Supreme Court of WA|2010-06-22|Before: Murphy J

McCOURT -v- NATIONAL AUSTRALIA BANK LTD [No 2] [2010] WASC 151 (22 June 2010)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : McCOURT -v- NATIONAL AUSTRALIA BANK LTD [No 2] [2010] WASC 151

Caveat - Alleged improper exercise by mortgagee of power of sale - New caveats lodged after original caveats ordered to be removed - Equitable estoppel - Sale at alleged undervalue - Turns on own facts

Transfer of Land Act 1893 (WA), s 138B(1) - Whether the words 'proprietor of the land' confined to the registered proprietor - Meaning of 'proprietor' in s 138D(1)(d)

Transfer of Land Amendment Bill 1996 (WA) (No 81 of 1996)

Application granted in relation to removal of caveats

Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925

Bourke v Beneficial Finance Corporation Ltd [1991] ANZ ConvR 473

Colin D Young Pty Ltd v Commercial & General Acceptance Ltd (1982) NSW ConvR 55-097

Commonwealth Bank of Australia v Hadfield [2001] NSWCA 440; (2001) 53 NSWLR 614

Dobbie v Davidson (1991) 23 NSWLR 625

General Credits (Finance) Pty Ltd v Stoyakovich [1975] Qd R 352

George v Commercial Union Assurance Co of Australia Ltd (1977) 1 BPR 9649

His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated [2003] WASC 15

McCourt v National Australia Bank Ltd [2010] WASC 121

McGinnis v Union Bank of Australia Ltd [1935] VicLawRp 31; [1935] VLR 161

National Australia Bank Ltd v MCMC Pty Ltd [2005] WASC 104

Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676

R & I Bank of Western Australia Ltd v Lavery (Unreported, WASC, Library No 930567, 25 October 1993)

Tomlin v Luce (1889) 41 Ch D 573

Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646

Warner v Jacob (1882) 20 Ch D 220

1 This is an application by chamber summons by the first defendant (the bank) to remove further caveats lodged by the plaintiff over two properties in Dalkeith, which are the subject of registered mortgages in favour of the bank. The properties were sold at auction on 1 May 2010 and the sales were to be completed on 31 May 2010. Settlement has been prevented.

2 The plaintiff had lodged caveats over the same land previously, on 30 April 2010 (the original caveats). The original caveats were ordered to be removed on 28 May 2010. My reasons in relation to that earlier application are in McCourt v National Australia Bank Ltd [2010] WASC 121.

3 The caveats presently in question were lodged on 31 May 2010, after the making of the orders for the removal of the original caveats.

4 I would note here that the purchasers of the properties should be a party to these proceedings: George v Commercial Union Assurance Co of Australia Ltd (1977) 1 BPR 9649, 9652, 9654. In the exigencies which have arisen, this appears to have been overlooked. Nevertheless, their interests were not adversely affected on the last occasion. Similarly, for the reasons which follow, I will order that the plaintiff's present caveats be removed, and consequently their interests are not prejudiced by this application. However, in principle, they ought to have been joined.

5 At the outset, the plaintiff raises a question of standing, the background to which is as follows.

6 The plaintiff originally commenced these proceedings, CIV 1738 of 2010, by originating motion, to extend the operation of the original caveats pursuant to s 138C of the Transfer of Land Act 1893 (WA) (the Act). (It is common ground that the original, and current, caveats are 'section 138A' caveats under the Act.) The plaintiff's solicitors described the application, in the letter to the Registrar seeking an urgent return date, as an application pursuant to s 138C of the Act.

7 Section 138C provides, relevantly:

138C. Powers of Supreme Court

(1) A caveator who is served with a notice under section 138B(1) may apply to the Supreme Court, in accordance with rules of the court, for an order extending the operation of the caveat.

(2) On the hearing of an application under subsection (1), the Supreme Court -

(a) if satisfied that the caveator's claim has or may have substance -

(i) may make an order extending the operation of the caveat for such period as is specified in the order;

(ii) may make an order extending the operation of the caveat until the further order of the court; or

(iii) may make such other orders as it thinks fit concerning the caveat or the land in respect of which the caveat was lodged;

(b) if not satisfied that the caveator's claim has or may have substance, shall dismiss the application; and

(c) may make such ancillary orders in relation to the application as it thinks fit.

8 The 'notice' the subject of s 138C(1) is the Registrar's notice referred to in s 138B of the Act. Section 138B provides:

138B. Certain caveats may lapse unless justified by caveator

(1) If a section 138A caveat has been lodged then the proprietor of the land in respect of which the caveat was lodged, or the judgment creditor named in a property (seizure and sale) order registered under section 133 in respect of the judgment debtor's saleable interest in such land, may apply, in an approved form and on payment of the prescribed fee, for the Registrar to serve the caveator with a notice to the effect that, unless the caveator takes the action referred to in subsection (2) within 21 days after the day on which the notice is served, the caveat will lapse.

(2) If the notice referred to in subsection (1) is served on the caveator then the caveat lapses 21 days after the day on which the notice was served unless, before that time, the caveator has -

(a) obtained from the Supreme Court an order extending the operation of the caveat -

(i) for such further period as is specified in the order; or

(ii) until the further order of the court;

and

(b) lodged with the Registrar a copy of the order.

9 In these proceedings, commenced by the plaintiff in relation to the original caveats, the bank issued a chamber summons to have the plaintiff's original caveats removed. Under s 138(2) of the Act, a proprietor (including, it is common ground, a registered mortgagee) may summon the caveator to attend before the Supreme Court or a judge in chambers to show cause why the caveat should not be removed.

10 The plaintiff, on the last occasion, did not succeed in his application under s 138C(1) to obtain an order, for the purposes of s 138B(2)(a), extending the operation of the original caveats. Nor did the plaintiff succeed in showing cause why, on the bank's application under s 138(2), the original caveats should not be removed. The original caveats were consequently removed under s 138C(2)(c) and s 138(2).

11 The plaintiff now contends, however, that these proceedings are a nullity and that consequently the bank has (and had) no standing within these proceedings to summon the plaintiff to show cause under s 138(2) of the Act. The plaintiff contends that:

(a) the bank had no standing to apply to the Registrar under s 138B(1) of the Act to cause the Registrar to serve the requisite notice under s 138B;

(b) the Registrar's notice was, accordingly, not a valid notice;

(c) in consequence, the plaintiff had no standing to apply, by its originating motion herein, to extend the operation of the caveats under s 138C(1);

(d) the proceedings commenced by the plaintiff are, consequently, a nullity; and

(e) the chamber summons by the bank, on this occasion (and on the last occasion), is (and was) brought within the proceedings commenced by the plaintiff and, as the proceedings are a nullity, there is (and was on the last occasion) no proper application by the bank under s 138(2) to show cause.

12 The point would not, perhaps, have been taken by the plaintiff had he succeeded in his application under s 138C(1).

13 The starting-point of the plaintiff's argument is that the words in s 138B(1) 'the proprietor of the land in respect of which the caveat was lodged' refer only to the 'registered proprietor' of the land, and not to the 'proprietor' as defined in s 4 of the Act.

14 Section 4 of the Act defines 'proprietor' as:

proprietor means -

(a) in relation to freehold land, the owner, whether in possession, remainder, reversion or otherwise, of land or of a lease, mortgage or charge over land;

(aa) in relation to a carbon right, carbon covenant or plantation interest, a person; or

(b) in relation to Crown land -

(i) the holder of an interest in Crown land; or

(ii) a management body empowered under the Land Administration Act 1997 to grant or enter into interests in Crown land or to deal with or create any other right or title of a proprietary nature in Crown land,

whose name appears in the Register as the proprietor of that freehold land, carbon right, carbon covenant or plantation interest, or the holder of that interest or power, and includes the donee of a power to appoint or dispose of that ownership, interest or power.

15 Accordingly, under s 4, a proprietor in relation to freehold land means, relevantly, the owner of a mortgage over the freehold land whose name appears in the register as the owner of a mortgage of that freehold land.

16 The proposition that s 138B picks up the definition of 'proprietor' under s 4 was adopted by Barker J in His Grace Metropolitan Petar v Macedonian United Society of Western Australia Incorporated [2003] WASC 15 [32], where his Honour said:

The reason why s 138B was introduced by amendment to the Act in 1996, was to provide a simpler means of removing a caveat other than requiring an applicant, or proprietor, or any person claiming under a transfer or other instrument signed by the proprietor, to summons the caveator to attend to show cause why the caveat should not be removed. It also appears to be a provision which enables a wider class of persons to apply for the effective removal of a caveat. By s 138B(1), the 'proprietor of the land in respect of which the caveat was lodged may apply' for a 21-day notice to issued [sic] by the Registrar. The expression 'proprietor' is defined by s 4 of the Act in relevant terms to mean -

'(a) In relation to freehold land, the owner, whether in possession, remainder, reversion or otherwise, of land or of a lease, mortgage or charge over land.'

This plainly includes a holder of a mortgage, such as the Bank in this case. Thus, s 138B might be taken advantage of by a person such as the Bank to cause a caveat to be removed without immediately having to incur the expense that would normally be associated with summonsing the caveator under s 138.

His Honour's decision on that point was referred to with approval by Commissioner McKerracher QC (as his Honour then was) in National Australia Bank Ltd v MCMC Pty Ltd [2005] WASC 104 [5]. These cases were quite properly drawn to the court's attention by the plaintiff's counsel.

17 The plaintiff's contention is, however, that the words 'of the land' which follow the words 'the proprietor' in s 138B(1) signify that s 138B(1) is only concerned with the registered proprietor of the freehold interest. The plaintiff draws attention, in his submissions, to provisions in the Act which draw a distinction, expressly or implicitly, between the holders of encumbrances and other interests, on the one hand, and registered proprietors of freehold land on the other. In this regard, the plaintiff refers to the definition of 'encumbrances' and 'land' in s 4, and to s 48(1), s 48A, s 48B(1), s 59, s 60, s 63, s 68, s 82, s 105 and s 106(1). He also refers to s 91 - s 104 which deal with leases and subleases; s 104A - s 104L which deal with carbon rights and carbon covenants; s 104M - s 104S which deal with tree plantation agreements and plantation interests; and s 105 - s 128A which deal with mortgages and annuities.

18 As to this argument, it may be accepted that various provisions of the Act do expressly deal with encumbrances and interests in land and that others, expressly or implicitly, deal with the position of registered proprietors of the land as opposed to proprietors of a mortgage or other interest in the land. The provisions to which the plaintiff refers do not, however, in my opinion, assist in resolving the question of whether s 138B(1) itself distinguishes between the registered proprietor of the land, as opposed to, relevantly, a mortgagee with a registered mortgage over the land. Nor, in my view, does the Act have the textual symmetry and purity implicit in the plaintiff's submissions. An interesting history of the drafting of the progenitor legislation is found (with particular reference to the equivalent NSW legislation) in Dobbie v Davidson (1991) 23 NSWLR 625, 647 - 656.

19 The definition of 'proprietor' in s 4(1) of the Act applies 'except where the subject or context or the other provisions hereof require a different construction'. There is, in my view, nothing in the subject of s 138B which would require a different construction. The subject is a process by which caveats prohibiting dealings may lapse. A registered mortgagee who is unable, by the operation of a caveat, to exercise its rights with respect to its proprietary interest, does not seem to me to be outside of the scope of s 138B merely because its proprietary interests, including indefeasibility of title, arise by reason of its position as a registered mortgagee. Similarly, the context of the words 'the proprietor' within s 138B, and the context of s 138B within pt V of the Act, do not call for a different construction from the definition under s 4. There is nothing, in the context of s 138B, which would suggest that the word 'proprietor' should be read in the confined way suggested by the plaintiff. It would be an odd result if a creditor named in a property (seizure and sale) order registered under s 133 of the Act could avail itself of s 138B, but not a person holding the highest security interest in land, viz a registered mortgagee. A creditor of that kind is expressly mentioned because such a person does not fall within the definition of 'proprietor'; a property (seizure and sale) order does not create a charge over or an interest in real property: s 80(6) Civil Judgments Enforcement Act 2004 (WA). Also, in my view, the other provisions of the Act do not 'require' a different construction.

20 For these reasons, in my view, the bank had standing to cause a notice to be issued under s 138B(1) of the Act and the Registrar's notice was a valid notice. The plaintiff had, in this regard, standing to bring the proceedings, and the bank's summons within the proceedings is an application for the purpose of s 138(2) of the Act.

21 The plaintiff also refers, in its most recent submissions, to the second reading speech of the Transfer of Land Amendment Bill 1996 (WA) (No 81 of 1996), which introduced s 138B. The reference to the second reading speech is, in my view, unnecessary. I do not consider that the meaning of the words in s 138B are ambiguous or obscure, or that their ordinary meaning would lead to a result which is manifestly absurd or unreasonable: cf Interpretation Act 1984 (WA), s 19(1)(b). In any event, the Minister's speech does not, in my view, advance the plaintiff's position on this point. It is apparent from the speech that the legislative intention was that s 138B would provide an easier alternative to s 138(2) for the removal of caveats. There is nothing in the speech to suggest that the legislature intended to confine the use of the new provision to the registered proprietor, to the exclusion of persons who could apply under the existing provision (s 138(2)).

22 There was a related issue raised by the plaintiff. The plaintiff alleged that under s 138D(1)(d), the 'proprietor' whose consent is required for the lodgement of a further caveat if s 138D(1)(a), (b) or (c) apply, is the registered proprietor of the land, and not (as the bank contended) the 'proprietor' who applied to have the requisite notice issued to the caveator under s 138B(1). The point was raised, as I understood it, in order to contend that the plaintiff was not precluded, by the orders made on the last occasion, and by the operation of s 138D(1), from lodging the caveats in question.

(a) is withdrawn after a notice under section 138B(1) is served on the caveator but before the caveat could lapse under section 138B(2);

(b) has lapsed under section 138B(2); or

(c) no longer has effect because of the operation of an order made, or a dismissal, under section 138C by the Supreme Court,

then the caveator cannot lodge with the Registrar any further section 138A caveat in respect of the same land unless -

(d) the consent of the proprietor to do so and, if the notice issued under section 138B(1) was issued on the application of a judgment creditor, the consent of the judgment creditor to do so are endorsed on the further caveat; or

(e) the Supreme Court has made an order giving leave for the lodgment of the further caveat and a copy of that order has been served on the Registrar.

24 If accepted, the plaintiff's submission would have the result that even if a caveat lodged by a registered proprietor affecting a registered mortgage lapses under s 138B(2), or the caveator's claim is dismissed under s 138C(2)(b) and the caveat removed by order under s 138C(2)(c), then the statutory prohibition against lodging a further caveat under s 138D(1) can be circumvented by the registered proprietor, as caveator, giving its own consent, for the purposes of s 138D(1)(d), to it lodging a further caveat. I do not accept this submission. If the 'proprietor' in s 138B has the meaning which I have concluded it does have, s 138D(1)(d) must refer to the proprietor who caused the notice to be issued under s 138B(1).

25 The consequence of the above discussion is that:

(a) the bank has standing to bring the present application (and had standing on the previous occasion); and

(b) the plaintiff was precluded, by s 138D, from lodging the caveats presently in question over the same land.

26 For that reason alone, the present caveats should be removed on the bank's application.

27 In case I am wrong in that conclusion, I will proceed to consider the merits. The relevant principles were referred to in [7] of my earlier reasons.

28 The current caveats have been tailored to address the deficiencies identified with respect to the original caveats in my earlier reasons at [23] and [26]. The plaintiff has also, this time, offered an undertaking as to damages in connection with the balance of convenience (cf my earlier reasons [25]).

30 The estate or interest being claimed is 'as registered proprietor who has been granted a mortgage and the mortgagee has entered into a contract for sale for the land described above in bad faith in the purported exercise of the power of sale'. The interest is claimed 'by virtue of the facts contained in the Statutory Declaration of Daniel Patrick Redden McCourt dated 31 May 2010 and Amanda Jane Gray dated 31 May 2010'.

31 Before considering those statutory declarations, I should mention, by way of background, the bank's unchallenged evidence, in the form of an affidavit of Ms Facius sworn 27 May 2010, concerning the history and enforcement of the loans to the plaintiff.

32 The bank provided a facility known as a Portfolio Facility, and a home loan, to, relevantly, the plaintiff in 2007. Both were secured by registered mortgages over the Dalkeith properties and over other properties in Claremont, Yallingup and South Bunbury.

33 Prior to 19 December 2008, the plaintiff was in default under the Portfolio Facility and under the mortgages over the Dalkeith and the other properties. By notices dated 19 December 2008, the bank gave the plaintiff notice that there had been a default under the Portfolio Facility and demanded repayment of the sum then outstanding of $10.489 million, and gave notice that unless the default were remedied in 35 days, all amounts under the mortgages over the Dalkeith and other properties would be payable on demand, and that the bank may sell all the mortgaged properties. No payment was made, and further interest accrued. On 29 January 2009, the bank gave further notices under the mortgages over the Dalkeith and other properties demanding repayment of the sum then outstanding (with the additional interest accrued) of $10.572 million, and stating that unless the moneys were repaid the mortgaged properties may be sold.

34 The bank also issued a notice of default in respect of the home loan on 12 February 2009.

35 The debt was not discharged, and the bank then proceeded to realise its securities:

(a) the sale of the Claremont property was completed on 3 July 2009;

(b) the sale of the Yallingup property was completed on 19 November 2009;

(c) marketing of the South Bunbury property was undertaken and three offers in respect of villas on the property have been received and are the subject of continuing negotiation;

(d) the bank, to the knowledge of the plaintiff, entered into a contract, on 8 September 2009 to sell the Dalkeith properties to an acquaintance or friend of the plaintiff for a total of $3 million, but that sale fell through when the friend or acquaintance withdrew;

(e) following this, the bank obtained a valuation from CB Richard Ellis dated 19 February 2010 and engaged agents to market and bring the Dalkeith properties to auction; and

(f) the Dalkeith properties were subsequently sold at auction on 1 May 2010 for a combined figure of $2.71 million - one was sold for $1.35 million and the other for $1.36 million.

36 As noted above, the plaintiff lodged the current caveats on the day scheduled for completion of those contracts for sale.

37 Mr McCourt's (the plaintiff's) declaration deals with two points. First, it describes circumstances which are said, by the plaintiff's counsel, to give rise to a promissory estoppel by which the bank is, allegedly, estopped from relying on the notices which it issued on 29 January 2009.

38 The matters said to give rise to the estoppel are described by Mr McCourt in his statutory declaration as follows:

I am the sole director and shareholder of Redden (WA) Pty Ltd ACN 112 117 816 (Redden), which is in receivership.
In about 2006, Redden established with NAB a National Portfolio Facility, account number ... (the Facility). Fixed Rate Interest Only Home Loan account number ... (the Home Loan).
The Facility and the Home Loan were subject to a fixed and floating charge. 23A Leon Road is subject to a registered mortgage number K494061; 23B Leon Road is subject to registered mortgage number K494062. In the [sic] both mortgages NAB is the mortgagee.
Now produced and shown to me and marked 'DPRM1' is a copy of the Memorandum of Common Provisions that apply to the mortgages I have with NAB.

On 23 September 2008, at the offices of National Australia Bank on St Georges Terrace in Perth I met with Jeff Kapler, NAB's South-West Regional Manager. Now produced and shown to me and marked 'DPRM1A' is a copy of the note of this meeting in my diary for that day.
At this meeting Mr Kapler and I discussed applying the proceeds of the sale of the Clifton Hotel in Bunbury to the Facility. At this point I was behind with payments on the Facility, but the meeting was an amiable one to discuss how to get things back on track. Up until this point my dealings with NAB were friendly and the meeting was in this spirit.
At this meeting Mr Kapler wanted me to keep trading. He suggested I do the following with the Facility:
1. Apply the $710,000 I expected to receive from the settlement of the Clifton Hotel in Bunbury to servicing the debt on the Facility in the following manner:
  1. Put $350,000 into an offset account for the purposes of servicing the debt;
  2. Put $200,000 into debt reduction;
  3. Put $110,000 towards my tax bill;
  4. Put $30,000 into paying my credit cards; and
  5. Allow me $160,000 for personal use.
2. In return, NAB would keep the Facility going, that is, operating normally.
I acted in reliance on NAB's representation and ordered my affairs on the understanding that when the sale proceeds from the Clifton Hotel in Bunbury were received by me then NAB would act as they undertook to act at the meeting on 23 September 2008.
On 29 January 2009, contrary to what it undertook to do at the meeting on 23 September 2008, NAB issued a notice of demand under the Registered Mortgage for payment of $10,571,928.43. I understand it did so as a precondition to exercising its power of sale over my properties, including my properties on Leon Road. Now produced and shown to me and marked 'DPRM1B' is a copy of this notice of demand.

The 'note' referred to in par 9 of the statutory declaration is a copy of a diary entry for 23 September 2008 which says '11.00 National Australia Bank Jeff [K]appler'.

39 The second point dealt with by Mr McCourt in his statutory declaration concerns the sale of the Dalkeith properties to the purchasers at auction on 1 May 2010. Mr McCourt says, in effect, that the properties were sold at an undervalue. In this respect he relies, again, on the valuations on which he relied on the last occasion. On the last occasion I found that the evidence, including those valuations, did not arguably give rise to an inference that the bank had sacrificed the plaintiff's interests in respect of the sale of the Dalkeith properties (earlier reasons [17] - [21]).

40 The plaintiff's counsel submits, however, that the evidence has gone beyond that which was available on the last occasion. First, he refers to Mr McCourt's statement in the current statutory declaration that the auctioneer of the properties 'told the crowd that the [Dalkeith] properties were going ... cheap, cheap, cheap'. Secondly, counsel for the plaintiff also refers to Ms Gray's statutory declaration, sworn 31 May 2010.

41 It is convenient to address Ms Gray's statutory declaration at this point.

42 Ms Gray is a real estate agent employed by Acton Real Estate in Dalkeith. Her statutory declaration is to the effect that the valuation obtained by the bank from CB Richard Ellis, dated 19 February 2010, was defective in that CB Richard Ellis took into account previous sales in Dalkeith, Claremont and Peppermint Grove which did not provide proper comparators for estimating the value of the Dalkeith properties the subject of this application.

43 CB Richard Ellis valued each of the Dalkeith properties at $1.45 million whereas Ms Gray says that 'based on [her] experience in conducting appraisals in Dalkeith the [two] properties would fetch in today's market $1.65 million to $1.75 million [each]'.

44 Five further features of Ms Gray's evidence may be noted:

(a) Ms Gray is the plaintiff's partner, and could not purport to be an independent expert;

(b) whilst she criticises the comparable sales data relied on by CB Richard Ellis, she does not contend that the overall value at which they arrive, $1.45 million for each property, was outside of the bounds of any reasonable valuation of the property in February 2010;

(c) in ascribing the value of $1.65 million to $1.75 million, she does not outline what methodology or comparable sales data she used, or the reasoning process she employed;

(d) she makes no mention of the most recent sales data, namely the price for which the properties were actually sold at auction. The price at which they were sold at auction on 1 May 2010 was $1.36 million as to one of the properties, and $1.35 million as to the other. Nor does she mention the contract for sale to the plaintiff's friend or acquaintance for a combined price for the two properties of $3 million, which fell through; and

(e) she makes no comment on the history of the bank's engagement of agents in relation to the marketing of the properties set out in pars 4.88 - 4.108 of Ms Facius' affidavit sworn 27 May 2010.

Whether the caveats disclose an arguable interest in land

45 The first basis upon which the plaintiff's claim is put is the alleged promissory estoppel.

46 At the outset, I note that the bank has not contended that the plaintiff's description of the interest claimed in the caveat does not extend to the estoppel claim.

47 In considering the estoppel claim, I note that the plaintiff, for the purposes of this application, has sworn an affidavit in opposition to the bank's application, in which he deposes to a somewhat different arrangement to the one the truth of which he swore in his statutory declaration. In his affidavit of 10 June 2010 he states:

I am the plaintiff in the above action.
I have had the opportunity to review certain records relevant to this matter. I have also noted that the sums cited in paragraph 11 of my statutory declaration dated 31 May 2010 do not add up to $710,000. As a result, this affidavit corrects certain statements I make in my affidavit dated 28 May 2010 and my statutory declaration dated 31 May 2010.

...

NAB's representations about the mortgage

On 23 September 2008, at the offices of National Australia Bank on St Georges Terrace in Perth I met with Jeff Kapler, NAB's South-West Regional Manager. Now produced and shown to me and marked 'DPRM2' is a copy of the note of this meeting in my diary for that day.
At this meeting Mr Kapler and I discussed applying the proceeds of the sale of the Clifton Hotel in Bunbury to service my debt. At this point I was behind with payments, but the meeting was an amiable one to discuss how to get things back on track. Up until this point my dealings with NAB were friendly and the meeting was in this spirit.
At this meeting Mr Kapler wanted me to keep trading. He suggested I do the following:
1. Apply the proceeds I expected to receive from the settlement of the Clifton Hotel in Bunbury to servicing my debts in the following manner:
  1. Pay off my credit card debt of $30,000;
  2. Pay my tax bill of approximately $120,000;
  3. Put $200,000 into debt reduction; and
  4. Apply the remainder into an offset account to cover interest.
2. In return, NAB would keep the Facility going, that is, operating normally.
The object of this arrangement was to keep me trading so I could generate income.
On 26 February 2009, contrary to what it under took [sic] to do at the meeting on 23 September 2008, NAB failed to apply the proceeds of the sale of the Clifton Hotel in Bunbury in the manner agreed. Instead it applied the entire sale proceeds towards servicing my debt.
I was counting on NAB following through with what was agreed on 23 September 2008. I planned on being able to pay off my credit card and then use the credit available for my daily activities. I had planned on paying my tax bill. I had planned on being able to continue to trade.
Instead, NAB left me without any money. I could not afford everyday activities let alone being able to challenge what was happening. My ability to do so was gone.

48 The plaintiff also annexed to his affidavit a settlement statement of the sale of the Clifton Hotel in Bunbury. The settlement occurred on 26 February 2009. It was explained, without objection, by counsel for the plaintiff that:

(a) the Clifton Hotel was owned by a partnership of which the plaintiff was a partner;

(b) the partnership had a partnership debt to the bank in respect of the hotel of $3.8 million;

(c) after the sale of the hotel and subject to certain deductions, the plaintiff was left with a surplus of (approximately) $701,000; and

(d) the plaintiff paid the $701,000 to the bank but the bank did not apply it in accordance with the arrangement referred to in par 7(a) of the plaintiff's affidavit, and instead applied the whole $701,000 to debt reduction.

Estoppel - the law relied on by the plaintiff

49 In support of his allegation of equitable estoppel, the plaintiff relies on Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925. In that case the mortgagor, a trustee under a will, mortgaged several properties in the trust estate to the bank. Under the mortgage, the mortgagor covenanted to pay the sum advanced within 24 hours of demand in writing. The mortgagor defaulted on principal and interest in the first half of 1904. On 9 July 1904, the bank manager made a demand for payment within 24 hours of the amount then due on the security of the mortgaged land. The demand contained the relevant notice to the effect that unless the amount were immediately paid to the bank, the bank would exercise its power of sale under the mortgage. The mortgagor failed to make payment. However, on 10 July 1904 the mortgagor advised the bank manager, in effect, that he had made arrangements to procure an advance sufficient to pay out the bank, but that the money would not be available for two or three months. After this, in around August 1904, the bank manager agreed with the mortgagor that he was satisfied with the proposed arrangement, providing that the money was paid by 31 December. Notwithstanding this, in September 1904 the bank gave notice that it intended to proceed forthwith with the sale of the mortgaged property under the demand of 9 July 1904. The notice did not contain a formal demand for payment so as to create a new default. The background to this development was that the bank manager had sought election to the board of directors of a company of which he and the trustee were members. He looked to the trustee mortgagor for support in his election. The mortgagor refused to endorse the election of the bank manager, and instead endorsed another candidate. The bank manager said, 'If you don't second my nomination today, I'll make it dammed hot for you. I'll do my best to ruin you' (941). The property was then sold by the bank to purchasers. The sale was insufficiently advertised and the reserve price was disclosed before and at the auction. The jury found that the sale was not made bona fide, but recklessly, and without regard to the interests of the mortgagor. That verdict was set aside by the Full Court but reinstated in the High Court. The High Court found that there was sufficient evidence before the jury to indicate that there was bad faith in the exercise of the power of sale.

50 The court did not determine the question of whether, in any event, the bank had by its arrangement in August 1904 waived its right to rely upon the notice of 9 July 1904, or was estopped from doing so. It said (941):

In the view which we take of the other part of the case, it is not necessary to decide what were the rights of the parties under the agreement or arrangement of August, as found by the jury, but there can be no doubt that that transaction had an important bearing upon the question of the bona fides of [the bank manager] in the exercise of the power of sale, which he almost immediately proceeded to exercise ... .

51 Although it did not decide the point, the High Court made the following observations on whether a waiver or estoppel could arise in these circumstances (937 - 939):

For the appellant the case of Hughes v Metropolitan Railway Co was cited, and in particular the language of Lord Cairns LC. 'It is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results-certain penalties or legal forfeiture-afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.' In that case the negotiations referred to had taken place after the giving of a notice requiring the doing of an act, but before the expiration of the period within which the act was required to be done. No actual default, therefore, had been then committed. The respondents contended that this doctrine has no application to a case where default has already been committed. The language of the Lord Chancellor is not in terms limited to the case where the negotiations precede default, but it must, no doubt, be read with reference to the facts with which he was dealing. This case was cited to the Court in Williams v Stern, and it is to it, no doubt, that Cotton LJ referred to in his judgment. In Tommey v White, the assignees under a deed executed by a debtor in trust for his creditors were empowered to sell his house and business after three months' notice. Notice was given, but afterwards it was agreed at a meeting of the trustees and creditors that it should be considered as abandoned, and it was held that a sale in pursuance of it was unauthorized and unlawful. In this case the agreement was within the three months. We are by no means satisfied that the doctrine stated by Lord Cairns is limited to cases in which the so-called waiver takes place before the occurrence of actual default. In reason, the unfairness to the party who is induced to suppose that the strict rights of the other party will not be enforced is just as likely to occur in one case as in the other. In either case there must be something in the nature of what is called a consideration. As Sir W. Grant said in Stackhouse v Barnston: 'A waiver is nothing; unless it amount to a release. It is by a release, or something equivalent, only, that an equitable demand can be given away. A mere waiver signifies nothing more than an expression of intention not to insist upon the right; which in equity will not without consideration bar the right any more than at law accord without satisfaction would be a plea.'

If the acts set up as showing waiver occur before actual default, the party is induced to abstain from taking steps to prevent the default from happening, which abstention, if the strict terms of the contract were adhered to, would or might operate to his prejudice. Regarding the case then as one in which some consideration must be shown, is there any such consideration in the present case? The suggested consideration is that [the mortgagor] at the request of the mortgagees refrained from taking steps which might, and upon the evidence probably would, have resulted in his saving the property for his beneficiaries. We have some difficulty in saying that this is not a sufficient consideration to bring this case within the rule laid down in Hughes v Metropolitan Railway Co.

Again: We are reluctant to hold that a mortgagee, who has made a formal demand of payment which is a necessary condition precedent to the exercise of a power of sale, cannot by his conduct in negotiations with the mortgagor, as well after as before the existence of actual default, estop himself from alleging that the notice has been given. If it is arranged between them that their relations shall continue on the footing that the notice has not been given, and on the faith of that arrangement the mortgagor acts or refrains from acting, we are strongly disposed to think that the case should be considered not as a representation of intention, but as a representation of an existing fact on the basis of which both parties are to act, namely, that the demand is to be regarded as not having been made, so that a fresh demand must be made before the mortgagee can be heard to allege that default has been committed. (footnotes omitted)

52 The evidence in the statutory declaration and affidavit of the plaintiff is sparse and ambiguous. This makes it difficult to characterise the nature of the arrangement asserted by the plaintiff in order to consider the question of whether any estoppel might arguably flow from the arrangement. These deficiencies are not readily explained by reference to the need to move quickly on 31 May 2010, when the alleged representation was made in September 2008 (approximately 20 months ago) and its alleged non-fulfilment occurred in January 2009 (approximately 16 months ago).

53 I would note that on the last occasion, counsel for the plaintiff submitted in effect that the plaintiff had made a decision, with knowledge that the 29 January notices had been issued, to apply approximately $810,000 (presumably intended to be a reference to $701,000) from the sale of his interest in the Clifton Hotel to selling down the debt. That submission is difficult to reconcile with the proposition in this application that the notices were issued contrary to a prior arrangement. Counsel said (and the plaintiff was in court instructing counsel):

Mr McCourt also applied approximately $810,000 from the sale of his interest in the Clifton Hotel in Bunbury to selling down the debt. These need to be incorporated, because the paying down of these particular debts occurred after NAB issued its notice of demand for all moneys on 29 January 2010.

Mr McCourt then started paying down this debt through various means. Yes, NAB did exercise its power of sale over certain properties, but also there were actions by Mr McCourt, and the one that I'm talking about is him applying the sale of the proceeds of the Clifton Hotel in Bunbury to the debt, $810,000 applied to servicing the debt.

54 On this occasion the plaintiff's submissions were, relevantly, as follows:

The Barns principle directly applies to Mr McCourt's case. At the meeting on 23 September 2008 NAB, through its South-West Regional Manager Jeff Kapler, and Mr McCourt agreed to apply the proceeds of the settlement of the Clifton Hotel in Bunbury in a certain way. The understanding was that NAB wanted Mr McCourt to keep trading: Second McCourt Affidavit at paragraphs [5]-[8].
By its conduct NAB on 23 September 2008 ... rendered its default notices on 19 December 2008 and 29 January 2009 ineffectual. Prior to the default notices being issued both NAB and Mr McCourt agreed to applying the proceeds of the Clifton Hotel settlement to address Mr McCourt's debt. Both default notices were issued before the Clifton Hotel settlement. Given what was agreed, Mr McCourt was entitled to (and did) proceed as understood on 23 September 2008.
Pursuant to what was agreed at the meeting on 23 September 2008, Mr McCourt paid the entire proceeds of the Clifton Hotel settlement to NAB. By doing so, Mr McCourt left himself extremely vulnerable as he had no other financial resources at the time: Second McCourt Affidavit at paragraphs [10]-[11].
Further, Mr McCourt did not set aside any funds for himself from the Clifton Hotel settlement although he could have easily done so. He could have paid his credit cards and tax bill, and set aside money for himself. He did not. He counted on NAB fulfilling what was agreed.

55 Those submissions were confirmed orally at the hearing, at least initially (but see [60] below). They tend to suggest that but for the arrangement on 23 September 2008, the plaintiff would not have paid, or authorised the payment, of $701,000 to the bank upon settlement of the sale of the Clifton Hotel on 26 February 2009, and instead would have paid the bank only $200,000 for debt reduction, and kept $150,000 for other personal debts (credit card and tax) and, perhaps, would have paid the remaining $350,000 into an offset account with the bank. None of these matters could arguably, in my view, give rise to an estoppel of the kind now alleged for two reasons.

56 One is that the nature of the arrangement, on this argument, would not prevent the bank notifying the plaintiff that it intended to exercise its power of sale. The arrangement (if binding at law or in equity) would only preclude the bank from applying the surplus of the sale proceeds of the Clifton Hotel in a certain way. The second is that, in any event, the plaintiff could not have operated on an assumption, as at 26 February 2009 when he authorised the bank to receive the whole of the sale proceeds, that the bank would not give notice of an intention to exercise the power of sale, given that the bank had already given that notice a month earlier, on 29 January 2009.

57 Another way of characterising the effect of the evidence, and perhaps the most commercially realistic, is this. It appears, from the reference to the plaintiff being 'behind with payments' (par 6 of his affidavit) and from the reference to 'debt reduction' of $200,000 (par 7 of his affidavit), that the plaintiff had not serviced his interest bill at the time, and that he had accrued arrears of interest of at least $200,000 by 23 September 2008. The object of the meeting (par 8 of his affidavit), was to enable the plaintiff to keep trading so as to generate income. The ordinary inference, in this context, would be that the purpose of the plaintiff generating income was to give the plaintiff an opportunity to service at least its current and future interest obligations, even if he could not, at the time, pay the arrears in respect of which he was in default.

58 If that is the nature of the meeting, presumably, at least on the ordinary view of it, the effect of the alleged communication on 23 September 2008 was that providing the plaintiff kept trading and kept servicing current and future interest obligations, or at least servicing them to the bank's satisfaction:

(a) the bank would not enforce the securities over assets needed by the plaintiff for trading, pending the sale of the Clifton Hotel in Bunbury; and

(i) $200,000 would be applied in reduction of the interest arrears as at 23 September 2008;

(ii) the plaintiff would have $150,000 to pay other personal debts - tax and credit card; and

(iii) the balance of the surplus would be paid into an offset account to reduce the amount of interest otherwise payable on the principal debt.

59 If that were the nature of the arrangement, an arguable estoppel would not arise without further evidence that the plaintiff kept up interest payments, or at least paid interest to the bank's satisfaction, between 23 September 2008 and 29 January 2009. Neither the plaintiff's statutory declaration nor his affidavit suggest that interest continued to be paid in that period.

60 Another possible characterisation of the evidence was raised by counsel for the plaintiff orally at the end of the hearing. He said:

The other thing is just concerning the overall position of Mr McCourt, that had this undertaking by NAB been followed through he wouldn't be in the position that he would be - or he would still be in the position that he would be.

Well, the object of the understanding between NAB and Mr McCourt on 28 September we would suggest is to keep him in trade. Mr McCourt is a property developer by profession and his whole line of work is to realise the value of the unrealised value of properties. Had he been allowed to do that - and we are speculating at this stage - he would have continued to sell down properties and manage the debt. It is just that he would be doing it on his own terms, not on NAB's terms.

That was the understanding on the 28th, that Mr McCourt could still be in trade and NAB wanted him in trade and his trade was developing properties and if there was a dead issue, sell them down in a controlled fashion on his own terms, not have NAB come in and act as mortgagee in possession. NAB's reneging on that understanding meant that - not to put it in too strong terms, I don't think it is appropriate - renders fundamentally illegitimate everything they have done so far as mortgagee. (emphasis added)

61 That submission seems to involve the proposition that there was a representation by the bank that, irrespective of whether the plaintiff continued to default on interest payments, the bank would never enforce its securities and would instead leave it to the plaintiff to sell assets, as and when he saw fit, and at prices suitable to him, from which bank debt would be repaid at the plaintiff's choosing. Two points may be made about that possibility (which might be regarded as a commercially unusual arrangement, at the least). First, the plaintiff has not deposed to such an arrangement in his statutory declaration or affidavit. Secondly, even if that were the arrangement, there is no cogent evidence to support, on an arguable basis, the speculation to which counsel referred in his submissions.

62 For these reasons, I am not satisfied that the plaintiff has established that his claim for an equitable estoppel has or may have substance.

Whether exercise of power of sale arguably in bad faith

63 As indicated earlier in these reasons, on the last occasion I found that the plaintiff's evidence did not disclose an arguable case that the bank had exercised its power of sale in bad faith. The two additional matters to which the plaintiff's counsel refers in this application do not appear to me to advance the position so far as the plaintiff is concerned.

64 In relation to Ms Gray's evidence, counsel for the plaintiff submitted that Ms Gray's statutory declaration revealed 'serious blunders' in the valuation undertaken by CB Richard Ellis.

65 In this regard counsel invoked the language of Kekewich J in Tomlin v Luce (1889) 41 Ch D 573, 576 referred to with approval in Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676, 684. In the latter case Griffith CJ said:

In the case of Tomlin v Luce, Kekewich J, speaking of the liability of a mortgagee under such circumstances said:- 'So long, however as he selects agents presumably competent he cannot be made liable for their errors in judgment or in matters of detail not seriously affecting the success of the sale or the price realized. On the other hand, I think that if the mortgagee is guilty, directly or indirectly, of a serious blunder inducing a failure to sell, or a large diminution of the price realized, the mortgagor can hold him responsible for that, and it is no answer for him to say that the blunder was no fault of his own, but was that of an agent in whom he properly placed implicit confidence.'

The court of Appeal (Cotton, Bowen and Fry LJJ), held that the mortgagee was liable for any loss occasioned by the mistake which had in fact been made, but dissented from the measure of damages adopted by Kekewich J (footnotes omitted).

66 In Tomlin v Luce the mortgagee's agent gave a misdescription of the nature of the property which was one of some importance, and the error led to a diminution in the sale price of a considerable sum (576).

67 However, mere inadequacy in the price obtained, and the value of the property, will not normally of itself be sufficient for a mortgagor to upset a purported sale: Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646 [40], [47].

68 In Pendlebury v Colonial Mutual Life Assurance Society there were a number of issues in relation to the sale, one of which was that the property, having a value of £2,000, was sold for £720 and had the property been sold at its true value, there would have been a considerable surplus to the mortgagor. Barton J said (695):

The sale was thus at a great sacrifice, not to the mortgagee, who stood free of loss, but to the mortgagor, who at full value would have secured a balance of £1200 or more. But very low prices are often obtained at such sales, in spite of all efforts to secure real value. And the mortgagee is entitled to force a sale even when the market is not favourable. But it is not set up that there was a falling or a stagnant market. Also it is not to be taken that what the cases call 'a fair price' is the full market value. What is a fair price must, of course, depend on the circumstances of each individual case. But it may safely be said that £720 for this property is so greatly below the market value that ... the reasonable inference is that it is not a fair price.

Barton J's observations were adopted by Hill J in Bourke v Beneficial Finance Corporation Ltd [1991] ANZ ConvR 473, 475.

69 Similarly, in Warner v Jacob (1882) 20 Ch D 220, 223 - 224 Kay J held that a sale price may be so low as in itself to be evidence of fraud.

70 For the reasons indicated in [44] above, in my view, Ms Gray's evidence carries no real weight and does not add any substance to the allegation, which I have previously rejected, that there was, arguably, an exercise of the power of sale in bad faith.

71 In relation to the other matter referred to in [40] above, it does not, on its own, justify a conclusion of an arguable case of bad faith. If there were any other matters which arguably pointed to an absence of good faith, the auctioneer's statement referred to by the plaintiff could weigh in the balance in considering whether there was an arguable case of bad faith. In the absence of any other evidence to suggest that the power of sale has, arguably, been exercised in bad faith, that matter alone, which might (and so much depends on context) be seen as mere puffery to get the bidding at the auction started, does not persuade me of the existence of an arguable case of bad faith.

72 I would add that again (as in my earlier reasons at [12]), I have assumed, without deciding, that a registered proprietor has, potentially, a caveatable interest in accordance with the authorities referred to in [8] - [10] of my earlier reasons. In addition to the cases referred to in [10] of my earlier reasons, I would add reference to Patmore v Upton [2004] TASSC 77; (2004) 13 Tas R 95.

73 Even if the plaintiff had established an arguable case on estoppel, or that the power of sale in respect of the Dalkeith properties has been exercised in bad faith, I would still order that the caveats be removed having regard to the balance of convenience. The following matters are relevant in this respect:

(a) the power of sale is exercised when the contract for the sale of the mortgaged property is entered into: Tyler ELG, Young PW & Croft CE, Fisher & Lightwoods Law of Mortgage (2nd Aust ed) [20.8]. In this case the contracts for the sale of the Dalkeith properties were entered into on 1 May 2010;

(b) whilst at the time that the contracts for sale were entered into, the plaintiff had caveated (albeit the day before) each of the Dalkeith properties, I have found, in the earlier application, that the original caveats had no substance;

(c) the caveats as presently formulated, including with respect to the alleged estoppel, were not on the title at the time the purchaser bought the Dalkeith properties at auction, and were only lodged on the day on which the purchaser's contracts were to be completed;

(d) the plaintiff must be taken to have known, since shortly after 29 January 2009, that the bank would rely on its notices dated 29 January 2009 as a precondition of the exercise of its power of sale;

(e) there is nothing to suggest that the plaintiff has done anything since 29 January 2009 and prior to 31 May 2010, to suggest or contend that the notices were defective;

(f) to the knowledge of the plaintiff the bank has sold, or made arrangements to sell, other mortgaged properties in the meantime, and has entered into contracts for the sale of the Dalkeith properties to the plaintiff's friend or acquaintance (albeit that the sale fell through), without any contention or suggestion that the notices of 29 January 2009 were defective;

(g) there is no dispute about the validity of the mortgages;

(h) even if Ms Gray's evidence is accepted, and using the higher of the figures to which she refers, the properties have a combined value of $3.5 million. There is no prospect of a surplus, having regard to the amount of debt still owed by the plaintiff to the bank; and

(i) the plaintiff's claim (assuming at this point that it is arguable) could not be regarded as strong on the present material.

74 In these circumstances, for the reasons indicated at [24] of my earlier reasons, the balance of convenience weighs in favour of the caveats being removed. I should add that the reference by Justice White in R & I Bank of Western Australia Ltd v Lavery (Unreported, WASC, Library No 930567, 25 October 1993), to a claim for damages (echoing the nomenclature used in Barns v Queensland National Bank (944 - 945)), is to be understood as referring to the mortgagor's right, in equitable proceedings, to hold the mortgagee to account on the footing of wilful default or to have equitable compensation brought to account: Pendlebury v Colonial Mutual Life Assurance Society (692 - 693); McGinnis v Union Bank of Australia Ltd [1935] VicLawRp 31; [1935] VLR 161, 164; Colin D Young Pty Ltd v Commercial & General Acceptance Ltd (1982) NSW ConvR 55-097; General Credits (Finance) Pty Ltd v Stoyakovich [1975] Qd R 352; Commonwealth Bank of Australia v Hadfield [2001] NSWCA 440; (2001) 53 NSWLR 614 [35] - [48], [69]; Ultimate Property Group v Lord [36].

75 The bank has also applied for an injunction to restrain the plaintiff from lodging further caveats over the Dalkeith properties and has applied, in effect, for orders in respect of alleged contempt of court in relation to the lodgement of the caveats presently in question. The bank provided no written submissions on the former, and its oral submissions were scant, to say the least. The bank has not persuaded me that an injunction should be granted. As to the latter application, the bank sought 'such further order pursuant to Order 55 in relation to those persons who caused the [original] caveats ... to be lodged ...'. The plaintiff's counsel submitted, and I accept, that this is an unsatisfactory allegation of contempt. It is vague and lacking specificity, it does not identify the alleged contemnors, and it does not specify the content of the charge. Nor has O 55 r 5(1) of the Rules of the Supreme Court 1971 (WA) been complied with.

76 I will order that the caveats lodged by the plaintiff on 31 May 2010 be removed and otherwise dismiss the bank's application.

Judgments Enforcement Act 2004

Administration Act 1997

McCOURT -v- NATIONAL AUSTRALIA BANK LTD [No 2] [2010] WASC 151 (22 June 2010)

At a glance

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Judgment (171 paragraphs)

McCOURT -v- NATIONAL AUSTRALIA BANK LTD [No 2] [2010] WASC 151 (22 June 2010)

Estoppel - the law relied on by the plaintiff

Legislation Cited (3)

Cases Cited (6)