St George v Wallis

St George v Wallis - [2001] NSWSC 23 - NSWSC 2001 case summary — Zoe

[6]

(ii) The Initial Proceedings 2 St George lent money to a company, the repayment of which was secured, inter alia, by a Guarantee given by Mr and Mrs Wallis and by a second mortgage which they gave over their home. The principal debtor defaulted and St George commenced proceedings 16388 of 1992 in the Common Law Division against Mr and Mrs Wallis, in which the only relief sought was possession of their home pursuant to the provisions of the mortgage and the obtaining of vacant possession of it. St George did not seek to recover the monetary sum allegedly payable pursuant to any of the covenants to pay in the mortgage. Proceedings 16388 of 1992 were transferred subsequently to the Commercial Division and re-numbered 50049 of 1993. 3 The transfer to the Commercial Division occurred because St George commenced proceedings 50571 of 1992 in that Division, whereby it sued the principal debtor, Mr and Mrs Wallis, and other guarantors, who had also given mortgages, namely Mr and Mrs Collins, on their Guarantees. St George brought proceedings in the Common Law Division for possession of two properties mortgaged to it by Mr and Mrs Collins at Engadine and East Kurrajong, which were also transferred to the Commercial Division, the one against Mr Collins, who played no part in these proceedings, being re-numbered 50050 of 1993, and the one against Mrs Collins, who defended the proceedings, being re-numbered 50051 of 1993. 4 All these actions came on for hearing before me from 22 to 25 November 1993. When the hearing commenced I was informed, and I recorded in my reasons for judgment: p.597 of the Appeal Book, Exhibit B:- "In proceedings 50049 of 1993 the plaintiff sought possession of the land upon which the home of the fourth and fifth defendants (Mr and Mrs Wallis), who, at all material times, have been married to each other, is erected. That property is known as 14 Raleigh Street, Blakehurst. Since the commencement of the proceedings it has been sold and, on 23 August 1993, the net proceeds of sale amounting to $156,099.99, which are allegedly payable to the plaintiff, were credited to it. I am informed that this money is held by the plaintiff on the basis that if the fourth and fifth defendants are successful in the proceedings it will be paid to them . As the property has been sold the claim for possession is (no) longer pursued ."

[7]

I have added the emphasis in my present judgment. It did not appear in the original reasons. The word "no", which appears in parentheses in the last quoted sentence, was not in my original reasons, although, on the present hearing, the parties accepted that it obviously should have been and the matter proceeded on the basis that the final sentence should be read as if it were there. 5 On 11 February 1994, I delivered my reasons for judgment in which I found in favour of St George, essentially, and rejected a principal defence raised by, relevantly for present purposes, Mr and Mrs Wallis that the Guarantee was not enforceable against them because St George had failed to meet a condition precedent to its enforceability. I invited the parties to bring in Short Minutes of Order to give effect to my reasons. Although this was not done until 19 May 1994, by which time the legal representatives for St George had an ample opportunity to consider my reasons, no suggestion was then made that what I had recorded at p.597 was inaccurate. Had it been, I would have expected to have been told. 6 It was unnecessary for me to consider the claim for possession against Mr and Mrs Wallis for the reasons I stated at p.597, I was not requested to do so, no submissions were made in relation to it and no orders were sought for possession. 7 On the present hearing it was conceded by Mr Newlinds that I was not informed at the original hearing of the bases on which the money was held by St George nor why, if Mr and Mrs Wallis were successful, it would be paid to them. My finding in favour of St George made it unnecessary for me to consider that matter. The information with which I was provided was sufficient for me to make a consequential declaration that St George was entitled to retain the money. 8 Mr Newlinds pointed out that in stating St George's case I said, Exhibit B, p.604:- "As against the second to seventh defendants inclusive the plaintiff sues on agreements of guarantee and indemnity entered into by them pursuant to which demands were made in November 1992 that payment of the principal sum outstanding, which demands, it is not in issue, have not been met, save, perhaps, to the extent of the money derived from the sale of the property of the fourth and fifth defendants. The plaintiff seeks the benefit of those sale proceeds and possession of the Engadine and Kurrajong properties." 9 Mr Newlinds submitted that in this portion of my reasons I recognised that St George was suing to recover the amount it had been paid. In my respectful opinion this submission should not be accepted. I do not understand that the reference to seeking the benefit of the sale proceeds was anything more than a repetition or, perhaps, an elaboration, of what I had said about the circumstances in which St George would have to repay the money to Mr and Mrs Wallis. St George's entitlement to the benefit of the sale proceeds was dependent, as I had noted at p.597, upon its being successful in the proceedings. It was conceded, as I have said, that I was unaware of there being any other issue which may entitle St George to retain the money. The position of which I was advised, which was the agreed basis on which the matter proceeded, was that if St George was successful in the Guarantee proceedings it would retain the money paid from the proceeds of sale and, if it was not, it would repay it. I was not asked to consider further the possession proceedings brought against Mr and Mrs Wallis. 10 Such an understanding, leaving aside for the moment the correspondence of which I was not made aware at the original hearing, was inherently probable. Mr and Mrs Wallis had sold the property. They could not complete the sale without obtaining discharges of mortgages on settlement. They could not achieve that without St George's consent. On the other hand, a substantial defence to St George's proceedings on the Guarantee, which was the only monetary claim St George had made against them, was that St George could not succeed on that claim because of the non-compliance with the condition precedent. It was, accordingly, entirely improbable that they would pay over the money absolutely, and entirely probable that they would bargain for a repayment of it if their pleaded defences to St George's only monetary claim succeeded.

[8]

(iii) The Letters Giving Rise To The Present Claim 11 It is convenient, at this stage, to refer to the letters of 8 and 26 July 1993, which are annexed to Mr Bowles' affidavit. The first stated:- "As you are aware this firm acts for Mr and Mrs Wallis. Our clients have negotiated the sale of the property 14 Raleigh Street Blakehurst for a price of $482,000. The Purchaser, as we are instructed, will exchange contracts immediately and settle within 14 days. Our clients are only prepared to proceed with the sale if the payment of monies to St George is without prejudice to the litigation of the Guarantees. Accordingly, would you please obtain urgent instructions on the following:- (a) That St George acknowledges that the payment of monies to St George arising from the above sale is without any admission and without prejudice to the Supreme Court proceedings. (b) That if St George is successful in the litigation, at the conclusion of the trial, the amount claimed against the Guarantors will be reduced by the amount received by St George from the proceeds of sale. (c) That if the Guarantees are set aside, St George undertakes to repay to Mr and Mrs Wallis the amount paid to St George from the proceeds of sale. Would you please obtain urgent instructions in relation to the above proposal." 12 On 26 July 1993, the solicitors for St George replied:- "We refer to your letter dated 8 July 1993 and our subsequent telephone conversation on 26 July 1993. We confirm our client's instructions to agree to your client's proposal as outlined in your letter of 8 July 1993 and as further particularised in your letter of 15 July 1993 subject to the following: (a) That St George receive at settlement the entire proceeds of sale after the deduction of moneys properly due and payable to the First Mortgagee and the proper costs and expenses of sale; (b) That in the event the guarantees are set aside at a final hearing of this matter and for whatever reason St George is found to be entitled to possession of your clients' property then St George will be entitled to retain any amount paid to it from the proceeds of the sale of the property. Please confirm the above arrangements are satisfactory to your client. If so we shall require full particulars of the disbursement of the sale proceeds when known but, in any event, prior to settlement. Please also confirm the date of settlement so that the necessary discharge documentation can be prepared in anticipation thereof." 13 It will be necessary to consider the correct construction to be placed on sub-paragraph (b) of the letter of 26 July 1993. Subsequently the Court of Appeal upheld Mr and Mrs Wallis' appeal and set aside the Guarantee. Their submission is that that having occurred and St George not having been found entitled to possession of the Raleigh Street property, St George is not entitled to retain the money but should repay it. 14 Put shortly, for the moment, St George's submission is that whilst accepting that the setting aside of the Guarantee by the Court of Appeal prima facie entitles Mr and Mrs Wallis to recover the money, none-the-less on the findings of fact made the conclusion should follow that St George was found to be entitled to possession and, therefore, it may retain the money.

[16]

The proceedings referred to in Order 4 were, of course, the possession proceedings against Mr and Mrs Wallis. 17 The Court of Appeal also made consent orders in the possession proceedings between St George and Mrs Collins that the Summons be dismissed with costs. 18 It was not in issue before me that the declaration I had made in relation to the money was not before the Court of Appeal until 7 March 1996, nor that their Honours made no order setting it aside. 19 It is not clear to me why this was not done either on 7 or 11 March 1996, when the matter was again before the Court of Appeal, particularly having regard to what Cole JA said:- "It seems on the face of it that there was an agreement between the parties which was announced to Rolfe J and that agreement was, it would seem, that if your clients were successful in these proceedings, that is the proceedings before Rolfe J which came on appeal, that they would have returned to them $156,099.99. They have been successful and on the face of that they are entitled to have that money back." 20 This comment was made by Cole JA after Mr G.J. McVay of Counsel, who appeared for Mr and Mrs Wallis before me and the Court of Appeal, had raised with the Court of Appeal that the money should be repaid to them. In doing so Mr McVay handed up three copies of the order I made "declaring the Bank was entitled to keep that money but that of course is now overturned having regard to the orders of this Court". 21 In response Mr Cashion stated that he accepted the general thrust of what Mr McVay had said, but that he did not have any instructions in relation to "the current position, vis-à-vis the money" and that:- "If there has been money paid on the basis of the judgment below then I would imagine there'd be no difficulty in light of this Court's orders refunding it." 22 The Court then adjourned for lunch and after that adjournment Mr Cashion said he wished to investigate the terms of the agreement between the parties. Cole JA referred to what I had said at p.597 as being the arrangement recorded, to which Mr Cashion replied, he having appeared at the hearing, that he had no recollection "one way or the other about that". By then the legal representatives for St George had had some three years to consider what had been said to me, and some months to do so since the delivery of the Court of Appeal's reasons, which made what I had noted at p.597 particularly relevant. 23 It was at the conclusion of this discussion that Cole JA made the comments to which I have referred, and the Court of Appeal, notwithstanding Mr McVay's protestations, adjourned the matter until 11 March 1997 to enable further instructions to be obtained. 24 On 11 March 1997, the position had still not been clarified and Mr Cashion submitted that what was being sought was an order for specific performance of the agreement:- ".. in circumstances where there has been no exploration of the relevant evidence or any testing of it or any proper submission or argumentative process or where there's been any property (sic) determination by this Court."

[19]

(vi) What Happened Thereafter 26 The solicitors for Mr and Mrs Wallis applied to St George for a refund of the money, which was refused. Subsequently the Notice of Motion was brought and, in the course of my case management of it, I required Mr and Mrs Wallis to file Points of Claim and St George to file Points of Defence, so that the issues could be identified with greater precision. When I gave those directions St George did not seek leave to file a cross-claim to raise any further or other issues. 27 The facts alleged in paragraphs 1 to 3, 5, 8 to 14 and 20 of the Points of Claim were all admitted in the Points of Defence. It is unnecessary for me to repeat them, as they are set out, essentially, above and if any others are thought to be important reference may be made to the file. 28 In paragraph 4 of the Points of Claim, Mr and Mrs Wallis alleged the entry into an agreement with St George in July 1993 and provided particulars thereof. St George admitted there was an agreement between the parties and asserted that it was made by an exchange of the letters of 8 and 26 July 1993 "and not otherwise", which letters set out the entirety of the agreement. 29 Although paragraphs 6 and 7 were originally admitted, the Points of Defence were amended without objection, so far as paragraph 6 was concerned to admit that there was a contested hearing before me; to deny that the possession proceedings against Mr and Mrs Wallis were not pursued; and to assert that they were pursued to the extent that St George sought the benefit of the proceeds of sale of the property. 30 In relation to paragraph 7, St George admitted sub-paragraphs (a) and (b) and that the words attributed to me in sub-paragraph (c) formed part of my judgment delivered on 11 February 1994, but denied that they constituted a "holding". 31 Paragraphs 15 to 19 of the Points of Claim were denied, the denial of paragraph 15 asserting that on the proper construction of the agreement between the parties and in the events that have happened St George is entitled to retain the money. In reply to paragraph 19, which was not pursued by Mr Biscoe, there was a denial of the allegations contained therein and St George relied on the provisions of the mortgage generally.

[20]

The Construction Argument 32 As I have noted, St George admits that there was an agreement between the parties and asserts that it was made in the terms of the letters of 8 and 26 July 1993. There is, accordingly, no issue between the parties as to whether there is an enforceable agreement, but rather what it means and, as I have also noted, in paragraph 15 of the Points of Defence, St George asserts its entitlement to retain the money on the proper construction of the agreement and in the events that have happened. Accordingly, no issue is raised about consideration or the enforceability of the agreement, save for the question of its proper construction. 33 It is, therefore, convenient to return to sub-paragraph (b) of the letter of 26 July 1993. It is not in issue that the Guarantees have been set aside at a final hearing, nor was any argument put that that did not have any consequence. Rather, the submissions proceeded on the basis that that having occurred St George was only entitled to retain the money if:- ".. for whatever reason St George is found to be entitled to possession of your clients' property ..". 34 In his written submissions, paragraph 21, Mr Newlinds contended that it had been found that St George is entitled to possession of the property, and further that the Court would not order payment to Mr and Mrs Wallis in circumstances where they "are clearly indebted to St George pursuant to the mortgage in an amount greatly in excess of the amount claimed". 35 The written submissions continued that when the agreement was made it was clear that each contemplated that it would only be operative in circumstances where the property had been sold, from which it followed that the parties were well aware that it would never "come to pass that there would actually be an order for possession made in favour of St George". Further, the parties were aware that there would be no express finding that St George was entitled to possession. 36 Mr Newlinds continued that whatever the parties intended by the phrase "is found to be entitled to possession", they did not intend it to be limited to a circumstance where St George obtained a formal order for possession or a finding of an entitlement to such an order. This, in my opinion, was the natural meaning to be given to those words, particularly in the context in which they appear. What was being said was: if St George cannot recover under the Guarantee, but for some reason is found to be entitled to possession, it can retain the money paid. This was a fall back position if the Guarantee claim failed, but it was made dependent on a finding of an entitlement to possession. His submission was that the words would be satisfied if there was a determination that the mortgage was valid and that Mr and Mrs Wallis were in default under it. He submitted that the parties "clearly distinguished" between the issues litigated in relation to the Guarantees and "what was obviously seen as a separate contest" concerning the mortgage and described as "an entitlement to possession". But there was no pleaded "separate contest" about payment under the covenants in the mortgage and one is unaware of what defences Mr and Mrs Wallis may have raised in relation to its enforceability. Certainly Beazley JA in her judgment in the Court of Appeal, albeit probably obiter dictum, shows that there are possibly defences to a monetary claim under the mortgage. 37 He continued:- "Properly construed the agreement between the parties means that St George is entitled to retain the moneys if it can be demonstrated that there has been findings that would, if the property had not been sold, have entitled St George to possession."

[23]

It is therefore clear that by the time of the hearing St George had given up any rights under the mortgage in so far as they affected the property. 41 Finally, far from any finding being made that St George was entitled to possession, the Court of Appeal made an order dismissing with costs its proceedings for possession. 42 In the result there has been no finding, nor in my opinion could there have been, that St George was entitled to possession of the property. That was the condition St George imposed for the entitlement to retain the money paid to it, the reasoning probably being that in lieu of an entitlement to possession, St George should be entitled to retain the money it would have obtained by enforcing its rights on taking possession. But the entitlement to possession was predicated upon a finding and, as I have said, no such finding was made nor, in my opinion, could it have been. 43 I also consider, that in the way in which the case was conducted, it would be quite wrong to give effect to the construction for which Mr Newlinds now contends. I have set out what I was advised at the commencement of the hearing. Those representing Mr and Mrs Wallis were entitled to assume that the proceedings were being conducted on that basis. No suggestion was ever made that findings were being sought to support, in some way, a finding of entitlement to possession, so that the agreement evidenced by the letter of 26 July 1993 would entitle St George to retain the money Mr and Mrs Wallis paid to it. Indeed no reference was made to that letter. I do not overlook that I said that an issue was St George's entitlement to retain the benefit of that money, but that was in the context of whether St George succeeded on the Guarantee issue before me. A Court is entitled to have all passages in a judgment read in context. Further, it must be appreciated that when I made orders, I was not asked to make any order that St George was, or would have been in certain circumstances, entitled to possession of the property. The declaration I made was consequential upon what I considered to be St George's entitlement as a result of its success in the Guarantee proceedings as I had recorded at p.597. 44 For these reasons I consider that St George has not established that the letter of 26 July 1993 has the effect for which it contends. The condition necessary to entitle it to retain the money has not been established and, accordingly, Mr and Mrs Wallis are entitled to have the money repaid. 45 Although there are assertions as to the liability of Mr and Mrs Wallis under the mortgage to St George, these have not been established and, as I have pointed out, firstly, the Court of Appeal expressly refused to allow St George to amend to bring any such case, and, secondly, it is not apparent that Mr and Mrs Wallis do not have a defence to any monetary claim founded on the mortgage.

[25]

Are The Proceedings Properly Constituted? 48 There has been a dispute between the parties as to whether these proceedings should go forward by way of a Notice of Motion, or whether Mr and Mrs Wallis should have started substantive proceedings. It was submitted by Mr Newlinds that had this been done St George could have cross-claimed and sought other relief. The two main heads of relief, as I understand it, would have been to claim under the mortgage, a right to pursue which the Court of Appeal had refused, and for rectification of the agreement. 49 At the outset I think it appropriate to say that there is nothing which would have precluded St George from bringing its own proceedings for either of those heads of relief. Further, when the Notice of Motion came before me for directions I ordered that there be Points of Claim and Points of Defence. There was no suggestion made then that St George should be entitled to bring forward a cross-claim, notwithstanding that I had required a pleading regime. None-the-less, there was continuing correspondence between the parties, which is Exhibit G, about the form of the proceedings. Suffice to say that no steps were taken by St George to dismiss the Notice of Motion and, in so far as St George complains that it may not be able to appeal against this decision because the proceedings were by way of Notice of Motion, a Statement of Agreed Facts, Exhibit H, was provided. Whilst the parties may have come to that agreement I say nothing about its binding effect upon the Court of Appeal. However, I would assume, without being in any way presumptuous, that the Court of Appeal would wish to bring these proceedings to as expeditious and cheap conclusion as possible. 50 The circumstances in which a Notice of Motion may be used were considered by McLelland J in Phillips v Walsh (1990) 20 NSWLR 206. In that case a plaintiff sought relief in relation to an estate and, on 19 July 1989, a final order disposing of the proceedings was entered. On 30 March 1990, the plaintiff filed a Notice of Motion seeking substantive orders in relation to accounts and the delivery of statements of assets and, by a Notice of Motion filed on 5 June 1990, the defendant sought to have it dismissed or struck out. The primary ground on which that relief was sought was that none of the orders in the plaintiff's Notice of Motion could be properly sought in the present proceedings, which came to an end when the final order was made. The plaintiff relied upon Part 19 rule 1, which provides:- "An interlocutory or other application, in or for the purposes of or in relation to proceedings commenced by statement of claim or by summons, shall be made by motion." 51 The plaintiff submitted that the relief sought in her Notice of Motion was "in relation to" the original proceedings because both related to the administration of the same estate. 52 His Honour held that it was not the purpose or effect of Part 19 rule 1 to prescribe the kinds of applications which could be made in existing proceedings, but rather the way in which applications in existing proceedings are to be made, namely by motion. He considered that the question whether any application could properly be made in existing proceedings is to be determined according to general principles as modified by any relevant statutory provisions. He identified one principle as being that when proceedings have been disposed of by a final order, which has been entered, they are at an end and cannot be revived. He continued, pp.209-210:- "There are a number of exceptions and qualifications to this principle but none that has any relevance to the present application, unless it be that subsequent to a final order application may be made for the purpose of dealing with a matter involved in, or arising in the course of working out that order; for example, by making more specific provision for its implementation or by modifying its operation to take account of some subsequent change of circumstances or by enforcing it. This exception or qualification does not, however, extend to an application made for the purpose of giving substantive relief not sought in the statement of claim or which is substantially different to that given by the final order ..".

[28]

He concluded that it was an appropriate case for the Court to deal with the matter on motion. 57 In Darling Downs there was an agreement to settle proceedings with which one party refused to comply. The majority decided that the particular provisions of the Federal Court of Australia Act 1976 led to the conclusion that ordinary ancillary powers to enforce the compromise were intended to be vested in the Court: p.521. 58 In my opinion it is necessary in any given case to consider whether it is appropriate on the facts, to allow proceedings to go forward by way of motion. The factors making it appropriate in the exercise of the Court's discretion to do so in this case are that the matter is within the ambit of the original proceedings, the matter of substance is confined to an issue of construction on basically uncontradicted facts, and the interests of justice certainly favour a conclusion of these long drawn out proceedings without delay. The order I have been asked to make arose clearly from the concession made by St George before me and noted at p.597 of Exhibit B that if Mr and Mrs Wallis succeeded, which they did, they were entitled, subject to the operation of the proviso, to be repaid the money they had paid. If I may say so with great respect, it seems to me that once the Court of Appeal held that Mr and Mrs Wallis were entitled to succeed and once it was drawn to their Honours' attention that there was the agreement to which I have referred, that Court would, generally speaking, have concluded the matter by giving effect to the agreement. Ample opportunity was afforded to St George to place before the Court of Appeal any reasons why effect should not be given to it, but St George did not seek to avail itself of it, and provided no explanation of what had been said to me. 59 The point before me is quite short. It depends upon the construction of the agreement into which St George has admitted it entered in the circumstances which occurred. St George has argued the matter on the basis that the agreement should be construed in a manner which would entitle it to succeed. That argument has been rejected by me. 60 St George has also submitted that by following this course it has suffered two potential detriments. The first is that it may not be able to appeal against my decision. I have referred to Exhibit H. The second is that it could not bring a cross-claim for relief under the mortgage or, alternatively, for rectification. As I have noted, I ordered pleadings and, at that time and at no time thereafter, did St George seek to bring a cross-claim raising the points it now wishes to ventilate. It seems to me that the claim under the mortgage, in the light of the Court of Appeal's decision not to allow that claim to be pursued before it, may well have been doomed to failure in any event. That would have left the rectification question, although that is not an issue which St George has ever attempted to bring forward by way of a cross-claim. 61 It seems to me that once I ordered pleadings, it was clearly open to St George to assert an entitlement to bring forward any other claims. This it failed to do and, in all these circumstances, I am satisfied that the proper exercise of discretion is for me to take the course which I consider to be the appropriate one of upholding Mr and Mrs Wallis' claim. 62 In my opinion the matters raised by the present Notice of Motion are sufficiently within the ambit of the proceedings as originally constituted, such that effect can be given to the particular term of the agreement between the parties, being the term in the letter of 26 July 1993. The situation is, of course, quite different from that which confronted the Court of Appeal in Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691.

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