Webuildem Pty Ltd v Arab Bank Australia Ltd

Judgment 1ALLSOP ACJ: I will ask Justice Barrett to deliver the first judgment. 2BARRETT JA: The applicants are Webuildem Pty Limited, Maroun Investments Pty Limited, Mr Rahme and Mrs Rahme. They seek leave to appeal against an order of Justice Black of 27 June 2012 refusing to stay certain orders made on 8 March 2012 in Corporations List proceedings. 3Those proceedings were commenced in November 2011. They were listed for hearing for three days commencing on 7 March 2012. The parties reached a settlement on the first day. The settlement was recorded in orders made on 8 March, some of which are referred to as "the escrow orders". All such orders were recorded as consent orders. 4The applicants were the defendants in the Corporations List proceedings. Webuildem was a borrower from Arab Bank Limited. The other defendants (present applicants) were guarantors of Webuildem's indebtedness. Both Webuildem and the several guarantors had given security to Arab Bank for Webuildem's indebtedness. 5The plaintiffs (present respondents) were Arab Bank and Mr Weston and Mr Young, receivers it had appointed pursuant to the securities it held from the owners of the security properties. 6The Corporations List proceedings were, as I have said, commenced in November 2011. They arose from disputes about the state of the indebtedness of Webuildem to the bank and in more general terms the rights and obligations in respect the secured finance facility provided by the bank. The early March 2012 settlement, on its face, was on the basis that the bank would withdraw its receivers and allow Webuildem and its guarantors time within which to obtain replacement finance to pay out the bank debt, with full access to the mortgaged property being available to Webuildem for this purpose. 7The deadline for this was fixed as 12 June 2012 and, if that deadline was not met, the bank was to be at liberty to enforce its security and recover indebtedness quantified at an agreed sum of $23,721,717.20. This last aspect was provided for in the escrow orders which had been made on 8 March 2012 but were not to be entered unless and until there was default by Webuildem under the settlement arrangement. 8On 6 June 2012 - six days before the deadline - Webuildem asked the bank for an extension of time to 14 August 2012. This was not granted and, on 12 June 2012, Webuildem and the guarantors filed the interlocutory process which Black J dismissed on 27 June. The principal relief sought in that interlocutory process in the form in which it was ultimately argued was a stay of the escrow orders until further order. 9Upon the hearing of the interlocutory process, the applicants put forward various matters in support of the proposition that the escrow orders should be stayed until further order. 10The first matter was alleged delay by the bank in notifying withdrawal of the receivers in the sense that notification was not made in a timely fashion having regard to the terms of settlement. This, it was said, hindered the applicants' attempts to obtain refinancing. The judge did not accept this. He noted that he had no evidence of the effect of any delay and that on the material before him there was no attempt by the applicants to obtain refinance until 7 May 2012, that is, two months after the settlement. 11The second matter put forward by the applicants in support of the application for a stay was a demonstrated ability to refinance within a fairly short time based on Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd [2011] NSWCA 39. The applicants submitted that that was sufficient to warrant an embargo on enforcement action by the bank. 12The judge made three points about this: first, that according to Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; (1972) 126 CLR 161, a mortgagor normally cannot expect to stay the mortgagee's hand unless it has paid into court the sum calculated by the mortgagee to be due; second, that the period of ten weeks put forward by the Webuildem parties was not a "fairly short period" in the Bayblu sense; and, third, that it had not been shown that Webuildem had in any event demonstrated the requisite financial capacity. This, as Mr Hutley SC, counsel for the respondent, pointed out, is borne out by evidence of indicative financing proposals received, loan to valuation ratios they indicate and the values of properties that is put forward by the applicants themselves. 13The third matter relied on by the applicants in support of the stay application before Black J was that the bank had misrepresented the indebtedness and that the escrow orders had been procured by misrepresentation so that rescission was available. 14The judge rejected this because intervening events, particularly the withdrawal of the receivers, meant that restitutio integrum was not possible. There was obvious strength to that point. There was also the significant point that there was a well-ventilated dispute between the parties on the subject of quantum. The bank considered a sum of more than $23 million - the precise sum it had calculated - to be involved. The applicants maintained that the correct figure was some $1.585 million less than the figure for which the bank contended. Each position was openly asserted and explained. There was no apparent basis for thinking that there was any cloaking or misrepresentation of what either party considered to be the true position. 15In connection with the misrepresentation allegation, the judge rejected the tender by the applicants of a report of an expert which went to the question of correct calculation of the indebtedness. He did so on the basis that reliance by the applicants on the report would have prejudiced the bank by putting it in a position of either being unable to lead evidence in response or requiring an adjournment which would delay the determination of the application and leave the bank unable to appoint a receiver for a longer period. The report was served only a short time before the hearing and the bank, as his Honour saw it, had no opportunity to come to grips in any meaningful way with its content. 16Also, and in any event, it appeared that the calculations in the report took account of interest on a "prompt payment basis" whereas in fact there may well not have been "prompt payment". The reliability of the report - based as it was upon assumptions that, at a prima facie level, were at odds with the reality of the situation - was therefore highly questionable. In other words, the rejected material was at best of highly questionable probative value because of factual underpinning. Added to this was the point, of course, that in their compromise of 8 March 2012 the parties had agreed the amount of the debt at $23,721,717.20 for the purposes of security enforcement by the bank under the escrow orders. 17The fourth basis for the stay application was that the consent orders were obtained under duress and that the applicants were "directed" to sign by their then senior counsel contrary to the advice of their solicitor who had refused to sign. 18The judge properly described this as a serious allegation. It was obviously one that could not be dealt with in the context before the judge at the time. His Honour decided, in any event, that there was no need for him to decide whether duress could be established. This was because in the view he took the settlement should not be set aside for duress if the other party had no actual knowledge of facts indicating undue influence. He cited in that regard Tresize v National Australia Bank (1994) 50 FCR 134. 19The fifth basis on which the application for a stay was made was that Mrs Rahme did not authorise her husband to sign the terms of settlement for her. His Honour held that the signing by counsel was sufficient, noting that the applicants did not in terms contest the authority of their former senior counsel to sign on behalf of all of them including the individuals in question. 20On the application for leave to appeal now before the Court the applicants really did no more than to reiterate the arguments upon which they had relied before the primary judge. Their proposed grounds of appeal cover essentially the same territory in essentially the same way. 21I think it is significant that, as the primary judge made clear at para 2 of his reasons, he approached the stay application before him as a true interlocutory application. This was entirely consistent with the way in which it was framed and presented. His Honour was concerned to see whether in relation to each matter raised a serious question to be tried had been shown. He also referred where appropriate to the balance of convenience. This, as I have said, was consistent with the nature of the stay application as framed and presented, that is, as an application for a stay until further order. 22But although the possibility was flagged in the interlocutory process before Black J, the applicants had not in fact initiated any claim for final relief. They sought relief until further order in the fashion appropriate to the maintenance of the status quo pending trial but did not seek to create any platform for eventual determination of the question whether final relief should be granted. Logically in the circumstances and having regard to the matters raised before the primary judge, that platform would have taken the form of a suit for rescission of the settlement agreement and the consequential setting aside of the consent orders. The proceedings commenced in November 2011 had, of course, been disposed of by the settlement of 8 March 2012. Only if a rescission suit or some like proceeding were initiated in the way I have mentioned would substantive cause of action be delineated so as to define dimensions within which it would be possible to judge whether there was a serious question to be tried and where the respective detriments relevant to the balance of convenience or balance of hardship actually fell. 23As Gleeson CJ observed in Australian Broadcasting Corporation v Lenah Game Meats [2001] HCA 63; (2001) 208 CLR 199, the proposition that there is a freestanding right to interlocutory relief is a contradiction in terms. As Mr Hutley pointed out, the applicants will be in a position to make whatever interlocutory application they think fit if and when they do institute a suit. 24This fundamental matter is sufficient, to my mind, to dispose of the present application. In the absence of any claim for final relief there was no basis for the grant of any stay until further order that the judge in fact refused. 25I would add that if one looks beyond that matter and to the merits as canvassed in the judge's reasons and in submissions made on both sides to this Court, very formidable obstacles lie in the path of the applicants. These are succinctly set out and explained in the written submissions of Mr Hutley and Mr Koch which will be retained in the court file. Of particular force is the consideration that the mortgagor has not, it appeared, made any move whatsoever to tender money or to make any payment into court. 26The prospects of a result on appeal different from that reflected by Black J's orders of 27 June 2012 are in my opinion negligible. I propose that the application for leave to appeal be dismissed. 27ALLSOP ACJ: I agree. I would add the following reasons. 28 The three substantive attacks made upon the settlement arrangement were lack of authority, duress and misrepresentation. 29The lack of authority attack made before the primary judge in the interlocutory hearing was on the basis of the proper construction of the instrument. There was some suggestion in some of the argument before this Court of a wider attack but ultimately we are reviewing the approach of the primary judge which was one restricted on this issue to the proper understanding and construction of the settlement agreement, it being conceded before him that Mr Murr did not have any limitation of authority. It may be in the future that some case upon proper instructions can be mounted on a lack of authority but that can form part of any substantive action impugning the validity in law of the settlement arrangement. For the reasons given by the primary judge and Justice Barrett I do not think that there is any serious question or prima facie case about the construction of the settlement agreement legal representatives signed. He was not signing for himself, he was not signing, one would have thought, for any reason of comfort. There is not any real basis in my view to think that there would be a successful appeal on the restriction of the instrument in the way argued for. 30As to duress, the fundamental underlying evidence put before the primary judge was. to put it as highly as it could be in my view, of marginal weight in a conclusory fashion, but more importantly as the primary judge and Justice Barrett indicate, there is no evidence of the bank being on notice of any duress should it have existed. This was not a settlement between a bank and domestic parties in relation to private, non-commercial dealings. The totality of the background would indicate sophisticated commercial parties in dispute with their commercial financier. The whole of the context would tend to tell against the likelihood of success of the claim. I would add that (if this has not already occurred) by the putting of the matter in issue, the claim would need to be propounded on the basis of the complete waiver of the legal professional privilege involved in the settlement. 31Thirdly, misrepresentation: There was really, with respect, no coherent case put forward to the learned primary judge or this Court as to an evidential foundation for a misrepresentation case based upon the amount owing or said to be owing to the bank. As has been indicated, this was one of the matters which had agitated the parties in the substantive suit. Pursuant to directions given in the Division, evidence had been brought forward by both parties to deal with the matter. It appears that the issue was one on that evidence brought forward prior to March of a dispute in the order of a million and a half dollars. That could well be seen to be one matter of compromise for the arrangements which were then put in place in March, that is the removal of the receivers and the giving of a period of reasonable commercial opportunity to refinance. To say that the applicant entered into a settlement of a dispute which included as an aspect of it how much was owed to the other side, on the basis of a misrepresentation by the statement by the other side as to how much was owed, has its own inherent difficulties. Those inherent difficulties were not assisted by the fact that no evidence of any coherent kind was led to throw the natural conclusions of the nature of the dispute into doubt. 32The real issue in my view as to restitutio integrum was the fact that a legal case had been settled and that reality of what would have occurred simply cannot be entered back into. To the extent that his Honour may have looked at restitution from a slightly different perspective, I am not sure that I entirely agree with him, however one way of understanding the way his Honour viewed restitution was as I have indicated. In any event, as his Honour made clear in his reasons immediately prior to dealing with restitution, there was really no evidence of any weight to amount to a credible claim that these applicants, in fighting the bank about how much they owed the bank and in settling on the sum they did, relied on what the bank told them about what they said, that is what the bank said was owed. 33As there was no coherent articulation of either a duress claim capable of touching the bank, nor of a misrepresentation case, subject to the slight qualification that I have mentioned about restitution, in my view, there is no basis to consider that his Honour approached these fundamental questions in any way incorrectly. 34Significant weight was put on the fact that the value of the security is said adequately to cover the loans. That is not a basis to hold a commercial secured creditor out of its lawful entitlement. Further, the evidence before the primary judge for the refinancing could be described in the context in which it appeared as less than persuasive. That context included, as has been said, the failure, through either unwillingness or inability, to bring any money into court to hold the position. 35For those reasons and for the reasons of Justice Barrett, the orders of the Court are that the application for leave to appeal be dismissed with costs. [Discussion and orders as to the question of a stay.]