Satchithanantham v National Australia Bank Ltd

Satchithanantham v National Australia Bank Ltd - [2009] NSWCA 395 - NSWCA 2009 case summary — Zoe

[14]

2 The background to the dispute is set out in the reasons of both the primary judge and Young JA (who delivered the substantive reasons of the Court on appeal). The following suffices for present purposes. 3 In early 2003, the applicant's husband, Mr Thambiappah Satchithanantham, was an undischarged bankrupt. He and the applicant had owned their home at Westmead. His interest was then held by his trustee in bankruptcy. The judgments do not disclose the precise interest held by him before his bankruptcy. The home was apparently worth something over $800,000. There was an existing home loan facility secured over the property under which both Mr and Mrs Satchithanantham were indebted. The creditor was Bankwest. At the time of the settlement of the transaction in question with the respondent (the NAB), Bankwest was owed $361,469.82. Bankwest had been threatening to take proceedings under its security. The trustee in bankruptcy had offered to transfer the interest in the property of Mr Satchithanantham to Mrs Satchithanantham for $25,000. 4 Mr Satchithanantham arranged for the NAB to lend $680,000. Given that he was an undischarged bankrupt, the loan was to be made to the applicant. 5 The loan and security transaction were entered. The NAB advanced $680,000 to the applicant in April 2003. She thought the loan was a home loan for $400,000. It was not. 6 The primary judge's reasons disclose sufficient facts to reveal what can be described as the less than prudent banking approach to the transaction by the NAB. The NAB knew, for instance, that Mr Satchithanantham was an undischarged bankrupt and that the applicant was in receipt of Centrelink payments. (The Satchithanantham's son is severely disabled.) The primary judge's reasons also disclose that the bank was given facts about the rental income of the property by Mr Satchithanantham that were less than accurate. The primary judge concluded that the NAB engaged in "pure-asset lending", that is "to lend money without regard to the ability of the borrower to repay … in the knowledge that adequate security is available in the event of default": Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41; (2005) 14 BPR 26,639 at [128]. 7 On 6 February 2009, the primary judge concluded that Mrs Satchithanantham was subject to the undue influence of her husband, but her Honour rejected claims by the applicant that the NAB was privy to that undue influence. The primary judge also rejected relief (a) under the principles in Yerkey v Jones [1939] HCA 3; 63 CLR 649, (b) for unconscionable conduct and (c) under the Trade Practices Act 1974 (Cth). The primary judge did, however, find the contract unjust under the Contracts Review Act 1980 (NSW). Central to this finding was the undue influence of Mr Satchithanantham and the absence of appreciation by the applicant that the loan was anything other than a refinancing of the Bankwest home loan. 8 On 6 February 2009 the primary judge made orders varying the loan agreement so as to operate as if the amount advanced on 16 April 2003 had been $408,665.86. This sum was derived from the disbursement authority on 15 April as follows:

[16]

The sums other than the moneys referred to in the last line (which were applied by Mr Satchithanantham) total $408,665.86. 9 The primary judge then made the following orders: "1. That the parties be deemed to have entered into a deed varying the loan agreement between them so that in all respects the Facility shall operate as if the loan amount advanced on 16 April 2003 and debited to the defendant's account had been $408,665.86. 2. Judgment for the unpaid balance in the account calculated on that basis. 3. An order for possession of the Westmead property." 10 On 3 March 2009 the matter again came before McCallum J. The matter had been stood over to 3 March 2009 to allow a calculation of the indebtedness of the applicant based on the varied loan agreement. McCallum J made the following orders: "1. The defendant give the plaintiff possession of the [subject property] 2. The plaintiff have leave to issue a writ of possession to enforce the judgment referred to in 1 above. 3. The defendant pay the plaintiff the sum of $461,043.74. 4. The defendant pay two thirds of the plaintiff's costs, including any reserved costs." 11 Counsel for the applicant, Mr Patel, submitted on 3 March that the variation to the loan agreement vitiated the NAB's entitlement to an order for possession. 12 In response to this, counsel for the NAB reminded the judge that this was a facility cancellable at will and that it was cancelled and that a clause of the loan agreement conferred a contractual entitlement on the bank to take possession of the security property. Thus, counsel submitted, the claim for possession did not turn on any question about the validity of the notice under s 57 of the Real Property Act 1900 (NSW). The judge accepted these submissions. 13 A stay of the writ of possession was then sought by the applicant. The primary judge heard this application on 7 April 2009. One argument put on behalf of the applicant was that the primary judge failed to deal with the validity of the notices under s 57 of the Real Property Act. The primary judge dealt with this as follows at [11] and [12] of her reasons on that day: "[11] The thrust of that ground appears to be that having granted relief under the Contracts Review Act , I have effectively created a new facility between the bank and Mrs Satchithanantham. I do not understand that to be the effect of the orders I made. I did not make any order at all in respect of the mortgage granted by Mrs Satchithanantham over the Westmead property. In respect of the loan facility for which that mortgage is security, the order I made was that the parties be deemed to have entered into a deed varying the loan agreement only so as to reduce the amount advanced. Even if ground 18 amounts, in effect, to a challenge to the power of sale, it does not entail a challenge to the judgment debt which follows from the orders made by me on 3 March 2009 and entered on that date.

[57]

27 The application for special leave is less than fully coherent. It does, however, focus, to a degree, on the alleged deficiencies of the notices under s 57 of the Real Property Act. 28 A number of allegations of impropriety against the NAB and its legal advisors are made. Many references are made to interlocutory proceedings subsumed by the principal judgment. 29 Propositions in the application also include questions as to whether the mortgage was void and whether there was consensus ad idem for the loan agreement. 30 Subject to one point, it is difficult to extract from Mr Patel's submissions before the Court of Appeal and from the application for special leave any coherent possible ground of appeal. The one point by way of qualification to that is whether or not the question of benefit received by the applicant should have been analysed not merely by reference to the sums involved but also by reference to the terms of the commercial facility compared to the house loan from Bankwest. Allied to this is the issue of reliance on the notices under s 57 of the Real Property Act. It may be that these issues were not run below (cf the submissions at the hearing on 3 March 2009). Young JA may well be correct (if I may respectfully phrase it this way) that the applicant would fail on the "home loan terms" issue. Young JA did not deal with the validity s 57 notices. Mr Patel did not address the Court of Appeal on this issue. 31 This Court undoubtedly has authority to stay the issue of the writ pursuant to the orders of the Court of Appeal, pending hearing of the special leave application: Jennings Constructions Ltd v Burgundy Royale Investments Pty Ltd [1986] HCA 84; 161 CLR 681. 32 Subject to the balance of convenience this would ordinarily only be done if there was some real prospect of success on the special leave application, or to put it in a way which does not seek to forecast the views of members of the High Court, whether there is an identifiable point of substance to throw into doubt the orders of the Court of Appeal. 33 On the other hand, unless a point of substance impugning the Court of Appeal's orders is evident, the NAB should not be held out of the consequences of its victory. 34 The only matters of doubt are the two related points that I have raised: One was not put to the Court of Appeal: the s 57 issue; as to the other, the assessment of benefit issue or home loans terms issue, I am not presently persuaded on the basis of Mr Patel's submissions to this Court on the substantive appeal and from how Young JA dealt with the matter that there is an available ground of appeal. 35 Further, there is no reliable evidence that Mrs Satchithanantham is in a position to pay interest at home loan rates on the sum owing based on an indebtedness of $408,665.86 in April 2006. 36 In these circumstances, I am not persuaded that the stay should be continued. 37 I would, however, without intended disrespect to Mr Patel, direct the Registrar to approach the New South Wales Bar Association to seek the assistance of senior junior counsel or senior counsel who practises in these kinds of matter in the redrafting of the application for special leave. 38 These reasons subsume the question of the review of Young JA's decision on 27 October 2009. 39 In the motion filed Mr Satchithanantham placed his son's and his names on the motion as applicants. He accepted, however, at the hearing fo the motion that only Mrs Satchithanantham was a party. 40 The orders I would make are:

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