Commonwealth Bank of Australia v Saracen Holdings Pty Ltd [2010] NSWSC 541 | Case summary

2010/40916 COMMONWEALTH BANK OF AUSTRALIA -V- SARACEN HOLDINGS PTY LIMITED EX TEMPORE JUDGMENT 1 HIS HONOUR: By Amended Summons dated 18 February 2010 the plaintiff, ("the Bank") claims a declaration that it and the defendant entered into an agreement pursuant to which the defendant would grant the Bank a mortgage over lot 72 in DP 661069, being land situated at lot 72 Sirius Road, Voyager Point, New South Wales, ("Voyager Point") in substitution for the Bank's then existing mortgage over the defendant's property at lot 3 in DP 259401 being land situated at lot 3 Lawrence Hargrave Drive, Helensburgh, New South Wales ("Helensburgh"). The Bank seeks an order that the agreement be specifically performed together with the usual ancillary orders to facilitate performance. 2 On 26 March 2010 the proceedings were set down for hearing today on an estimate of one day. Also on that date, directions were made for the filing by the defendant of any cross-claim by 16 April 2010. 3 A cross-claim was filed outside the deadline on 23 April 2010 claiming damages. There are significant difficulties with the document including that it appears in substance to be a claim by the defendant's sole shareholder and director Mr Nathan Elali rather than the defendant itself. 4 There is on Court file copy of the cross-claim the handwritten notation "Listed 4/6/10 at 9.45am". This does not appear to be an official endorsement. 5 Both parties were content to proceed with today's hearing on the basis I would decide whether the plaintiff is entitled to the declaration, decree for specific performance and ancillary orders which it seeks, and that the defendant's cross-claim would be stood over. I accordingly made an order under Uniform Civil Procedure Rules 2005 Pt 28 r 28.2 to facilitate a separate hearing. 6 On or about 26 October 2007, the Bank lent and advanced to the defendant $1,249,000. The terms of the loan are contained in an instrument entitled Consumer Credit Contract Schedule, signed on behalf of the defendant by Mr Elali on about 23 August 2007. With leave, Mr Elali appeared for the defendant. 7 The terms provided that the defendant would give security for the loan in the form of a registered mortgage over Helensburgh. The defendant executed a mortgage accordingly, and it was registered on 13 December 2007. 8 The Bank says that some time in 2008 but before 26 February (the precise date was not established by the evidence) Mr Elali, on behalf of the defendant and with a view to restructuring the defendant's finances, requested the Bank to discharge the mortgage over Helensburgh on the basis that there would be substituted for it security by way of a mortgage over Voyager Point. 9 On 26 February 2008, the Bank faxed to the defendant for its signature a "Discharge/Refinance Authority" containing a written request to the Bank to discharge the mortgage over Helensburgh. The following day the defendant returned the document signed by Mr Elali on its behalf. The result was that the Bank's mortgage over Helensburgh was discharged on 9 September 2008. The defendant then mortgaged Helensburgh to another bank. 10 The Bank, however, failed to obtain any mortgage from the defendant over Voyager Point. More than that, it failed to obtain any formal agreement from the defendant let alone any note or memorandum signed on its behalf for the substitution. 11 The Bank tendered in evidence an unsigned letter addressed to the defendant bearing the date 15 February 2010 (the date upon which the document was printed) recording an offer "In response to a recent request by you" to change the terms of the "Credit Contract" by adding as security a mortgage over Voyager Point and releasing the mortgage over Helensburgh. The letter made provision for an acknowledgment to be given by Mr Elali as guarantor. The Bank was unable to provide any evidence as to the date upon which the letter was sent, if at all. It has no record that the letter was countersigned and returned, nor does it have any record that any additional security documents were signed or returned to it. 12 In support of its contention that the agreement contended for was made, the Bank put that it should be inferred that a signed version of its letter was sent and returned by the defendant with formal documents. Such an inference is not open especially given the significant shortcomings of the Bank's internal administration disclosed in this case. Counsel for the Bank aptly described this as not being the Bank's finest hour. 13 There is, however, ample evidence including the evidence of Mr Elali himself that the agreement which the Bank asserts was entered into. 14 Firstly on 19 October 2009, Mr Elali sent an email to the Bank in which he said: "Over past days, it became somewhat evident that the CBA, somehow, believe that they are still holding Helensburgh as security when in fact it was released by CBA last August and the security for the Saracen loan substituted with Voyager Point." 15 Secondly in an affidavit sworn 14 April 2010, Mr Elali says: "17 August 2008, settled the purchase of Voyager Point property by substituting the security for Saracen Holdings Pty Ltd loan no. 419695905 with CBA from Lot 3 Lawrence Hargrave Drive, Helensburgh with Lot 72 Siruis (sic) Road, Voyager Point. Helensburgh property was refinanced by NAB." 16 Thirdly Mr Elali was cross-examined. His evidence was that he made a proposal to the Bank for the substitution of the security, acceptance of which was communicated by the Bank giving the discharge over Helensburgh. 17 I accordingly am satisfied and I find that there was an agreement under which the defendant would substitute a mortgage of Voyager Point for the mortgage of Helensburgh as security for the loan. 18 According to the Bank, as at 27 January 2010 the balance outstanding on the loan was $1,347,579.45. It is not necessary to make any findings as to the level, if any, of the indebtedness of the defendant to the Bank at this stage. 19 Mr Elali made submissions which disclosed on his part a serious level of disgruntlement with the way in which he has been dealt with by the Bank. His complaints include that the Bank has not deleted from relevant documentation the fact that Helensburgh has been released (a complaint the validity of which the Bank appears to acknowledge) and that other Bank documentation reflects that the Bank has security over Voyager Point for loans in respect of which Voyager Point was not given as security. He complains that the Bank has treated him and the defendant high-handedly and in a bullying fashion. It is neither necessary nor appropriate for me to consider whether these complaints are made out because even if they are they do not amount to a defence, and the hearing before me was not an appropriate occasion for the Bank to respond. Maybe on mature consideration, however, the Bank might consider it appropriate to investigate Mr Elali's grievances further. 20 Section 54A of the Conveyancing Act 1919 (NSW) provides as follows: 54A Contracts for sale etc of land to be in writing (1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged. (2) This section applies to contracts whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 and does not affect the law relating to part performance, or sales by the court. (3) This section applies and shall be deemed to have applied from the commencement of the Conveyancing (Amendment) Act 1930 to land under the provision of the Real Property Act 1900. 21 Although the defendant did not expressly plead as a defence to the Bank's claim the absence of a written memorandum or note signed by it on authority, the defendant did plead that no mortgage document was signed. 22 It is clear that the defendant agreed to execute a mortgage over Voyager Point in favour of the Bank and that the defendant has declined and continues to decline to execute it. The Bank accepts there is no written memorandum or note of the agreement it asserts (and which I have found) signed by the defendant or someone lawfully authorised on its behalf. It puts that the Court should make an order for specific performance because the Bank has performed its part of the agreement, namely the discharge of the mortgage over Helensburgh and that the defendant has had the benefit thereof. 23 It is well established that the doctrine of part performance enables a Court of Equity to decree specific performance even where the statute has not been complied with, provided the acts done in performance were done with no other view or design than to perform the agreement: Khoury & Anor v Khouri (2006) 66 NSWLR 241 at 260; Meagher, Gummow & Lehane's Equity Doctrines & Remedies 4th ed [12:100] and following. Section 19(2) provides that the section does not affect the law relating to specific performance. The doctrine of part performance applies equally to enforcement of a contract to execute a mortgage: Takemura v National Australia Bank Ltd [2003] NSWSC 339. 24 It is clear that the discharge of the mortgage over Helensburgh was done with no other view or design than to perform the Bank's agreement with the defendant to discharge it in substitution for a mortgage over Voyager Point. The defendant did not suggest otherwise. 25 The Bank is accordingly entitled to the relief it seeks. I will make orders in accordance with paragraphs 1, 2, 3 and 4 of the Summons. Short Minutes are to be brought in. I will hear the parties on costs and directions with respect to the cross-claim. **********

Commonwealth Bank of Australia v Saracen Holdings Pty Ltd

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