Commonwealth Development Bank of Australia Limited v Kerr & Ors [2001] QSC 234

[3] A defence to the CDBA claim was filed on 19th July 2000.

[4] On 4 April 2001 an application for summary judgment in relation to the claim for possession of the Calliope land was filed.

[5] The facts are relatively simple. RG Kerr and JS Kerr are the parents of RJ Kerr. CD Kerr is the wife of RJ Kerr. On 13 December 1988 RG & JS Kerr applied to CDBA for a loan of $150,000 to purchase the Calliope land ("the first facility"). RJ Kerr and CD Kerr joined the application because they were to be joint registered proprietors.

[6] Later, on 22 December 1988 RJ Kerr and CD Kerr applied to CDBA on their own behalf for a second facility of $140,000 to discharge some existing debts.

[7] The security required by CDBA for the first facility was a mortgage over the Calliope land, a stock mortgage, an equitable mortgage over brands or marks and a mortgage over the Rockhampton land.

[8] The security required by CDBA for the second facility was a mortgage over a property at Lawrence Avenue, North Rockhampton and a bill of sale over the assets of a milk run at Frenchville.

[9] In an application for summary judgment I am concerned only with whether the respondent has raised a question to be tried: Fancourt v Mercantile Credits Ltd (1983) HCA 25; (1983) 154 CLR 87 at 99.

[10] In June 1992 RG & JS Kerr received a letter from CDBA offering to extend the term of the second facility over a term of 20 years at reduced monthly payments subject to a condition linking the securities for the first facility to cover the second facility. RG & JS Kerr signed the letter and returned it to CDBA but only after deleting the reference to the Rockhampton land and writing:

"It is not agreed that property at 147 Stewart Street be linked to cover Mr & Mrs RJ Kerr loan number 40163779-3"

[11] RG & JS Kerr had further contact with officers of CDBA in relation to CDBA's requirements but no agreement was reached. Contact ceased in 1997. This might be because the terms of the mortgage over the Calliope land made it security for the second facility in any event. Under the mortgage, "mortgager" was defined as "Robert John Kerr and Cheryl Dawn Kerr as joint tenants inter se and Robert George Kerr and Joan Shirley Kerr as joint tenants inter se as tenants in common in equal shares." The "debtor" was defined as Robert George Kerr and Joan Shirley Kerr. The money secured included:

"All moneys...now or hereafter to become owing or payable to the bank by the debtor and the mortgagor or either of them either alone or on joint or partnership account or on any other account whether as principal or surety".

[12] Clause C35 of the mortgage relevantly provided:

"Except to the extent that such interpretation shall be excluded by or repugnant to the context... when two or more mortgagors are parties hereto, [mortgagor] shall mean and include the mortgagors or any of them..."

[13] Plainly this meant the property was security for money owning by RJ Kerr & CD Kerr on a separate account. If authority to support this interpretation was required reference could be made to Hall v Westpac Banking Corporation (1987) NSW Conv R 55-368 at 310-311,312.

[14] The first facility has never been in default. The first facility is not due for repayment before June 2003.

[15] Mr RG Kerr deposes that he would not have borrowed from the CDBA if he had known or been made aware that the securities for the first facility were also security for the second facility.

[16] The real question is whether there is anything raised by the material filed which might, if it is accepted, relieve the defendants from the consequences of the terms of the mortgage they entered into.

[17] The defence filed raises two issues. It contends for a construction of the mortgage which does not allow it to be used for the second facility. I am satisfied that construction is not open. It also raises the question of an estoppel based on the letter of June 1992 and the subsequent negotiations. I can see no basis for relief founded on such an estoppel. The money had already been borrowed and the liability incurred before that letter was sent. It is plain to me that whatever belief the letter engendered was not causative of any action or inaction on the part of the plaintiffs.

[18] In a supplementary affidavit sworn 17 May 2001 Mr RG Kerr deposes to his paucity of education (Grade 7), lack of business experience and naivety in dealing with the bank. He says, in essence, that he did not know the second facility had even been sought or obtained. He says he received no advice in relation to the mortgage and that his dealings with bank were through his son RJ Kerr. Mrs JS Kerr swears to similar commercial disadvantage. The affidavits are undoubtedly directed to raising an issue similar to that considered in Commercial Bank of Australia Limited v Amadio [1983] HCA 14; (1982) 151 CLR 447.

[19] Mr Kelly for CDBA counters by pointing to the distinguishing features of the present case. Of most emphasis is that in Amadio the disadvantaged parties were purely guarantors who derived no personal benefit. Here RG Kerr & JS Kerr were borrowers in relation to the purchase of the Calliope land.

[20] In the end, this is an application for summary judgment. While there are obvious deficiencies in the defendants' case I am left with the position that "it is not possible to say without doubt, on the whole of the material, that there is no question to be tried" (Fancourt at 99).

[21] Here, both facilities were entered into at about the some time. Each had specific, clearly defined securities. There was no suggestion raised by the mortgagee that the security for one facility would also be security for the other. In relation to the second facility RG Kerr and JS Kerr were not borrowers and derived no obvious benefit. There is sworn evidence that the money would not have been borrowed in relation to the first facility if the true consequence of entering into the mortgage was made known. In a very loose sense, the terms of the mortgage over the Calliope land make the first defendants guarantors of the second facility. It does not seem to me to be beyond argument that it is unconscionable to allow the bank to recover against the first defendant's property in circumstances where they were not informed by the bank of the second facility or of the risks to themselves if it were granted. As the claim is against the land I do not think it should be determined against one pair only of 2 pairs of tenants in common. Possession is sought against all registered proprietors.

[22] In the result I dismiss the application for summary judgment.

[23] A submission has been made that I should require payment of the money claimed to be owed to CDBA or a substantial portion of it into court as a condition of leave to defend the action. There is no suggestion the bank's security is not adequate to cover the debt owed to CDBA. It is likely on the material, although not stated expressly that to order payment of the debt as a condition of leave to defend would be tantamount to giving judgement on the basis that such an order could not be met: cf DMS Shipping & Trading Co Ltd v Lionheart Asia Ltd [1995] QCA 448; [1996] 2 Qd R 20. There is, in fact, no money claim by CDBA in the action. I do not, therefore consider this to a proper case to require a payment into Court.

[24] CDBA seeks costs of the application even if it is not granted on the basis that the issue on which the respondents succeeded was not included in the defence. While I have some sympathy for CDBA on this issue it cannot be ignored that they have failed in the application. It seems to me to be a proper case in which to make each party's costs that party's costs in the cause.

[25] I give leave to the defendants to amend their defence to raise the issue on which they have succeeded before me.