession was not entirely surprising, as the profile of the case described to the Court in the Investments Proceedings was considerably weaker than that in the Developments Proceedings. But that concession having been made it follows in my view that the stay in respect of the Consent Judgment in the Investments Proceedings must now be lifted. I see no proper basis to continue the stay in the Investments Proceedings, merely because there may be a continuation of the stay in Developments Proceedings. The borrowers, Investments and Developments, were different corporate entities, even though their associated sureties, Mr and Mrs Shannon, were common parties to both proceedings. Accordingly, I will order that the Court's existing stay of the Consent Judgment in the Investments Proceedings be dissolved. But this order of dissolution will operate after 5.00pm on 17 May, to allow the Shannon parties to exercise their appeal rights if they wish. 7In relation to the other proceedings, the Developments Proceedings, two further issues arise between the parties: the calculation of the amount of the Shannon parties claimed set-off against the Consent Judgment; and the amount of money, if any, that should be paid into Court as a condition of continuing the existing stay. On these two issues the parties hold the following positions. The Shannon parties say that only $38,763.66 is outstanding to the Bank after their cross-claims are set-off against what the Bank claims. The Bank says that the undisputed balance owed to it is larger, namely the sum of $94,012.88. The Bank says that no further stay can now be justified for the undisputed $94,012.88 and that a stay should only be continued for the disputed balance of $517,072.74 on the basis that this disputed balance is paid into Court.

What is the undisputed Developments Proceedings' judgment debt? 8The Shannon parties criticise the Bank's proof of the undisputed balance of Developments Proceedings' Consent Judgment debt on the basis it is only supported in a solicitor's affidavit given on information and belief, without reference to underlying documents and that there is an unexplained discrepancy between actual sales prices and the amount said to be applied to the outstanding debt. Whilst it is true that part of this affidavit is on information and belief, much of the calculation is purely a matter of mathematics. 9The real dispute raised is about differences between sale prices for which the Bank says it sold the three Developments properties and the exact amounts the Bank applied to the debt on the Consent Judgment in the Developments Proceedings. In short, the Bank's evidence is that it obtained a $755,000 from the sale of these properties, but has only applied $695,122.30 to reduction of the original judgment debt of $1,152,572.42. It is not obvious to the Court on the materials provided precisely what accounts for this difference, although it is presumably legal and other professional expenses and disbursements associated with the recovery of the debts on the Consent Judgment, for which the Bank would ordinarily be entitled to indemnify itself from proceeds of sales under the applicable mortgage terms. The appropriate way to deal with this as yet unresolved discrepancy on the present state of the evidence is for me to take it into account in the total exercise of the Court's discretion, which I will do. Arguments about whether the full sale proceeds have been applied in reduction of the judgment debt account for much of the difference between: (1) the Bank's claim of an undisputed balance of judgment debt of $94,012.88 (being a gross judgment debt of $611,085.62 less the Shannon parties' cross claim of $517,072.74); and (2) the Shannon parties' claim of an undisputed amount of $38,763.66.

What amount should be paid into Court? 10This issue requires consideration of both legal and factual matters. The plaintiff seeks an exercise of the Court's discretion under Civil Procedure Act 2005 s 135(2)(c) to prohibit the taking of further action to enforce the Developments Proceedings' Consent Judgment. 11The Court has a wide discretion as to whether any terms should be imposed upon such a stay and if so, the nature of those terms. Appropriate terms may include the payment of part of the judgment to the plaintiff or the provision of security: Andrews v John Fairfax & Sons Ltd [1979] 2 NSWLR 184 and Rosengrens Ltd v Safe Deposit Centres Ltd [1984] 3 All ER 198. It is also now clear that in the exercise of jurisdiction under Civil Procedure Act 2005 s 135(2)(c) that the Court may grant a stay of execution effectively amounting to a set-off whether or not the set-off would amount to an equitable set-off: Padkohe Pty Ltd v Fletcher [2006] NSWSC 1239 (Barrett J) at [4] ("Padkohe"), Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2006) 58 ACSR 22, [2006] NSWSC 560 at [79] (White J) ("Evans & Tate") and Adamson v Ede [2008] NSWCS 1184 (McCallum J) ("Adamson"). Padkohe, Evans & Tate, and Adamson all are authority for the proposition that a central discretionary issue in deciding whether or not to impose terms on a stay, and if so what terms, is "what the justice of the case requires" by way of exercising the general jurisdiction of the Court over its suitors. 12The Shannon parties submit that the amount of any payment into Court should only be the undisputed amount, which they allege is only $38,736.66 and that the rest of the judgment should now be stayed. But, of course, there is a dispute about the size of the undisputed amount. The Bank says that the undisputed amount is $94,012.88. It submits that it should now have that sum paid to it and that the amounts to be set off on the Shannon parties' best case of $517,072.74 on their counter claim, should be paid into Court. 13I am not persuaded by the logic of the position taken by either the Shannon parties or the Bank. The Shannon parties' argument that only the undisputed amount be paid into Court (assessed in the most favourable way for the Shannon parties) as a condition of a stay does not properly account for other factors which justice requires be considered in the Bank's favour. The sum of $38,736.66 may turn out to be a considerable under-estimate of the true undisputed amount. The Bank may incur legitimately recoverable costs in showing that its full judgment debt is recoverable. And it may be successful in showing that the whole judgment debt is recoverable. Moreover the $38,736.66 is due on a judgment entered by consent. Paying $38,736.66 into Court represents the best position for the Shannon parties. 14On the other hand, the Bank's request for judgment for $94,012.88 and for payment into Court of the whole disputed balance of $517,072.74 as the price of a stay of the balance, does not give full consideration to some matters of justice which should be considered in the Shannon parties' favour. If the Shannon parties succeed a sum as little as $38,736.66 may end up being found owing to the Bank. And the Shannon parties may get the benefit of the costs order if they are successful against the Bank. Moreover, the Bank's securities were limited to the properties which were sold together with their personal rights of action on the guarantees. The Bank is not entitled to security for the sums in dispute which it claims to be owed to it. Its rights as a mortgagee over secured property were exhausted when it applied the whole proceeds of sale of the Developments' properties to reduce the debt it was owed. The remaining action is therefore not analogous with that which might apply when a mortgagor was attempting to restrain a mortgagee from exercising a power of sale but where the basis for exercising that mortgagee's power is not impeached: Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 and Maguire & Tansey v Makaronis (1997) 188 CLR 449. 15The matter is one which requires the exercise of an appropriate discretionary judgment reflecting the justice of the case. In my view the Developments Proceedings' Consent Judgment should be partially stayed. The partial stay will stay this judgment for all amounts in excess of $60,000 upon the payment into Court of $100,000 by Friday 17 May 2013 at 5pm. This means that $60,000 should be paid to the Bank now on the Development's Consent Judgment. But of course if the Shannon parties are wholly successful on their counter claims then some (or all) of this sum may eventually be repaid to them.

Conclusions and Orders 16In the result therefore the stay on the Consent Judgment in the Investments Proceedings will be dissolved and the stay on the Developments Proceedings' Consent Judgment continued on terms. 17The Court orders that: (1)The existing orders staying the Consent Judgment in the amount of $419,386.46 in proceedings 2009/29708 (the Investments Proceedings) shall be dissolved at 5.00pm on Friday 17 May 2013; and (2)The existing orders staying the Consent Judgment in proceedings 2009/297093 (the Developments Proceedings) are continued but will be varied as and from 5.00pm on 17 May 2013 so that from that time the said judgment is stayed for all amounts in excess of $60,000 but that varied stay will only come into effect if the plaintiffs in these proceedings pay into Court the sum of $100,000 by 5.00pm on 17 May 2013; (3)Note that if the required sum of $100,000 is not paid into Court by 5.00pm on 17 May 2013 the existing stay orders described in (2) will be dissolved. (4)The defendant/applicant to file and serve any evidence in respect of its application to strike out the Amended Statement of Claim by 20 May 2013. (5)The defendant/applicant to serve on the solicitors for the plaintiffs, and the Associate to Justice Slattery, written submissions in respect of its application to strike out the Amended Statement of Claim by 5.00pm on 20 May 2013. (6)The plaintiffs/respondents to serve on the solicitors for the defendant, and the Associate to Justice Slattery, any evidence in reply and written submissions in respect of the defendant's application to strike out the Amended Statement of Claim by 5.00pm on 22 May 2013. (7)The hearing of the defendant's/applicant's application to strike out the Amended Statement of Claim be listed for hearing on 24 May 2013. 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. Decision last updated: 09 May 2013

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