Lisa Maree Campbell as Administrator ad litem of the Estate of the Late Ralph Gordon Barry Campbell v Commonwealth Bank of Australia

Judgment 1EMMETT JA: Until orders for the sequestration of their respective estates were made against Gregory and Jennifer Campbell, they were the registered proprietors of two parcels of land: one is described as the Noraville Property, the other as the Nora Head Property. The present dispute arises out of the Noraville Property, which apparently contains two separate residences known as 34A Clark Road, Noraville and 34B Clark Road, Noraville. 2Mr Gerald Collins and Mr Matthew Joiner were appointed as joint trustees of the estates of Gregory and Jennifer Campbell following the making of the sequestration orders in 2009. Subsequently, Mr Collins became registered as the proprietor of the Noraville Property and the Nora Head Property. At the time of the sequestration orders, the Commonwealth Bank of Australia, which is the successor of Bank of Western Australia Ltd (the Bank), was registered as the first mortgagee of both properties, under a mortgage given by Gregory and Jennifer Campbell on 6 May 2008. Proceedings were commenced by the trustees in bankruptcy against Gregory and Jennifer Campbell for recovery of possession. Subsequently, the Bank was joined as a plaintiff seeking possession of the two properties. 3At that stage, Mr Ralph Gordon Campbell (known as Barry Campbell) and Ms Pamela Campbell, who are siblings, claimed to have equitable interests in the Noraville Property, Barry in 34B Clark Road and Pamela in 34A Clark Road. They claimed to have purchased those interests from Jennifer and Gregory Campbell. Gregory is Barry's son. 4The proceedings continued against Jennifer, Gregory, Barry and Pamela Campbell, with the trustees and the Bank, as plaintiffs, seeking possession of both properties. A complication arose in that Barry Campbell died. Subsequently, Ms Lisa Campbell, Barry Campbell's granddaughter, was appointed by the trial judge as administrator ad litem of his estate. 5The mortgage to the Bank was given by Jennifer and Gregory Campbell to secure their liability under guarantees that they had given to the Bank in respect of financial facilities granted by the Bank to PMD Central Coast Pty Ltd (PMD) on 25 June 2009. Each of Jennifer and Gregory Campbell gave a guarantee of all of the obligations of PMD under the facilities, limited to an amount of $2,630,000.00. As I have said, that liability was secured by the mortgage given by them to the Bank on 6 May 2008 to secure all indebtedness. 6In May 2013, cross claims were filed on behalf of Barry and Pamela Campbell asserting their equitable interests in the Noraville Property. That interest had been foreshadowed by affidavits filed towards the end of 2012 in which they asserted their equitable interests. The Bank's response is that its legal title as registered mortgagee takes priority over any prior equitable interest that may have been created in favour of Barry and Pamela. 7Barry and Pamela claimed to have acquired their equitable interest in about 2005 when they entered into agreements with Gregory to purchase part of the Noraville Property for the purposes of residing there. Their assertion is that they each sold their respective homes and applied the proceeds in acquiring what they believed was an interest in the Noraville Property. They took no steps to protect their asserted interest. If leave to appeal is allowed, there will apparently be an assertion that the Bank was informed of the interest of Barry and Pamela by Ryan Campbell, who is the son of Jennifer and Gregory Campbell. They will also assert that their occupation of the Noraville Property would have some consequence in terms of giving notice to an acquirer of a legal interest. 8Lisa, on behalf of Barry's estate, and Pamela have also foreshadowed claims under the Contracts Review Act 1980 (NSW) based on the assertion that the arrangements in relation to the grant of the mortgage to the Bank by Jennifer and Gregory Campbell were unfair in the circumstances in which that arrangement was entered into. They claimed to be entitled to the benefit of orders under that Act. Thus, there were issues thrown up by the pleadings after the joinder of the Bank that indicated that there would be an issue about priority, as between the Bank, on the one hand, and Barry, his estate, and Pamela, on the other, in relation to the respective interests in the Noraville Property. 9When the Bank entered into the facilities with PMD, it made advances that enabled the discharge of obligations owed by PMD and by Jennifer and Gregory Campbell to Macquarie Bank Ltd (Macquarie Bank). Those obligations were secured by a registered first mortgage over the two properties granted to Macquarie Bank in June 2006. 10The Bank therefore sought to amend the statement of claim (which was also filed for the trustees) by asserting that the Bank's legal interest took priority over the alleged equitable interests of Barry and Pamela (relying on s 42 and possibly s 43 of the Real Property Act 1900 (NSW)). The amendment also sought to include as a basis for establishing priority of the Bank's interest the fact that the funds that it advanced were applied in satisfying obligations of Jennifer and Gregory Campbell to Macquarie Bank and to enable the discharge of the legal mortgage granted to Macquarie Bank. The Bank says that, in those circumstances, it is entitled to be subrogated to the position of Macquarie Bank such that, even if it had notice of the prior equitable interests of Barry and Pamela when it took its mortgage, if it stood in the shoes of Macquarie Bank. Accordingly, it says, it would be entitled to rely on absence of notice to Macquarie Bank of that prior equitable interest. In addition, the Bank sought leave to amend its statement of claim to assert that it acquired an equitable interest in the Noraville Property and the Norah Head Property by way of deposit of the title deeds when it discharged the indebtedness of Macquarie Bank and received certificates of title at the time of discharge, thereby giving rise to an equitable mortgage that it says would take priority over the alleged equitable interests of Barry and Pamela. 11The Bank, by notice of motion filed on 7 March 2014, sought leave to file a further amended statement of claim raising those bases for the relief it claims. The notice of motion was supported by an affidavit sworn by Mr Gaetano di Gregorio, an employee of the Bank. The relief sought by the further amended statement of claim included an order for possession of the Noraville Property and the Norah Head Property and declarations that the Bank was subrogated to the rights and remedies of Macquarie Bank, such that it was entitled to exercise in its own name or that of Macquarie Bank any power of sale that arose under the mortgage to Macquarie Bank. The further amended statement of claim also sought a declaration that Barry and Pamela have no right, title or interest of the Nora Head Property or in the Noraville Property that takes priority over the interest of the Bank. 12The amendment was opposed by Barry and Pamela Campbell on two bases. The first is that there was an unsatisfactory delay that was unexplained. The second is that because of the intervening death of Barry, a possible source of evidence has been lost and because of the frailty of Pamela, difficulties would be occasioned in obtaining evidence from her. The motion came before Davies J, sitting in the Common Law Division, who for reasons given on 21 March 2014 granted leave to the Bank to file a further amended statement of claim in the form of the proposed pleading. His Honour also gave directions for the further conduct of the proceedings. 13The bases of the opposition to the leave to amend are contained in an affidavit of Mr John Maguire, sworn on 19 March 2014, which was read before Davies J over the objection of counsel for the Bank. His Honour referred to several paragraphs of the affidavit that are the basis of the prejudice that was alleged might flow from the grant of leave. It is desirable to set out the relevant paragraphs. They are as follows: (4) I have advised the said Lisa Maree Campbell, and am of the opinion, that the conduct of the litigation on behalf of the third and fourth defendants would be prejudiced were leave to file the further amended statement of claim granted to the plaintiffs, for reason that, in the circumstances, instructions cannot be obtained in relation to the third defendant's knowledge of matters relevant to the subrogation claim which the plaintiffs are now seeking to prosecute. (5) The fourth defendant is presently 79 years of age and is in poor state of health generally. In the last 18 months or so she has been hospitalised on numerous occasions for lengthy periods in relation to the following conditions [which are then set out]. (6) Having regard to her state of health and her location and my location, it has been difficult to consult with the fourth defendant to obtain instructions. For the past several months, the only practicable means of communication has been by telephone and, having regard to the complexity of the matter and the fourth defendant's age and poor state of health, I am concerned that I may not be able to obtain or may not have obtained complete instructions. 14That is the extent of the alleged prejudice relied on to oppose the grant of leave to amend. 15Davies J considered that the amendments themselves really amounted to a different claim in law only. The only additional facts that would appear to be involved relate to proof of the existence of the former mortgage to Macquarie Bank and payment out by the Bank of the amount secured by it. His Honour referred to the evidence as to those matters in the affidavit of Mr di Gregorio and said that it was doubtful if there is any disputed issue of fact in relation to what is contained in that affidavit because it consists, for the most part, of contemporaneous documents relating to title and the advances made by the Bank in paying out the outgoing mortgagee, Macquarie Bank. 16His Honour said that, on one view, the amendments were only another way of pleading, as a sword, the principle that, in the ordinary course of things, a person alleging unjustness of a current loan contract and mortgage will need to give credit for any benefit obtained, such benefit ordinarily being the payment out of a prior mortgagee which releases a liability in the person claiming the unjustness. His Honour said that a person in the position of the defendants in the present case was always required to meet that principle and that it is not a principle that needed to be pleaded by the Bank in advance. His Honour said that in the event that the outgoing mortgage and loan agreement were challenged as defeasible through unjustness or otherwise, that issue would need to be pleaded and determined in the present proceedings without the necessity of joining Macquarie Bank, as the prior mortgagee. His Honour considered that there would not be any prejudice to the defendants if the amendments were allowed. 17In dealing with the question of delay, his Honour said that it was unfortunate that the amendments were sought so long after the proceedings had commenced and in circumstances where he had been case managing the proceedings for a lengthy period of time. Nonetheless, his Honour distinguished the present situation from that in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175. He said that it is not a matter of forensic decisions having been made and that the proceedings are not just about at the point of a hearing taking place. His Honour did not consider that the provisions of the Civil Procedure Act 2005 (NSW) were breached in any serious way that precluded the present amendments being made. For those reasons, his Honour permitted the filing of the further amended statement of claim. 18Counsel for the present applicants accepts that it is necessary for him to point to an error in the nature of that discussed in House v The King [1936] HCA 40; 55 CLR 499. That is to say, it is necessary to show that his Honour applied a wrong principle or failed to take into account relevant considerations or took into account irrelevant considerations. 19I do not consider that any such basis has been established in the present application. No feasible hypothesis has been advanced on behalf of Barry's estate and Pamela to suggest that there is any evidence that could possibly be given by either of them relevant to the circumstances in which the Macquarie Bank mortgage was discharged or the granting of the mortgage to Macquarie Bank, if it comes to that. It appears that any evidence as to those matters could be given only by Jennifer and Gregory, and possibly Ryan, all of whom are available to give evidence. 20I do not consider that there was any error on the part of Davies J in the exercise of his discretion to permit the amendment. While there has been some delay, the nature of the amendment, being simply to raise a purely legal argument, is such that the delay does not require a great deal of explanation. In any event, his Honour was satisfied that the delay did not preclude the grant of leave. I am not persuaded that there was any error on his Honour's part in exercising his discretion in that regard. 21There would be no utility in granting leave to appeal. In my view, the present application for leave should be dismissed with costs. 22TOBIAS AJA: I agree with the reasons of Emmett JA and the orders his Honour proposes. 23EMMETT JA: Accordingly, the formal orders of the Court are: (1)The application for leave is dismissed. (2)The applicants should pay the respondents' costs.