Mudge v Business Finance Pty Ltd

Subsequent events

1. Following the 21 May orders, the sale of the properties completed on 25 May 2021. The net proceeds of sale were applied by Business Finance to the amount owing by Seraphim under the loan, but were insufficient to repay the loan in full. According to Mr Ayres, there is a shortfall of $4,605,187.83 as at 6 September 2021 owing by Mr Mudge as guarantor.
2. The significant disproportion between the sale price and the ultimate shortfall seems to be a consequence of the extraordinarily high default interest rate under the mortgage; 60 per cent per annum, reducible to 15 per cent upon prompt payment. It is not necessary to consider whether the interest provision in the mortgage constitutes an unenforceable penalty (Paciocco v Australia and New Zealand Banking Group Limited (2016) 258 CLR 525; [2016] HCA 28), and if so, what consequences would follow in terms of the calculation of the amount owed by Mr Mudge to Business Finance.

Proposed appeal

1. Mr Mudge was self-represented on this application, as he was in the Court below. He has not served a draft notice of appeal as required by UCPR, r 51.12(2)(d). Accordingly, it is necessary to turn to his written summary of argument to identify the basis of the proposed appeal.
2. The summary of argument identified three high level questions. The first is whether Mr Mudge's claim as caveator has or may have substance and should have been "maintained/preserved" over the two properties. The second is whether the primary judge erred by not considering, accepting or placing any weight on Mr Mudge's "credible" evidence in eight specified respects. The third is whether the primary judge erred in failing to find that the Australia Post evidence showed that Mr Mudge was not served with the demands.

Disposition of application

1. Addressing the usual criteria for leave, it is plain that none of the questions raised by Mr Mudge involve an issue of principle or a question of public importance: Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v DAS [2012] NSWCA 164; Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206. Accordingly, it is necessary to consider whether any of the questions raise an injustice which is reasonably clear in the sense of being more than merely arguable.
2. Mr Mudge's written summary of argument did not identify any legal or factual error in the primary judge's rejection of Mr Mudge's contention that he had a caveatable interest with respect to the properties. Insofar as Mr Mudge made an oral submission that the sale process was not in good faith because the properties were not advertised as suitable for eco-tourism or potential residential development, that submission was not addressed in his written summary of argument, nor developed in oral argument. Mr Mudge did not identify any deficiencies of the valuation evidence or the marketing process undertaken by the respondents, which the primary judge relied on in rejecting Mr Mudge's submission that the sales of the properties involved an improper exercise of a power of sale or the exercise of a power of sale in bad faith.
3. Mr Mudge's contention in par 2(i) of his written summary of argument - that the primary judge failed to afford him procedural fairness at the hearing on 21 May 2021 - was not supported by reference to any particular aspects of the hearing below. Having reviewed the transcript of the hearing, I am satisfied that his Honour appropriately dealt with Mr Mudge as an unrepresented litigant. There is no substance in the criticism that the primary judge did not afford Mr Mudge a fair hearing.
4. Mr Mudge's contentions in par 2(ii)-(vi) of his written summary of argument that the primary judge erred in a number of ways was not based on any specific findings of fact or law which were challenged.
5. Insofar as Mr Mudge asserted that the reasons for the 21 May orders were inadequate, that complaint is untenable. Given the interlocutory nature of the hearing to maintain a statutory injunction against the respondents from dealing with the two properties, the reasons of the primary judge well-exceeded the "minimum acceptable standard": see the discussion in Prouten v Chapman [2021] NSWCA 207 at [32].
6. His Honour's reasons identified the relevant facts and issues, stated the applicable principles, and applied those principles to the arguments raised by Mr Mudge. There is no basis for complaint that some arguments were dealt with more briefly than others. There was no requirement for the judge to give a detailed explanation for rejecting every argument, especially arguments that were of little, if any, relevance (for example, that the powers of attorney were without merit or invalid, when no reliance was placed on the powers of attorney in the exercise of the powers of sale).
7. Mr Mudge's complaint that the primary judge failed to consider, accept or place any weight on Mr Mudge's "credible" evidence that the notice of demand had not been served at the Gilmore Close property ignored that in response to Mr Mudge's denial of service of the demand at that address, the respondents adduced the evidence referred to above from Australia Post confirming service by Express Post of an envelope containing the demand addressed to Mr Mudge at the Gilmore Close property: see [10] above. The primary judge was entitled to prefer this evidence over Mr Mudge's denial.
8. Insofar as Mr Mudge submitted in oral argument that the Gilmore Close property was not his last known residential address and accordingly service at the Gilmore Close address was deficient, and that his solicitor and mortgage broker knew at the time that he resided elsewhere (Conveyancing Act 1919 (NSW), s 170(1)(b)), the respondents objected to Mr Mudge raising a new point on the proposed appeal which had not been raised below. Mr Mudge did not dispute that this was a new point. That is a sufficient reason alone to refuse leave to rely upon this ground: Water Board v Moustakas (1988) 180 CLR 491; [1988] HCA 12.
9. In any event, Mr Mudge has not shown any injustice in relation to the "service" point. As the respondents correctly pointed out, at the time of obtaining the loan in 2018, Business Finance was provided with a document signed by Mr Mudge and his solicitor styled "Combined Appointment as Identifier Certificate and Identification Certificate", which included a photocopy of Mr Mudge's Driver Licence, which showed his address as the Gilmore Close property. Mr Mudge did not point to any evidence that indicated that Business Finance was aware of a different residential address for Mr Mudge at the time of issue of the demand on 30 November 2018.
10. As a further answer to the "service" point, counsel for the respondents submitted (in effect, as a foreshadowed notice of contention) that the respondents were entitled to exercise the contractual power of sale in cl 19.7 of the memorandum to the mortgage and cl 2 of the deed of appointment of Mr Ayres, together with s 420(2)(b) of the Corporations Act 2001 (Cth), if there was any impediment to the exercise of the statutory power of sale. The primary judge did not find it necessary to deal with this argument given his conclusion on the service point. As no injustice has been demonstrated, it is not necessary to say anything about this alternative argument.
11. As to the primary judge's refusal to grant leave to Mr Mudge to file a cross-claim on 21 May 2021, this was a decision regarding a matter of practice and procedure and particular caution and circumspection is required when reviewing such decisions: Hassan v Sydney Local Health District (No 2) [2020] NSWCA 356 at [25] (Bell P, Basten and Leeming JJA agreeing). In this case, Mr Mudge failed to identify any error of the type in House v The King (1936) 55 CLR 499 at 504-505; [1936] HCA 40 in the primary judge's reasons for refusing leave to file a cross-claim. Moreover, Mr Mudge could have brought separate proceedings against Business Finance or Mr Ayres at any time after Business Finance took possession of the Gilmore Close land. He has not done so. No injustice has been made out by this complaint.
12. Insofar as Mr Mudge complained that the primary judge erred in giving too much weight to the respondents' argument that Mr Ayres (as receiver and manager) had an express right to sell the Sneaths Road land under s 115(3) of the Conveyancing Act, this complaint is misplaced. The primary judge made no finding concerning the application of s 115(3).
13. To the extent that Mr Mudge seeks leave to appeal against order 5, that order was facultative in circumstances where Mr Ayres did not have possession of the certificate of title to the Sneaths Road land and the order was made against the Registrar General (who has not been joined as a party in this Court). Mr Mudge did not make any submissions in his written summary of argument as to why there was any error in order 5.
14. Mr Mudge's proposed challenge to the costs order made on 22 June 2021 was not addressed in his written summary of argument and no attempt was made in oral argument to identify any error in the costs order. The costs order in favour of the respondents accorded with the usual rule that costs follow the event: UCPR, r 42.1. The specification of a gross sum was a discretionary decision well-open to the primary judge on the evidence before him. It is well-established that the court will be slow to grant leave in respect of an appeal restricted to a challenge to an order for costs. This is for two reasons. First, as the power to award costs is discretionary, the "constrained" or "deferential" standard of appellate review of an exercise of judicial discretion adopted in House v The King applies. Second, costs involve matters of practice and procedure and hence there is the "added restraint" and the "particular caution" which an appellate court should exercise in reviewing a judgment on such matters: McInnes v Rheem Australia Pty Ltd [2021] NSWCA 89 at [22]-[23]. No error has been identified in the discretionary decision on costs.
15. One further matter should be mentioned. As Mr Mudge did not seek or obtain a stay of the 21 May orders to preserve the subject matter of the litigation pending any application for leave to appeal, and the sale of the properties completed on 25 May 2021, there is no utility in the proposed appeal against the 21 May orders. Mr Mudge has no right to maintain a statutory injunction against the current registered proprietors of the properties pending resolution of any dispute he has with Business Finance and Mr Ayres (such as an action for compensation for any loss if the mortgagee sale was unauthorised, or challenging the amount of the debt claimed to be owing to Business Finance).

Notice of motion

1. By notice of motion filed 6 August 2021, Mr Mudge seeks relief in pars [1] to [8], duplicating the relief sought in the summons seeking leave to appeal. That part of the motion should be dismissed for the same reasons as given above in relation to the application for leave to appeal.
2. Paragraphs [9] to [16] of the motion seek procedural orders in relation to the service and expedited hearing of the motion, as well as orders against the respondents and third parties for the production of various documents. Given the outcome of the application for leave to appeal, it is unnecessary to consider the balance of the motion which seeks to obtain additional evidence for the proposed appeal. The motion should be dismissed with costs.

Conclusion

1. I am satisfied that although the proposed appeal is without merit, there should be an extension of time given that the delay is not inordinate and that there is no prejudice to the respondents by that delay.
2. I propose the following orders: 1. Extend the time for filing of the summons seeking leave to appeal to 6 August 2021. 2. Summons seeking leave to appeal be dismissed. 3. Applicant to pay the respondents' costs in this Court. 4. Notice of motion filed by the applicant on 6 August 2021 be dismissed with costs.
3. SIMPSON AJA: I agree with Gleeson JA.

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: 20 October 2021