Donnelly v Australia and New Zealand Banking Group Ltd

Court of Appeal (NSW)|2014-03-05|Before: Emmett JA, Gleeson JA, Leeming JA, Stevenson J, Basten JA

Judgment 1THE COURT: By notice of motion filed 24 February 2014, Mrs Donnelly applied, pursuant to s 46(4) of the Supreme Court Act 1970 (NSW), to review the decision of Basten JA made on 10 February 2014, refusing a stay of execution of the final orders made at first instance on 4 December 2013 pending the outcome of her appeal. These are our reasons for ordering, on 5 March 2014, that the notice of motion be dismissed with costs.

Factual and procedural background 2A company (ANZ Asia Ltd, the second respondent) related to the first respondent (Bank) lent Mrs Donnelly and her husband $600,000, drawn down in Hong Kong dollars in the amount of HKD4,000,105,056 in August 2008. The funds were mostly used to discharge amounts owed to the National Australia Bank Ltd and to discharge a mortgage that that bank had over a property. The facility was subject to a power to convert the indebtedness to Australian dollars. That power was exercised on 18 December 2008, after the Australian had fallen sharply against the Hong Kong Dollar. 3The focus of the trial was whether there had been adequate disclosure of the exchange rate risk. The Bank took an assignment of the facility whose validity was disputed at trial. The primary judge found it to be valid, and that finding is outside the scope of the notice of appeal. 4Stevenson J gave judgment on 29 November 2013: Australia and New Zealand Banking Group v Donnelly [2013] NSWSC 1760. Orders were entered on 4 December entitling the Bank to possession of the property and granting leave to issue a writ of possession, with the writ to lie in the registry until 20 December 2013. The primary judge was asked, within that period, to stay those orders pending the disposition of the appeal. On 16 December 2013, a limited stay was granted, until 13 January 2014, but (expressly) only because there was evidence establishing that the Bank's policy was not to execute on judgment for possession over the Christmas season and that even if no stay were granted, it would not seek to execute the judgment until 13 January 2014: Australia and New Zealand Banking Group Ltd v Donnelly (Supreme Court (NSW), Stevenson J, 16 December 2013, unrep) at [7]-[8]. 5The reasons of the primary judge record at [6] that there is no challenge to the mortgage over the property which is the subject of the writ. That was confirmed by Mr Ryan, who appeared for the applicant when the motion was heard. The applicant and her husband (or former husband; they are separated) are the registered proprietors of the property. The Bank has obtained default judgment against Mr Donnelly. 6The primary judge also recorded that Mrs Donnelly accepted that the amount advanced under the facility must be repaid, although according to her, the amount is to be calculated "in HKD at Hong Kong interest rates": at [44]. Again, Mr Ryan acknowledged that the facility required repayment. He disagreed with the calculations recorded in the reasons of the primary judge at [48]. Although the primary judge stated that on Mrs Donnelly's case, she owed AU$575,420.91, Mr Ryan said that the amount owing by her was "in the high $400,000s" and "in excess of $460,000". On her case, she was entitled to the benefit of the lower interest rate prevailing in Hong Kong, and it is not clear what exchange rates underlay those calculations (the basis of which was not stated).

Reasons of Basten JA 7Basten JA's reasons record that the writ was issued on 21 January 2014. A further motion, seeking a stay of execution of the writ, had been filed in this Court on 9 January 2014. That motion was heard and determined by Basten JA on 10 February 2014. 8Basten JA referred to three matters on which submissions had been based: the personal circumstances of the applicant and her family, what was said to be a strong case on appeal, and lack of prejudice to the Bank if the appeal were unsuccessful. His Honour then turned to each of those matters. 9First, his Honour noted the adverse and prejudicial consequences to Mrs Donnelly and her children (who presently live on the property) if a stay were not granted, and observed that they weighed in favour of a stay. 10Secondly, his Honour addressed the submission that there was a strong case on appeal, and concluded that he was not satisfied that it was a "strong case", as opposed to an arguable case. His Honour had regard to the fact that there was conflicting evidence between Mrs Donnelly and the relevant Bank officer (Mr Stuart) as between whom the primary judge on some occasions accepted the former and on other occasions the latter. His Honour also had regard to the fact that the trial judge was influenced by the applicant's response to events which occurred when the Australian dollar fell, in determining whether there had been disclosure and understanding of the risks of the facility provided by the Bank. 11Thirdly, his Honour also expressly had regard to the prejudice to the Bank. On any event (and even if Mrs Donnelly is wholly successful), the Bank is owed a substantial amount of money, in excess of $460,000, although less than the presumed present value of the property based on the evidence before Basten JA. On the Bank's case, Mrs Donnelly's indebtedness exceeds the value of the property. It followed, according to his Honour, that the Bank would be prejudiced to the extent of ongoing interest amounts accruing, if it successfully maintains its judgment. His Honour also had regard to the fact that the Bank had an unchallenged judgment against Mr Donnelly and was (and is) entitled to an order for possession against him.

Applicable principles 12The application under s 46(4), if it is to succeed, needs to establish reviewable error in the reasoning process of the Judge of Appeal. Contrary to the approach adopted by counsel for Mrs Donnelly, it is not an appeal or a hearing de novo. It is not sufficient merely to point to the fact that the appeal is listed for hearing on 1 April 2014, four weeks away, such that the duration of the stay, and prejudice to the Bank, are now diminished compared to the position late last year before Stevenson J or earlier this year before Basten JA. 13At least ordinarily, a review will not succeed unless "the decision turns on an error of law, a material error of fact, a failure to take into account some material consideration or the taking into account of an irrelevant consideration, or unless the decision is so unreasonable as to suggest that one of these types of error has been committed even though it does not appear on the face of the reasoning": Patrick v Howorth [2002] NSWCA 285 at [10]; Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136; 60 NSWLR 143 at [6]. 14For those reasons, it is well established that the applicant bears a heavy burden: see Rinehart v Welker [2011] NSWCA 403 at [48], Jaffari v Grabowski [2013] NSWCA 114 at [27] and Collier v Lancer [2013] NSWCA 185 at [20]. 15Essentially, his Honour dismissed the stay having regard to the prejudice to Mrs Donnelly and to the Bank, his assessment of the strength of the appeal, and the considerations that the Bank was already entitled to possession against Mr Donnelly and that Mrs Donnelly admitted substantial indebtedness to it. It matters not whether any or all of us might have determined Mrs Donnelly's application differently (which is not to suggest that all or any of us might have done so). The onus in seeking a review of the decision of Basten JA falls to Mrs Donnelly to identify House v The King error on his Honour's part. It will be seen from the foregoing that his Honour applied an utterly conventional approach to the application before him.

Applicant's submissions 16The applicant served detailed written submissions criticising aspects of the reasoning process of Basten JA. Paragraphs 4-16 of the applicant's written submissions challenge what are said to be Basten JA's "findings" at [8]-[9] that Mrs Donnelly was aware of warnings given in the documentation and risks of borrowing in Hong Kong dollars. That challenge was repeated in oral submissions. It was submitted that those findings were not founded on the evidence and should not have been made and caused the subsequent exercise of discretion to miscarry. But the short answer is that those paragraphs make no such findings. Instead, they refer to the findings of the primary judge. The evident point of doing so was to explain why he was not persuaded that the applicant had what had been described as a "strong case". There is no scope for misreading his Honour's reasons, because his Honour expressly said that "I merely have before me the material constituted by the grounds of appeal and the judgment below". His Honour added that he had not read the evidence. 17On any fair reading of his Honour's reasons, no findings of the applicant's awareness of warnings and risk of foreign currency borrowings are made. Those paragraphs do not make out any basis for reviewable error. 18Secondly, it was submitted in writing, and developed orally, that the possibility that the Bank if it successfully maintains its judgment would be out of pocket to the extent of ongoing interest amounts accruing on the debt which cannot be realised was not, to use the applicant's words, "a relevant or decisive factor in the exercise of discretion where the interests of justice should be paramount". We respectfully disagree. Plainly, prejudice to the Bank is relevant to the exercise of discretion. Plainly, on the face of his Honour's reasons, it was not regarded by his Honour as decisive. The "interests of justice" undoubtedly include the interests of the successful judgment creditor. Although it was said, with evident sincerity, that there was relatively small pecuniary prejudice to a large bank, contrasted with large prejudice to the applicant and her children, it remains entirely orthodox to have regard to the ongoing prejudice to an acknowledged creditor whose debt is presently owing, secured and unpaid. 19The written submissions advanced other matters which were not developed orally, and with which it is not necessary to deal. In the course of oral address, attention was focussed on the insuperable difficulties Mrs Donnelly faced, in that she had proffered before Basten JA no payment, or security for payment, whatsoever as the price of the stay she sought. Instead, Basten JA and this Court were taken to documentation relating to an offer made by Westpac to the applicant and her mother in around August 2011 for a five year interest-only loan of $460,000. We were told that an offer to pay this amount had been made to the Bank shortly before it had commenced proceedings. But entirely absent from the application before Basten JA or before this Court on review was a current offer to pay or provide security to meet, at the very least, the acknowledged present secured indebtedness. 20It was pointed out to the applicant that the Court's attitude to an application for a stay might well be different if the applicant were proposing a regime by which it could be demonstrated that the Bank would be paid the amount of money which Mrs Donnelly acknowledged she owed it, and compensated it for the ongoing delay in its being repaid. However, absent any effort to do so, it is impossible to see how, consistently with settled authority, there could be any other outcome to the application for a stay. As was pointed out by Ms Vetrova, Basten JA's approach accorded with the "general rule" stated by Walsh J and Barwick CJ, with the agreement of Menzies and Gibbs JJ, in Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164-165 and 169. 21There are exceptions to the general rule, including where there is a dispute as to whether the power of sale has arisen, or where the validity of the mortgage is in issue, or where there is evidence that the mortgage can be redeemed in a short period of time by a proposal that seems reasonable on its face: see the decisions referred to in Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd [2011] NSWCA 39 at [58]. None of those circumstances apply in the present case. 22The undisputed secured indebtedness of the applicant is a decisive consideration in the present case. Basten JA was correct to have regard to it. The reason that it is not necessary to address the balance of the submissions advanced in writing is that it is a decisive consideration where, as here, the applicant proffers nothing to pay or secure what she accepts she owes, nor to ameliorate the ongoing prejudice to the creditor. 23For those reasons, on 5 March 2014 this Court dismissed the applicant's notice of motion filed 24 February 2014. We do not express any view of the strength of the applicant's prospects of success on appeal. However, as noted above, the exercise of discretion in granting a stay would be quite different in the event that the applicant was tendering payment of the amount she acknowledges she owes and proffering a reasonable proposal to protect her creditor from the prejudice it suffers from ongoing delay.

Amendments 07 March 2014 - Year in "Hearing Date(s)" and "Decision Date" corrected from 2013 to 2014 Amended paragraphs: Coversheet 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: 07 March 2014

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