Merton v Bank of Queensland Ltd

Judgment 1HIS HONOUR: This is an application by notice of motion filed 24 May 2013 by the applicants, Mr Merton and his wife Ms Butler, for a stay of the judgment of the Court of Appeal given on 14 May 2013 dismissing an appeal from a decision of Stevenson J given on 8 August 2012 (see Merton v Bank of Queensland [2013] NSWCA 115). 2The applicants seek a stay of proceedings while an application is made to the High Court to seek special leave to appeal from the decision of the Court of Appeal. 3Mr Merton appeared on his own behalf and was granted leave, as occurred in relation to the appeal, to also appear on behalf of his wife. There was no objection by the respondent to that course being taken. 4Mr Merton explained that he was seeking a stay for a period of 14 to 28 days. This was to enable his solicitor to complete the necessary papers in relation to an application for special leave to appeal to the High Court, so that the applicants could then seek a further stay from the High Court. The position is that no such papers have yet been filed with the High Court. It follows that no draft summary of argument was available on the hearing of the application for a stay, explaining the basis upon which special leave was to be sought by Mr Merton and his wife. The application was opposed by Mr Schneider who appeared on behalf of the respondent bank. 5The relevant legal principles on which the Court should approach an application for a stay pending an application for special leave to appeal to the High Court, have recently been reviewed by this Court in Rinehart v Welker [2012] NSWCA 1; (2012) 285 ALR 191. The approach the Court is to take, as made clear in Rinehart v Welker at [41], is to follow the approach set out by Brennan J in Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1) [1986] HCA 84; (1986) 161 CLR 681 at 684. This approach first requires that an application for a stay pending an appeal should first be made in the Court in which the relevant order was made. Secondly, that exceptional circumstances are shown before a stay is warranted as the grant of a stay is an extraordinary jurisdiction. 6In exercising the extraordinary jurisdiction to grant a stay, the following factors are material to the exercise of the Court's discretion. First, whether there is a substantial prospect that special leave to appeal will be granted. Secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the Court in which the matter is pending. Thirdly, whether a grant of the stay will cause loss to the respondent; and fourthly, where the balance of convenience lies. 7In the present case it is necessary to first give consideration to the prospects of the grant of special leave. This is made extremely difficult in circumstances where no application has yet been filed in the High Court, nor is there any draft summary of argument available to this Court on the hearing of this application. 8In a written submission provided to the Court, Mr Merton stated that the lead judgment of Barrett JA, with which both Sackville AJA and myself agreed, was wrong for two reasons. The first related to the proper construction of a clause in a facility agreement between Heritage Village Estate Pty Ltd ("HVE") and the respondent, and the meaning to be given to the reference in cl 7 (conditions precedent) to the "initial funding" to be made available under that facility. The second related to the cl 9 table in the facility agreement which identified that the amounts available for "land/refinance" was $880,000 and for "subdivision costs" was $180,000. Mr Merton contended that the "initial funding" was not limited to the two amounts stated in the cl 9 table, totalling $1,060,000. 9The construction of cl 7 of the facility agreement was considered by both the primary judge and by the Court of Appeal. The primary judge held that the expression "initial funding" consisted of an amount of $1,070,016.19, which was advanced by the respondent bank to HVE on 26 September 2008. The primary judge was of the opinion that the amount of $1,070,016.19 provided as a consequence of the Request Notice of 10 June 2008, although greater than the sum of $880,000 referred to in the Request Notice, was the "initial draw" and constituted the "initial funding" under the facility agreement. 10In this court, Barrett JA considered that the primary judge was correct to conclude that the $1,070,016.19 constituted the "initial funding" for the purpose of cl 7, and that conclusion was supported when regard was had to the contractual terms as a whole. Justice Barrett set out in [50] to [55] of his judgment additional reasons why it was clear that under cl 7 the "initial funding" was to be provided before the construction funding and that the total funding to be provided under the facility agreement was to consist of those two elements. 11The second element (construction funding) was to be available only if the subdivision confirmation occurred within three months after the advance of the first element. Thus two things were identified as following the provision of initial funding. First, subdivision confirmation; and secondly, provision of construction funding. Justice Barrett considered the impact of the cl 9 table on the proper construction of the facility agreement and came to the view that it had the effect of setting two limits. One, an amount of $880,000 for what was referred to as the "land/refinance" category of costs and the other, an amount of $180,000 for the "subdivision costs" category. 12The approach to construction by Barrett JA led to the conclusion that the facility agreement contemplated that the initial funding would consist of advances not exceeding the aggregate allowed for the first two purposes in the clause 9 table, that is, $1,060,000. In the events which occurred, an amount slightly greater than that was advanced by the respondent bank to HVE, being an amount of $1,070,016.19. Accordingly, Barrett JA rejected the construction argument put forward by the applicants on the appeal that the respondent bank was required to advance an additional amount over and above the amount of $1,060,000 before subdivision confirmation was obtained. 13I am not persuaded that Mr Merton has shown that the applicants have substantial prospects of obtaining special leave in the present circumstances. It is simply not possible to be persuaded to that point of view having regard to the judgment of the Court of Appeal and the absence of any draft summary of argument, let alone any application for special leave having been filed with the High Court at this stage. The case turns on the construction of a private agreement and its own special facts. 14In relation to the other matters which it is necessary to take into account, I have given consideration to submissions by Mr Merton in relation to the personal prejudice the applicants would suffer if they were deprived of the rental income they are currently receiving from the two properties, in respect of which the respondent bank currently has orders for possession. Mr Merton informed the Court that the rental income in relation to the property referred to as Nulkaba is an amount of $25 per week for agistment of horses and the rental in respect of a second property, being retail shop premises at West Wyalong, is an amount of $165 per week. 15Mr Merton also expressed concern in relation to the respondent bank's conduct in respect of the sale of a related security property at Castle Hill, and made an allegation from the bar table that this had been sold at an undervalue and that the bank had incurred substantial but unnecessary costs in relation to that sale. In my opinion, in relation to this matter, any complaint which Mr Merton wishes to make is properly the subject of separate proceedings. It is not relevant to the application before me. 16Mr Merton's argument concerning the prejudice the applicants would suffer if deprived of rental income from the two security properties, needs to be balanced against the prejudice which would be suffered by the respondent bank if it is not permitted to enforce its rights to possession of the security properties. The respondent has not been paid any interest which is accruing on the judgment debt it has obtained. 17Finally, Mr Merton also made a submission to the effect that he was concerned about foreshadowed conduct of the respondent bank if it was permitted to enforce the writs of possession and at some future stage proceed to a mortgagee sale in respect of those properties. Mr Merton submitted that the respondent would engage in what he referred to as further unconscionable conduct if it exercised its power of sale. In my opinion, there was no evidence available to support that submission on the current application. 18I have considered the balance of convenience, including the detriment to the respondent bank which, if a stay were granted, would be kept out of its money judgment on which interest is accruing, and from enforcing its rights to possession of the security properties currently the subject of the orders of Stevenson J. I have considered this against the prejudice and inconvenience to the applicants who would be deprived of an income stream, albeit a small amount, from the two security properties. 19In all the circumstances, I have concluded that it is not appropriate to grant a stay of the proceedings based on the material currently before me. I make the following orders: (1)The notice of motion filed by Mr Merton and Ms Butler on 24 May 2013 be dismissed. (2)The applicants to pay the respondent's costs of the motion.