Goater v Commonwealth Bank of Australia

Court of Appeal (NSW)|2014-08-04|Before: Ward JA, Bryson J

Background 5As noted, Mr Goater is the sole registered proprietor of the two Moree properties from one or both of which the Applicants have conducted a funeral home business. First registered mortgages were given over each of those properties in order to secure two loan agreements: an overdraft provided to Mrs Goater in 2006 and a business loan agreement between the Bank and the Applicants in 2007. 6Following a demand made by the Bank for repayment of the Applicants' business loan in May 2012, which was not met, the Bank issued a notice pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW) to Mr Goater. The default identified in that notice was not rectified. Accordingly, the Bank became entitled under the mortgage to exercise its power of sale. The Bank points out that no dispute or issue has been raised by the Applicants concerning the validity of the notice that it had issued. Proceedings were then commenced by the Bank in respect of the moneys claimed outstanding under the business loan agreement and seeking an order for possession of the properties. 7The Applicants then lodged a complaint with the Financial Ombudsman Service. This led, in October 2013, to the entry by the parties into a Financial Ombudsman Service Resolution and Release Agreement (the FOS Agreement) for repayment of the business loan. I will refer to the terms of the FOS Agreement in more detail in due course. For present purposes, I simply note that on the application before me it was acknowledged by the solicitor appearing for the Applicants that, in addition to an obligation under the FOS Agreement to make minimum repayments to the Bank on a monthly basis, there was some form of arrangement between the parties that the Applicants would meet payments of water rates and general rates due to Moree Plains Shire Council (the Council). 8In November 2013, the Bank was notified by an officer of the Council as to default by the Applicants in payment of water rates. The Bank contended that the Applicants had thereby breached the FOS Agreement. (The alleged breach is disputed by the Applicants who contend that the water rates had been paid. They say that this has since been conceded by the Council's solicitors.) 9By letter dated 27 November 2013, the Bank informed the Applicants that they were in default of the terms of the FOS Agreement, having failed to comply with the arrangement with the Council regarding outstanding water rates, and that, in the absence of the default being rectified within 7 days of the date of the letter (i.e., by 4 December 2013), the Bank would continue with its enforcement action 14 days after the date of the letter (i.e., by 11 December 2013). 10The Bank's statement of claim was served on the Applicants on 30 January 2014. 11It is not disputed that, in accordance with the timetable contemplated under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the time for filing a verified defence to that pleading was by 28 February 2014. There is also no dispute that the Applicants were in default in filing any defence to the statement of claim by that date. The Bank was then entitled to apply for default judgment in accordance with the UCPR. It filed a notice of motion for default judgment on that day. 12At about that time, the Applicants sought assistance on a voluntary basis from a financial services advisor based in Melbourne, Mr Humphries. He has sworn a number of affidavits in which he has deposed to his knowledge of the course of events since then. In his affidavit sworn 19 May 2014 (at [6]), he deposes that on 27 February 2014 he contacted the Supreme Court Registry by email "to obtain details on the status of the situation". He says that a Court officer telephoned him within a couple of days to advise him that the date for lodging the defence had been extended to 6 March 2014. It does not appear that any formal direction to that effect was made. Nevertheless, default judgment was not entered before that date, so in practical terms the Applicants had the benefit of the extra period of time for the filing of their defences. 13There is no suggestion that the Bank was notified before 6 March 2014 of the Applicants' intention to file a defence, although it was aware that there was a dispute as to the contention that the water rates had not been paid. Mr Humphries has deposed to a telephone conversation with an internal bank solicitor, Ms Cassimatis, in which he says he had informed her that the Council was in error and that the water rates had been paid (Mr Humphries' affidavit sworn 21 May 2014 at [8]). 14Mr Humphries deposes that on 6 March 2014 he contacted the Supreme Court by telephone on three occasions indicating that Mrs Goater was planning to file a defence and asking whether it could be faxed. Mr Humphries says that he was informed that it would be acceptable for the defence to be faxed. 15The rules provide that a person may lodge a document for filing in relation to any proceedings by any of the means specified in rule 4.10 of the UCPR, none of which includes facsimile transmission of the document to the registry (unless, which in my opinion cannot be the case, this falls within "delivering it to an officer of the court in the registry"). A document is taken to have been filed when it is "lodged for filing". There is provision for electronic filing of documents but that is not relevant in the present case. Therefore, if someone in the registry did advise that the defence could be faxed, there would be a question as to when the document so transmitted should be taken to have been filed - on receipt of the facsimile transmission or when a Court officer in the registry accepted the faxed document for filing, which may or may not have occurred on the same day. 16Mr Humphries deposes that he had prepared the defence based on his discussions with the Applicants and finished "the defence" on the morning of 6 March 2014. According to Mr Humphries, Mr Goater told him that he had taken the defence to the Moree Court House; had signed the affidavit and the defence in front of a Court officer; and that the Court officer had faxed it to the Supreme Court. Mr Humphries says he advised Mr Goater that the defence needed to be signed by Mrs Goater as the first defendant, not by Mr Goater, and that they needed to do it again and to get Mrs Goater to sign it. He has deposed that Mr Goater said later that day that Mrs Goater had signed the defence and had faxed and posted it to the Supreme Court. Neither Mr nor Mrs Goater gives any evidence about those matters. 17Pausing there, assuming Mr Humphries was paying attention to detail in the preparation of his affidavit, it might be concluded that the defence he had prepared was a defence for Mrs Goater, not a defence for Mr Goater, since that was what he contacted the registry about; and that he was only talking about the one document, hence the need for Mrs Goater to sign it. Mr Humphries did not say that he had prepared two separate defences. Nor did he say that he had prepared a joint defence. The description by his Honour of the only defence that was on the file is inconsistent with the proposition that what Mr Humphries prepared was a joint defence. 18Mr Humphries emailed Ms Cassimatis on 6 March 2014, informing her that "...a defence is being lodged this afternoon", not that one had already been filed. 19On 7 March 2014, default judgment was entered against the Applicants. There is no suggestion that the Bank acted improperly in this regard. At that stage, no defence for either of the defendants had been served on the Bank. Its legal officer had simply been told that "a" defence was being (or going to be) lodged. As far as the Bank was aware that may or may not have happened. Its application for default judgment had been filed on 28 February 2014. The entry of default judgment in the ordinary course would have occurred in the registry without further reference to the Bank. 20The evidence is unclear as to what precisely it is said had been faxed to the Court registry on 6 March - whether two defences were sent (one signed by Mr Goater followed later by another different defence signed by Mrs Goater) or the one defence (signed first by Mr Goater and then signed by Mrs Goater). The primary judge's reasons note that the only defence that has been found on the Court file is a defence by Mrs Goater. There is no suggestion that this document was the one that Mr Humphries said Mr Goater told him he had signed. Mr Goater's affidavit on the present application sheds no further light on this. Nor is there any evidence before me in the way of any facsimile transmission report or copy of the defence it is said that Mr Goater signed in front of the Court officer in Moree. His Honour found that there was insufficient evidence demonstrating that any defence was filed by Mr Goater ([10]; [36]). 21Following the entry of default judgment, the Bank filed a notice of motion seeking the issue of a writ of possession. It appears that the Applicants were informed of the Bank's intention to do so, since Mr Humphries deposes that, on 14 March 2014, he received an email from the Bank's solicitors advising that judgment had been entered against Mr and Mrs Goater on 7 March 2014 and that they were instructed to obtain a writ of possession. 22Mr Humphries says that he made enquiries of the Court registry and was informed that there was no record of the defence on the file. Mr Humphries says that he was told to send a letter to the Registrar to set aside the judgment. 23On 19 March 2014, Mr Humphries sent an email to the Registrar seeking that the default judgment be set aside. On 20 March 2014, he received an email from the Court indicating that the Court could not set aside a default judgment by email request and that a notice of motion and affidavit needed to be filed. 24Mr Humphries says he then made attempts to obtain legal advice as to the documentation needed to set aside the default judgment. He says that he received a phone call from Mr and Mrs Goater on 30 April 2014 saying that a notice of motion seeking to set aside default judgment, together with an affidavit in support had been signed and sent by post to the Supreme Court on 30 April 2014. The filing fee was not included. An application was subsequently made for waiver of the fee. It is not clear whether this notice of motion was served on the Bank at that time. 25On or around 3 April 2014, the Applicants were advised that the Bank intended to take possession of the premises on 13 May 2014. 26Execution of the writ of possession was scheduled for the morning of 13 May 2014 but upon arriving the sheriff agreed to defer eviction until 3.00pm that day as a funeral was being conducted that morning at the premises. 27The Applicants' solicitor, Mr Hill, has deposed that at 2.40pm on 13 May 2014 the Applicants filed a notice of motion with the Deputy Registrar seeking to set aside default judgment and a stay of enforcement. The document annexed to his affidavit appears to be one prepared by Mr Humphries. Therefore it may be the same as the one that Mr Humphries said have been posted by the Applicants on 30 April 2014. What is annexed to the affidavit is an unsigned and unstamped document. 28The following relief was sought in that notice of motion: an order that default judgment be set aside; an order that the defendant (in the singular not plural) be allowed 28 days to file a defence; and that the Court grant a stay of enforcement until the motion to set aside judgment was determined. 29Mr Hill sought an urgent ex parte stay from the Deputy Registrar. The application was listed for 4.00pm that day. Mr Hill has deposed that the Deputy Registrar immediately sought to make contact with the sheriff but was unable to do so. There is no evidence that Mr Hill (or anyone else on behalf of the Applicants) sought to appraise the Bank in advance of the Applicants' intention to seek urgent ex parte relief. Mr Hill says that the Bank was informed by the Registrar to attend at the 4.00pm hearing. Counsel appearing for the Bank, Mr Casselden, informed me that his instructions were that his instructing solicitors had been notified at 3.45pm that day of the 4.00pm application by the Applicants seeking to stay the writs of possession. If so, then that notification would have been too late because the writ of possession was executed at about 3.30pm. 30The Applicants' notice of motion seeking to set aside default judgment and for a stay of enforcement of the writ in due course came before Davies J on 22 May 2014. The application was dismissed. 31Before turning to his Honour's reasons for dismissing the application, I note that, although Mr Hill informed me that the application to set aside default judgment was brought pursuant to rule 36.16 of the UCPR, what appears now to be argued is that the default judgment was irregularly obtained. An application to set aside judgment on that basis is brought pursuant to rule 36.15 of the UCPR. 32The irregularity is said to be that the Applicants were advised that their defence could be filed by way of facsimile transmission and hence that, even though it is acknowledged that it is not the normal course for defences to be filed by facsimile transmission, default judgment should not have been entered when the parties had acted on that advice. In Mr Goater's case, that submission depends from a factual point of view on him establishing that he had verified a defence that had been received by way of facsimile transmission in the registry on 6 March 2013. Hence, he seeks in his proceedings in this Court to challenge the findings made by his Honour as to the lack of a verified defence filed by Mr Goater.

Primary judgment 33His Honour noted that there was a defence on the file and said that this was a defence filed by the first defendant, Mrs Goater. His Honour noted that in that defence Mrs Goater stated she did not believe she was in default under the loan agreement; that the letter from the Council was not accurate when it stated that no payment had been made towards water rates, and that, to the extent that any rates were in arrears, this was due to the Bank freezing funds in the account. Nothing in his Honour's description of the defence suggests that it was a joint defence (as is suggested by way of an alternative submission at [7(f)] of the Applicants' supplementary submissions). 34His Honour noted that there was some evidence before him that indicated that payments of $500 had been made to the Council although there seemed to be some anomalies about dates and some of the documents. 35His Honour identified the problem which the Applicants faced as being that the writ of execution had now been executed and they had been put out of their property, referring to J P Morgan Trust Australia Ltd v Bridge [2013] NSWSC 668 and Perpetual Ltd v Kelso [2008] NSWSC 906. In Perpetual, Johnson J said at [15]: A further argument advanced by the Defendants is that they seek to be allowed in to defend the proceedings upon arguments identified in the affidavit, where it is said that the loan contract is, in various respects, unfair and unjust. In my view, the fact that the writ of possession has been executed and the Plaintiff has taken possession of the subject land means that, as a matter of law, it is too late for the defendants to be seeking to be let back in to defend the proceedings. 36In J P Morgan, the mortgagor had been evicted from the premises but had regained possession. The question was whether the mortgagee was entitled to be restored to the possession it had been given as a result of the execution of the writ. Harrison J held that it was so entitled and that a writ of restitution should issue. His Honour noted that although the defendant in that case was still a registered proprietor of the property, and had re-taken possession, he had no right to re-take possession and had committed a trespass; and went on to say that: The validity of the judgment that supported the writ of possession that saw him out of the property cannot now be contested. 37In the present case at [23], the primary judge considered that he was not able to make any order enabling the Applicants now to challenge the judgment of the Court since the judgment had been executed and the matter was at an end. His Honour referred, in that regard, to the principle of finality governing judgments of the Court. 38His Honour went on (from [24]) to say that the evidence disclosed that the Applicants had not acted with any real sense of urgency for the matter and that there was no explanation for the failure of the defendants to act in any way after the service of the statement of claim until the call to Mr Humphries on 26 February 2013. 39His Honour noted that in Balanced Securities Ltd v Oberlechner [2007] NSWSC 80 at [19], Simpson J said that before a judgment could be set aside there needed first to be an explanation of the failure to file a defence by the appropriate time and that there was none here. His Honour referred to the chronology of events and to the delays in that chronology. His Honour said that, even putting those matters aside, the Applicants were not able to point to any power in the Court to reinstate their possession of the property in circumstances where the writ had been executed. (I interpose to note that this observation by his Honour was clearly addressing the application for a stay of enforcement of the writ of possession, insofar as his Honour referred to a power to reinstate the Applicants' possession of the properties.) 40At [36], his Honour said that, even if the entry of judgment against Mrs Goater was an irregularity, the Court did not act without jurisdiction and that, as noted earlier, there was not sufficient evidence demonstrating that a defence was filed for Mr Goater who was the registered proprietor of the land.

Application for leave to appeal 41The application for leave to appeal has been filed pursuant to s 101(2)(e) of the Supreme Court Act 1970 (NSW). The draft notice of appeal contains the following four appeal grounds: (1)His Honour erred in finding that there was no power to reinstate the applicants' possession after a writ for possession had been executed. To the extent that the decisions of the Court in [J P Morgan Trust Australia Ltd v Bridge [2013] NSWSC 668] and Perpetual Limited v Kelso [2008] NSWSC 906 suggest otherwise, they were wrongly decided. (2)The error in 1 above vitiated his Honour's exercise of discretion to decline to set aside the default judgment on which the writ was based. (3)That exercise was further vitiated by the following errors in fact-: (i)His Honour found wrongly that no Defence had been filed by the appellants on time, in circumstances where there was evidence that it had been filed and no evidence to the contrary. (ii)His Honour's finding that the applicants had received a notice from the sheriff that he would be attending on 13 May to take possession of their properties was not supported by the evidence. (iii)His Honour's finding that the appellants had not provided any evidence as to why they needed to apply for a waiver of Court fees for the filing of the notice of motion was not supported by the evidence. (iv)His Honour's finding that there was no adequate explanation for Mr Humphries' delay in contacting the Court or making the application was contrary to the evidence. (4)The exercise was further vitiated by the [sic] His Honour failing to take into consideration that the Notice of Motion seeking to set aside the default judgment was filed with the Duty Registrar half an hour prior to the sheriff taking possession, that the Duty Registrar had then made several attempts to contact the sheriff prior to execution of the writ and the Respondent was aware that the Applicants were taking such action.

Present application 42On the present application the Applicants rely on evidence from each of Mr Humphries, Mr Hill and Mr Goater. 43The Bank relies upon an affidavit sworn 30 July 2014 by Mr Ryan Malloy, the manager of the Bank having management of this matter on behalf of the Bank, who has annexed to his affidavit an affidavit that had been sworn by Ms Cassimatis on 21 May 2014 in the proceedings in the Court below. In that affidavit, Ms Cassimatis deposed to the following matters: (i)No defence, whether filed or unfiled, was served on the Bank by Mr or Mrs Goater or Mr Humphries either prior to the notice of motion for default judgment being filed on 28 February 2014 or between 28 February 2014 and 7 March 2014 when default judgment was entered. (ii)The default judgment entered against Mr Goater in favour of the Bank was for debt and possession of the properties. (iii)On 14 March 2014, the Bank's solicitors sent a letter to the applicants confirming that judgment was entered on 7 March 2014 and that the Bank was to apply for writs for possession for the properties. A copy of that letter was emailed to Mr Humphries. (iv)On 17 March 2014, the Bank filed a notice of motion for writ for possession of land in respect of the properties. (v)On about 3 April 2014, notices to vacate were issued by the sheriff, scheduling evictions for 13 May 2014 at 9.30am. (vi)No defence or proposed application to set aside default judgment was served on the Bank by the Applicants or Mr Humphries between 7 March 2014 and 12 May 2004. 44Mr Casselden emphasises that there was no evidence before his Honour that a verified defence was filed at any stage by Mr Goater, noting his Honour's findings at [10] and [36], but submits that, in any event, even assuming that a verified defence was faxed to the registry in time this did not amount to delivery of the defence for the purposes of UCPR rule 4.10(1)(a). 45Mr Malloy's affidavit deposes to the current fair market value of the property as at 21 May 2014, pursuant to a valuation received from a registered valuer, of $270,000 and to the present debt on the business loan being $385,000 there being thus an anticipated shortfall on the sale of some $115,000. The amount owing on Mrs Goater's overdraft facility is in the order of $49,000. Tendered on the present application were real property searches from each of the New South Wales, Queensland and Victoria land titles registries for the purpose of establishing that there are no other real estate assets in those jurisdictions in Mr Goater's name. 46There was no evidence of any imminent sale (by private treaty or auction) of the properties. Mr Casselden confirmed that his instructions were that no steps have yet been taken by the Bank to market the properties; no auction date has yet been scheduled; and that the Bank needs time to arrange for the removal of equipment owned by the third parties on the property in order to market the property. 47Mr Hill had no instructions at the hearing as to the proffering of the usual undertaking as to damages to support the grant of an interlocutory injunction, though those instructions were subsequently obtained (see [11] of the Applicants' supplementary submissions). 48In that regard, in its supplementary submissions the Bank notes that the Applicants have acknowledged that they do not have the capacity to support or satisfy such an undertaking. The Bank also notes that the minimum monthly payments as set out in the terms of the FOS Agreement ($2,205.00 per month) have not been met and that the Applicants, in their submissions, are not offering to meet those payments in their entirety ([10] of the supplementary submissions). It is said that since January 2014 the Applicants have made only one payment, of $2,610.00, in respect of the debt due under the business loan facility. 49Finally, Mr Hill made it clear that the Applicants do not allege any impropriety on the part of the Bank in proceeding to obtain the writ of possession and its execution.

Serious question to be tried 50As noted, the Applicants seek leave to appeal from the primary judge's refusal to set aside the default judgment and to stay the execution of the writ of possession. 51The fundamental challenge to his Honour's decision is as to whether the Court's statutory jurisdiction to set aside a default judgment (pursuant to rule 36.15 or 36.16) cannot be exercised once the mortgagee has entered into possession. The Applicants maintain that the authorities to which his Honour referred were incorrectly decided, or should be distinguished, and that his Honour's error in that regard vitiated the exercise of discretion to refuse the relief they had sought and is an error of the kind falling within House v R as permitting appellate intervention. They do not, however, point to anything other than an inconsistency with the statutory power to set aside default judgments (pursuant to rule 36.16) as demonstrating error in the conclusion reached in those cases. 52If the issue were simply as to the power to stay a writ of execution after it had already been executed, which appears to be part of what his Honour was asked to do, I would not have thought there was a serious question to be tried. Once the writ is executed there is nothing to stay. In Secure Funding v Webster [2008] NSWSC 443 at [24], McCallum J noted that there was no power to reverse the execution of a writ to the extent that it had occurred. With respect, that must be right. 53However, if the relevant issue is whether there is power, after execution of a writ for possession, to set aside the judgment (here a default judgment) on which the writ for possession was based, that is a different question. There have been instances where a writ of restitution has been issued, after the execution of a writ of possession, on the basis that the underlying judgment for possession has since been set aside (see Whittington v Hards (1851) 20 LJQB 406; Main v Haskin (1889) 10 ALT 276; where the judgment for possession had been irregularly obtained; and see United Starr-Bowkett Co-operative Building Society (No 11) Ltd v Clyne [1968] 1 NSWR 134; (1967) 68 SR (NSW) 331 and the commentary in Ritchie's Uniform Civil Procedure NSW (LexisNexis Butterworths) vol 1 at [39.1.35]). 54For present purposes, I would accept that the Applicants have raised a serious question as to whether the Court has power to determine an application to set aside default judgment for possession after a writ of possession has been executed. Such an application would not necessarily infringe the principle of finality of litigation, to which fraud is, for example, a well recognised exception (Spooner v Spooner (1954) 73 WN (NSW) 353). 55I was not taken to the above cases by the Applicants and hence the Bank has not had an opportunity to address any submissions as to the reliance that may or may not be able to be made on them in support of the Applicants' application for leave to appeal. Therefore, had I otherwise been minded to grant the interlocutory relief sought, I would have allowed the Bank the opportunity to do so. As it is, that is not necessary.

Balance of convenience/adequacy of damages 56As to the balance of convenience, it is submitted for the Applicants that if an injunction is not granted then any appeal that the Applicants might be granted leave to bring against the primary judge's decision will be rendered nugatory. It is submitted that this is the key consideration on the present application. 57Although not specifically the subject of submissions, damages ordinarily will not be an adequate remedy where land is involved. The Applicants also contend that, if the properties are sold, they will be deprived of their ability to conduct business from the premises and will face bankruptcy. (There is, I note, a suggestion in some of the Council correspondence that Mr Goater may already have been the subject of bankruptcy proceedings but there was no evidence of that before me.) 58The Applicants accept that they are not seeking a stay of any order or decision of the primary judge and that they are instead seeking to enjoin the sale, pursuant to a writ issued in consequence of the default judgement, of the properties. They nevertheless maintain that the substance of what they are seeking is akin to a stay pending the appeal because his Honour's refusal to set aside the default judgment allowed the Bank to move on its writ of possession. It is therefore submitted that the principles relating to stay applications are analogous. The Applicants emphasise that a stay will ordinarily be granted where not to do so would render the appeal nugatory (citing Sydney Attractions Group Pty Ltd v Schulman (No 4) (2013) NSWSC 1728). 59As to the competing rights of the parties, it is submitted by the Applicants that, without a stay, the Bank will sell the properties at a substantial loss leaving them with a large debt, no assets, an inability to carry on their business and a futile appeal against the Bank's right to sell the properties; whereas, with a stay, the Bank will only be prevented from selling the properties for a few months. They point to the Bank's own evidence as showing that it already expects to make a loss on the sale of the properties. The Applicants further submit that there is no risk of the disposal of assets since they have no other significant assets and the Bank has possession of their residential home and business premises. 60The central premise of the argument for the Applicants as to the futility of an appeal (assuming leave to appeal is granted) if an injunction is not granted is that the sale of the properties will occur prior to the determination of the appeal proceedings. 61There is, however, no evidence to suggest that a sale of the properties is imminent and the Bank made it clear in argument on the present application that there are steps to be taken before any such sale could occur (such as the removal from the property of items in which third parties have an interest). 62The Applicants submit that the refusal of the Bank to provide an undertaking not to proceed with the sale pending the determination of an appeal means that it is probable that, in the absence of an order, the sale will proceed before the appeal is determined even if expedition were to be available. 63The initial refusal of the Bank to provide an undertaking followed the filing and service on 19 June 2014 of the Applicants' notice of intention to appeal. An undertaking was sought from the Bank at that stage to the effect that the Bank would not pursue the sale of the properties until a then foreshadowed notice of motion (seeking an order that the forced sale of properties subject to the writ of possession be stayed pending the outcome of the appeal) had been filed and the Court had ordered accordingly. The Bank refused to provide that undertaking, noting that no basis had been disclosed upon which the Applicants sought to rely in obtaining a stay and no grounds had been disclosed on which there was a basis to appeal the decision. 64Subsequently, by short minutes of order made on 21 July 2014, the Bank gave an undertaking not to auction the properties prior to 4 August 2014, the date on which the Applicants' application was returnable in the referrals list. The Bank did not offer any undertaking beyond that date. 65The refusal by the Bank to continue the undertaking given in July 2014 does not give rise in my opinion to any reasonable apprehension that, if an injunction is not granted, the Bank will proceed immediately to dispose of the properties (even assuming that there was a buyer ready to purchase them). It is not suggested by the Applicants that the Bank has any improper motive in selling the properties or that it will do so without properly marketing the properties. Indeed, one would expect the Bank, exercising its powers as mortgagee, to be careful to ensure that the properties are properly marketed. I would have expected that such a process would take a number of weeks. Even if judicial notice of conveyancing practice cannot be taken, I would have expected Counsel for the Bank to correct me if I was under any misapprehension as to there being no suggestion of an imminent sale. Instead, the Bank's supplementary submissions reinforce that view. 66Therefore, it is by no means apparent that the refusal of an injunction at this stage will render the application for leave to appeal nugatory. Moreover, the Applicants have now indicated that they will seek expedition of the application for leave to appeal and there is no suggestion that the Bank will oppose any such course. 67The Bank will, of course, have the risk that if expenditure at this stage on marketing the properties with a view to their sale may be wasted if the outcome of the leave application and subsequent appeal is in the Applicants' favour but that is a commercial risk for the Bank to assess. 68In circumstances where the mortgage debt will continue to increase and where the proposal put forward by the Applicants for payment of moneys in the interim will not meet even the amount that was provided for under the FOS Agreement, and where the evidence is that the value of the properties is less than the mortgage debt, it seems likely that the Bank's financial position will continue to worsen the longer the delay in achieving a sale of the properties. 69Balancing the prejudice to the Bank if a stay is granted against the prejudice to the Applicants if a stay is not granted, I am not persuaded that the balance of convenience lies in favour of a stay in the absence of any basis to conclude that there is a reasonable apprehension of an imminent sale of the properties.

Application of Inglis 70The Bank maintains that, even if interlocutory relief to restrain the exercise of the power of sale might otherwise be available, no such relief should be granted in the present case as the Applicants are not in a position to pay into Court the amount of the mortgage debt. Reliance is placed on the principle articulated in Inglis v Commonwealth Trading Bank of Australia [1972] 126 CLR 161 at 164-165, by Walsh J (with whose decision Barwick CJ, Menzies and Gibbs JJ subsequently agreed). 71In Inglis (at 164), Walsh J confirmed the long established general rule that applications to restrain the exercise by a mortgagee of its power of sale will not generally be granted unless the amount of the mortgage debt, if not disputed, (or, if the amount is disputed, the amount claimed by the mortgagee) is paid into Court. His Honour considered that the authorities established that nothing short of actual payment was regarded as sufficient to extinguish a mortgage debt and said (at 164-165): If the debt has not been actually paid, the Court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet orders claimed by the mortgagee to be due. The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed. 72Barwick CJ, endorsing that view, considered (at 169) that the Inglis case fell fairly within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument and that "[f]ailing 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". 73In Harvey v McWatters (1948) 49 SR NSW 173 at 177, it was said that this rule operates to supplement the ordinary requirement of an undertaking as to damages on an interlocutory application. 74In E L G Tyler, P W Young, C E Croft, Fisher and Lightwood's Law of Mortgage (3rd Aust ed 2013, LexisNexis Butterworths) at [20.38], the authors note that the requirement for payment into Court as a condition of a grant of an injunction to restrain a sale by a mortgagee is an aspect of the general equitable rule that the mortgagor must offer to redeem before he can bring the mortgagee before the Court. 75In Eltran Pty Ltd v Westpac Banking Corporation [1988] FCA 712; (1988) 32 FCR 195, the Court proceeded on the basis that, where the mortgagor's lack of credit made it impossible to give the usual undertaking as to damages, an injunction might be granted without such undertaking if there was evidence that the mortgaged property is and was likely to remain adequate security for the mortgagee. The availability of such an approach will not assist the Applicants in the present case, having regard to their concession as to the loss to be expected on sale of the properties. 76However, as noted in Fisher & Lightwood at [20.38], the mortgagee need not offer to redeem, and therefore need not pay into Court, where it is alleged that the power of sale is not properly exercisable (see Inglis at 164-165). Examples given by the authors of exceptions to the rule in Inglis are where the validity of the mortgage is in issue, or there is a question whether or not there has been a breach or a question as to whether or not the notice was effective (Allfox Building Pty Ltd v Bank of Melbourne (1992) NSW Conv R 55-634), or where the power of sale is being used for an improper motive (Milton Park Country Club Pty Ltd v Yasuda Trust Australia Ltd (Supreme Court (NSW), Bryson J, 8 March 1991, unrep)). Campbell JA in Bayblu Holdings Pty Ltd v Capital Finance Australia Limited [2011] NSWCA 39 at [58] confirmed that there is a long recognised exception where the dispute goes to whether the power of sale has arisen at all (referring to Harvey v McWatters and Allfox). 77The Applicants argue that the present case falls within that exception. They contend there was no default by them under the FOS Agreement and hence the power of sale did not arise. The Bank argues that this case does not fall within the exception because there has been no challenge to the power of sale, which arose in 2012. 78On the material before me, there does not appear to be any suggestion that the power of sale did not properly become exercisable by the Bank in 2012. Rather, the Applicants maintain that, as a contractual matter, the Bank is precluded under the terms of the FOS Agreement from enforcing the writ. In one sense, therefore, the application for interlocutory relief might be seen as an application to restrain a breach of a contractual promise. It may be that it is in that sense that the Applicants argue that the rule in Inglis does not apply (though this would not overcome the need for the usual undertaking as to damages). 79Under the FOS Agreement, the Applicants were obliged to do various things: to reduce the balance of their overdraft facility within its limit by 25 October 2013; to ensure that the overdraft account was kept within its limit at all times and monthly interest repayments met; and to start making the required repayment of $2,205 per month to their business loan account starting from 25 October 2013. They also agreed to repay their credit card account in full by a certain date by making minimum monthly repayments of $170 starting from 25 October 2013. 80The Bank agreed not to proceed with "any legal action" if the customer maintained "this arrangement" and agreed that it would provide a 7 day reminder notice to the borrowers "if any or all of the arrangements are not met and if the payments are still not met, the Bank will start the realisation process with another seven days' notice to the borrowers". 81Relevantly, the FOS Agreement included the following bullet point clauses: ● [The Bank] Will confirm with Moree Council a repayment arrangement plan has been agreed between them and the customer and they are maintaining the agreed payments. If Moree Council does not provide this information to the Bank due to privacy issues, the Bank may request the customer to provide this evidence or authorise Moree Council to provide this information to the Bank. The Bank will require this information by 25 October 2013. ● If the Bank receives any Notice of Judgment or Garnishee Order against the borrowers ... and if the Bank does not receive written evidence than [sic] an arrangement has been reached between the borrowers and the creditors within 30 days from the notice, it will be a default on this arrangement and the Bank will proceed to start the realisation process following 14 days' notice to the borrowers. 82It appears from the material before me that the Council was a judgment creditor in Local Court proceedings against the Applicants (proceedings number 2012/356409 and 2012/247342). If so, then arguably under the terms of the FOS Agreement the Bank would not be precluded from taking "legal action" once it became aware that there was no arrangement currently on foot with that judgment creditors. 83There is evidence that suggests that there was, as at the time the default judgment was entered, no arrangement between the Council and the Applicants. By letter dated 4 March 2014, Mr Humphries was informed by the Council's solicitors that the last arrangement entered into between the Applicants and the Council was made in December 2013 for payments including $500 for water rates in December 2013 with rates payments to increase together with water payments from January 2014. That letter noted that rates payments were made in the correct amounts, though late, but that water and sundry payments were not paid. The letter stated that, notwithstanding whether any payments were made for rates as opposed to water, the Applicants were still in default overall and the agreement was void. The letter also confirmed that the Council would not negotiate a further arrangement on the rates, water or sundry debt. 84Even though the Applicants maintain that they were not in default of the relevant payment arrangements with the Council (referring to [5] of affidavit of Mr Humphries of 19 May 2014; [2] of the affidavit of Mr Humphries of 21 May 2014, and [5] to [11] of the affidavit of Mr Humphries of 2 August 2014), that is not consistent with the Council's solicitor's 4 March 2014 letter to Mr Humphries. 85Even if the Bank was in breach of the FOS Agreement in moving to enforce its rights as mortgagee, and obtaining the writ of possession, the present dispute is not one that goes to the validity of the mortgage or as to the breach that gave rise to the issue of the s 57(2)(b) notice or as to the validity of that notice. Nor is it contended that the power of sale is being used for an improper purpose. 86The Applicants might have a claim for damages for breach of the FOS Agreement but that claim would not fall within the recognised exceptions to the general rule articulated in Inglis. Even if the relevant dispute here is whether the Bank is correct in contending that it is no longer contractually bound to refrain from exercising the power of sale that arose in 2012 (and the validity of which has not been questioned), and the injunction that is sought is in aid of enforcing the FOS Agreement, the essence of the relief claimed is to restrain the mortgagee from exercising its power of sale. Given the rationale underlying the requirement in Inglis for the payment in of the mortgage debt by a mortgagor seeking to restrain the exercise of the power of sale, the fact that the case might be cast as an attempt to enforce compliance with the FOS Agreement does not persuade me that this falls within the exception to the rule in Inglis, nor that the exceptions to the rule should be extended to the present situation. 87Even if I am wrong in that conclusion, and the exception to the rule in Inglis does or should apply, it is recognised that the rule in Inglis is an extension to the requirement that (other than in exceptional cases) an undertaking as to damages is required if an interlocutory injunction is sought. I consider below whether, on the assumption that the Applicants were not required to pay in the mortgage debt in order to claim the interlocutory relief sought, they should nevertheless not be required to give the usual undertaking as to damages.

Usual undertaking as to damages 88As noted, the Applicants have now agreed to provide the usual undertaking as to damages. However, they acknowledge that they have no assets to support such an undertaking. 89Mr Hill has deposed that his clients have put $5,000 into his trust account for the purpose of forwarding to the Bank and are able to pay $1,000 per month until the appeal was determined with a view to minimising loss to the mortgagee. Under the FOS Agreement, they were obliged to pay more than that per month, though this no doubt is a result of the fact that they are no longer in possession of the properties from which they formerly conducted their business. 90Mr Goater has deposed to the income that they had earned in the weeks before possession was taken of the properties and it is submitted that the Applicants would be able to make higher repayments if given access to their business premises pending the appeal. However, there is no suggestion that they would be permitted by the Bank to return to the properties pending the appeal even if the injunctive relief is granted, nor is any such order for restitution of possession here sought. 91The Applicants note that the Court has a wide discretion as to whether any terms should be imposed on the grant of interlocutory relief and if so, the nature of the terms, citing Andrews v John Fairfax & Sons Ltd [1979] 2 NSWLR 184. I was invited, in effect, to impose terms on the grant of the injunctive relief sought by the Applicants to redress any prejudice that the Bank might suffer as a result of that relief. 92The usual undertaking as to damages is required in every case where an interlocutory injunction is sought, unless there are exceptional circumstances (Kerridge v Foley (1968) 70 SR (NSW) 251, referred to in Southern Tableland Insurance Brokers Pty Ltd (in liq) v Schomberg (1986) 11 ACLR 337 at 340 by Young J (as his Honour then was) and De Boer v Williams [2004] NSWSC 351 at [21] by Einstein J). 93However, the Applicants submit that their circumstances fall within the two exceptions adverted to in De Boer v Williams at [20] and [23]. In that case, Einstein J referred to the passage in R P Meagher, J D Heydon, M J Leeming, Meagher Gummow and Lehane's Equity: Doctrines and Remedies (4th ed 2002, LexisNexis Butterworths) at [21-410], to the effect that the possible exceptions to the requirement for the usual undertaking as to damages are where an unarguable case of fraud is made out and where a plaintiff's poverty prevents the plaintiff from tendering a meaningful undertaking. Here, there is no allegation of fraud, so it is the second of the possible exceptions on which the Applicants rely. 94As to the possible exception for impoverished plaintiffs, the learned authors of the aforementioned text refer to Dein v Bealey (1960) WN (NSW) 56 and Szentessy v Woo Ran (Australia) Pty Ltd (No 1) (1985) 64 ACTR 98. They go on to express the hope that these cases not be followed with any enthusiasm lest the res publica be held to ransom by paupers, referring to Smith v R (1991) 25 NSWLR 1 where it was said that poverty is a practical misfortune not a legal privilege (see fn 166). 95I note that insofar as the example of an exceptional case was one where the plaintiff was not only impecunious but was also supported by legal aid (from which one might draw an inference that it was considered that there was a reasonable case to warrant the expenditure of legal aid funds) and was seeking a Mareva injunction (Allen v Jambo Holdings Ltd [1980] 1 WLR 1252), the present is not such a case. 96The Applicants submit that, here, it is the wrongful conduct of the Bank that has caused the Applicants to lose their home and business and they refer to the statement by Burchett J in Cunningham v Olliver 1994 FCA 1004 at [6] to the effect that impecuniosity should not close the door of the Court against a natural person's claim. However, the question whether the Bank's conduct has been wrongful, in the sense of being in breach of the FOS Agreement, has yet to be determined and there is certainly material before the Court that suggests that it has acted in accordance with that agreement (having regard to the correspondence from the Council as to the lack of an arrangement for the payment of arrears). The Applicants have expressed the view that the difficulties with the Council arrangements arose from the freezing by the Bank of the Applicants' accounts but the Council's correspondence suggests that the difficulty in compliance with those arrangements extends beyond whether water rates were paid. 97I am not persuaded that the circumstances of this case make it an exceptional case in which the usual requirement for a party seeking an interlocutory injunction to provide the undertaking as to damages should not be imposed. 98The Bank further maintains that, as the Applicants have not the necessary financial capacity to honour their undertaking as to damages, if any undertaking were to be accepted they should be required to provide security for their undertaking (referring to Select Personnel Pty Ltd v Morgan & Banks Pty Ltd (1988) 12 IPR 167; Re DPR Futures Ltd [1989] 1 WLR 778 at 786 and Commodity Ocean Transport Corporation v Basford Unicorn Industries Ltd [1987] 2 Lloyd's Rep 197). Were I to have been prepared to grant the injunction sought, then at the very least I would have made that relief conditional on the Applicants paying in advance, on a periodic basis, the interest accruing on the whole of the outstanding mortgage debt claimed by the Bank, so that the prejudice to the Bank arising from the delay in the marketing and sale of the properties would be minimised. 99It is also submitted for the Bank that the Applicants should be ordered to pay security for the Bank's costs of the leave to appeal proceedings in circumstances where the Applicants admit to being impecunious. The Bank contends that its reasonable party/party costs would be in the order of $20,000 plus GST. 100I do not consider it appropriate to order security for the costs of the appeal proceedings, in circumstances where the application was made in the course of written supplementary submissions and the Applicants have not had an opportunity to respond thereto. Any such application should be brought in the normal course.

Conclusion 101The Bank contends that there is no utility in granting the interlocutory relief as there is no suggestion of an imminent sale of the properties, particularly in circumstances where the Applicants have flagged an application for expedition of the leave application and any appeal. I agree. There is no suggestion that the Bank will move to sell the properties other than properly in the exercise of its power as mortgagee and there is nothing to suggest that there is a real risk of an imminent sale. 102The Bank is facing a substantial shortfall in the moneys owing to it under the business loan facility, assuming the Bank's valuation of the property is correct. Although the Applicants point to the financial and personal consequences for them if the properties are sold, I am not persuaded that the balance of convenience lies in restraining the sale of the properties where such a sale is not imminent. The Applicants are not in a position to pay into Court the mortgage debt, which, in the circumstances, would be required as the price of an injunction to restrain the exercise of the power of sale, and, even if that were not required, the undertaking as to damages that has been proffered appears to be worthless. I am not persuaded that the impoverished state of the Applicants makes this an exceptional case such that the usual undertaking should not be required even assuming that payment in of the mortgage debt was not required. 103If an expedited hearing of the leave application can be arranged, then the Applicants should know (prior to when it could be expected that in the ordinary course the properties will have been marketed and listed for auction), whether there is any prospect of maintaining an argument that his Honour erred in proceeding on the basis that there was no power to set aside the default judgment after the writ for possession had been executed. 104The refusal of the present application does not preclude a further application for an interlocutory injunction at a later time if, for example, there is a change in circumstances, such as an imminent sale or if leave to appeal is granted. Refusing an injunction means that the Bank will not be prejudiced by delay in readying the property for a sale if such leave is not granted or if any appeal for which leave is granted is unsuccessful. 105In order to ensure that the Applicants are in a position to seek urgent relief in due course if there is a change in circumstances in relation to the sale of the properties, I propose to make an order requiring the Bank to notify the Applicants in advance if the properties are listed for auction or if it proposes to enter into a contract for the sale of one or both of the properties by private treaty. As the parties were not heard on this, I will give liberty to the parties to apply to my associate if any variation is sought to that order.

Orders 106For the above reasons I will make the following orders: (1)The application by Mr and Mrs Goater for an injunction to restrain the sale of the properties is dismissed with costs. (2)Direct the parties to liaise with the Registrar for the listing, on an expedited basis, of the application for leave to appeal (and, if appropriate, the concurrent hearing of the appeal). (3)Direct the respondent to notify the applicants by writing 7 days in advance of any listing of one or both of the properties for auction or before it proposes to enter into any contract for the sale of one or both of the properties by private treaty. (4)Liberty to the parties to apply for a variation of order 3 on reasonable notice to my associate.

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: 15 August 2014

Whittington v Hards (1851) 20 LJQB 406 Texts Cited: R P Meagher, J D Heydon, M J Leeming, Meagher Gummow and Lehane's Equity: Doctrines and Remedies (4th ed 2002, LexisNexis Butterworths) E L G Tyler, P W Young, C E Croft, Fisher and Lightwood's Law of Mortgage (3rd Aust ed 2013, LexisNexis Butterworths) Ritchie's Uniform Civil Procedure NSW (LexisNexis Butterworths) Category: Interlocutory applications Parties: Shirley Goater (First Applicant) Terrence Goater (Second Applicant) Commonwealth Bank of Australia (Respondent) Representation: Counsel: A Casselden (Respondent) Solicitors: Australegal (Applicants) Gadens Lawyers Sydney Pty Limited (Respondent) File Number(s): 2014/00182391 Publication restriction: Nil Decision under appeal Citation: Commonwealth Bank of Australia v Goater [2014] NSWSC 652 Date of Decision: 2014-05-22 00:00:00 Before: Davies J File Number(s): 2012/00332699

At a glance

Court

Decision date

Before

Source

Judgment (11 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (11)

Cited By (12)