BETWEEN : COMMONWEALTH DEVELOPMENT BANK OF AUSTRALIA LTD (ACN 074 707 458)

Practice and procedure - Judgment for possession of land - Application for stay of judgment - Validity of mortgage not at issue - No payment into court - Turn on own facts

Nil 1 OWEN J: This is an application for leave to appeal and the hearing of the substantive appeal from a decision of a Master of this Court made on 29 September 1999. The matter arises from an action commenced by the present applicant in relation to a mortgage security which it had taken over properties owned by the second defendants and the third defendants.

2 On 23 June 1999, the appellant obtained a judgment against the second defendants, and on 4 August 1999 the appellant obtained a judgment against the third defendants in the action. In both cases judgment was obtained as a result of the defendants' failure to comply with interlocutory orders made by the case management Registrar.

3 Judgments were entered and no argument has been raised which seeks to set aside the judgment or to impeach its integrity. Even more so, there is an admission by the defendants that the amounts claimed by the appellants are due and owing, and there is no attempt by the defendants to impeach the title of the mortgagee under the security instruments.

4 Against that background, the present respondent applied to a Master for a stay of execution of the judgment. On 29 September 1999, the learned Master granted a stay on conditions and for a fixed period. The reasons which commended themselves to the learned Master are set out at 19 to 21 of the appeal book. The Master noted that it was an application for a stay under O 47 r 13, and he said:

"Ordinarily the Plaintiff would be entitled to the fruits of its judgment, however, in this case I consider that there are 4 special circumstances, namely:

1. the judgment debt is relatively small with regard to the value of the property;

2. unlike the case of Scott v. Australian and New Zealand Banking Group Ltd [1989] WAR 256 the Defendants cannot refinance their loans;

3. the Defendants have a court case against Hall Chadwick for damages due to be heard next year and if they are successful this might well wipe out their debt to Magenta; and

4. the Defendants are willing to pay interest on the Bank's debt in the meantime.

The Defendants are lucky because the application was not as well prepared as it could have been. The Defendants should have annexed details of their financial circumstances and the pleadings from the Federal Court proceedings.

I am willing to grant a stay with a time limit. I will grant a stay until the end of May 2000, thereby giving a safety margin to the Defendants from March 2000, the expected date of the trial in the Federal Court proceedings.

I will also order that the stay is conditional on the Defendants paying interest of $1,225.00 per month, payable on the 15th day of each month to the Bank."

5 The reference in that quotation to Hall Chadwick is to a trustee in bankruptcy of some of the individual defendants. That case commenced in the Federal Court for damages against the trustee for alleged breaches of duty to the debtors. The reference to Magenta is a reference to a subsequent mortgagee; by "subsequent" I mean subsequent to the mortgage which is registered in favour of the appellant in these proceedings. In other words, the application for a stay had all the hallmarks of an injunction to prevent a secured creditor from exercising its remedies under the security instrument and, in particular, under a judgment obtained in relation to the debt the subject of the security. In that respect, in Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; (1972) 126 CLR 161, the High Court per Barwick CJ, said:

"The case falls fairly, in my opinion, within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument. Failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed by order upon the exercise of the respondent mortgagee's rights under the mortgage."

6 The difficulty which I have is that there is nothing in the short minute of reasons for decision of the Master which indicates that that principle was alluded to or taken into account. It appears on the face of the reasons that the Master has proceeded on the conventional grounds that are attracted when a stay of execution application is made. The Master does not appear to have addressed the additional problems, considerations and matters that must be taken into account when the matter concerns or affects the right of a secured creditor to exercise rights under the security document or a judgment arising from it.

7 That, it seems to me, is an error of law which is sufficient to dispose of this application. Whether, in circumstances such as this, the possibility, probability or likelihood of damages or money coming from totally unrelated proceedings in a different jurisdiction and which do not impinge on the rights of a party in the position of this appellant is a relevant consideration to take into account in looking for special circumstances in a stay application is a moot point and one upon which I express no concluded view.

8 However, in the circumstances of this case it seems to me that the failure properly to confront and to take into account considerations of the type raised in the Inglis decision is an error which goes to the heart of the decision. For that reason, I would grant leave to appeal, would then allow the appeal and set aside the stay order.

10 MURRAY J: I also agree. I just want to add, for the purpose of demonstrating my agreement, that the point is not at all dissimilar from one which arose before me in a case called Town & Country Bank Ltd v Inverarity; unreported; SCt of WA (Murray J); Library No 950138; 29 March 1995. At 22 of my reasons, referring to the decision in Inglis v Commonwealth Trading Bank of Australia (supra), I said:

"I can see no basis for distinguishing that case from this. I can see no basis in this case for thinking that the court ought to adopt a different approach where the defendants seek a stay of execution of the plaintiff's judgment for possession than if they had in their action sought an interlocutory injunction to prevent any action being taken under the mortgages by the plaintiff to obtain possession. Where the court is dealing with a mortgage security therefore, it seems to me that the rule in Inglis's case, as it has come to be known, although not invariably to be applied, would generally, and in this case, provide an additional factor to be satisfied before the defendants might succeed under O 47 r 13. That is, even if special circumstances were able to be established which would move the court to grant the stay, prima facie at least, it ought to be upon the condition precedent that the defendants provide the alternative security by payment, at least to a stakeholder, of the claimed mortgage debt."

Those remarks seem to me to be apposite to this case. I make no comment, because it is unnecessary to do so, upon the merits of the matters otherwise raised as constituting special circumstances. Certainly, they attract sympathy, but it is unnecessary to determine whether they would otherwise justify, in conventional terms, the grant of a stay. It seems to me, however, that the failure to have regard to the rule in Inglis's case is central to the decision under review and determines that the orders which should be made are those proposed by Owen J.