Woodman v Australian and New Zealand Banking Group Ltd

Application for Summary Judgment

1. By notice of motion filed on 19 December 2019, ANZ Bank sought summary judgment against Ms Woodman pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). ANZ Bank relied on affidavits by Ms Fiona Venuto, Mr Richard Lewin and Ms Jenny Luu dated 23 November 2018, 19 December 2019, and 25 March 2020 respectively. Ms Woodman relied on an affidavit made by her on 13 March 2020. Written submissions dated 25 March 2020 were filed on behalf of ANZ Bank and written submissions dated 25 March 2020 were filed on behalf of Ms Woodman by her solicitors. The parties agreed that the motion for summary judgment could be determined on the papers.
2. In her affidavit of 13 March 2020, Ms Woodman said that, in the period prior to 10 October 2016, she was negotiating a division of the assets of her marriage with Mr Whitehall and, at that time, anticipated that that would result in her unencumbered ownership of the Property. She also said that, in the period up to and including 10 October 2016, she did not sign any document in relation to, or giving rise to, the dealings between ANZ Bank and Mr Whitehall. She said that she was not aware of those dealings and was never contacted by ANZ Bank in relation to its dealings with Mr Whitehall.
3. On 27 March 2020, after considering the written submissions of the parties, the primary judge requested that further submissions be provided in relation to the assertion that ANZ Bank was not entitled to be subrogated to the rights of Perpetual under the Perpetual Mortgage because of "carelessness or laxness" on its part, which Ms Woodman claimed gave rise to a triable issue. His Honour pointed out that Ms Woodman's defence contained no allegations to that effect. That prompted Ms Woodman to file a notice of motion on 31 March 2020 seeking leave to file an amended defence. By the proposed amendment, Ms Woodman sought to respond to paras 20 and 21 of the Statement of Claim by repeating her responses to paras 8, 10 and 15 and saying that, because ANZ Bank was careless and lax in its dealings with Mr Whitehall, ANZ Bank has no entitlement to the relief claimed against her. Further written submissions dated 31 March 2020 were filed on behalf of Ms Woodman in support of her application to amend her defence.
4. Ms Woodman was represented by solicitors in connection with both ANZ Bank's motion for summary judgment and her motion for leave to amend her defence. Her written submissions of 25 March 2020 and 31 March 2020 were made by her solicitors.
5. ANZ accepted that, in order to succeed on its application for summary judgment, there must be evidence of the facts upon which its claim was based and that it must show that Ms Woodman's defence was clearly untenable such that it could not possibly succeed. ANZ Bank submitted that it was a settled principle that a lender will be entitled to be subrogated to the rights of a prior secured creditor where that lender has paid out the prior secured creditor with the expectation that the lender would obtain security and the lender has, for some reason, not received the security bargained for. [2] ANZ Bank submitted that, in so far as Ms Woodman appeared to raise a defence, the defence was untenable.
6. Ms Woodman opposed ANZ's application for summary judgment on the ground that there were triable issues of law and fact. Ms Woodman also asserted that the proceedings against Mr Whitehall should be heard at the same time as the proceedings against her and that, accordingly, summary judgment against her should not be considered at that stage.
7. The submissions filed on behalf of Ms Woodman asserted that there was a triable issue of fact as to the possibility that Ms Woodman would have obtained unencumbered ownership of the Property following a division of the assets of her marriage to Mr Whitehall. Thus, the submissions asserted, any benefit that ANZ Bank alleged had been obtained by her was a benefit that she otherwise stood to acquire had ANZ Bank not undertaken its dealings with Mr Whitehall. On the other hand, the submissions made no reference to the manner in which the debt to Perpetual would have been discharged by Mr Whitehall without recourse to the Property as security.
8. Ms Woodman also contended that, where there are multiple parties, it was desirable that all parties be heard generally together. In addition, she asserted that the case was not one of a knowing receipt of the benefit of the loan from ANZ Bank to Mr Whitehall and that she could not have acted unconscionably because she had no dealings with ANZ Bank and was not aware of any intention on its part to obtain security over the Property.
9. ANZ Bank submitted that, in so far as Ms Woodman appeared to raise a defence, the defence was untenable. It said that the fundamental difficulty facing Ms Woodman was that she had received the benefit of the funds advanced by ANZ Bank, which had discharged a debt that was owed by her to Perpetual and was secured over the Property. ANZ Bank contended that those circumstances meant that there was no arguable defence available to Ms Woodman, since she would profit unconscionably were she to be relieved of any obligation to pay to ANZ Bank the amount that it had paid to Perpetual. ANZ Bank's submissions did not address the contention advanced on behalf of Ms Woodman that any benefit that she had obtained by reason of the payment to Perpetual was a benefit that she otherwise stood to acquire from Mr Whitehall had ANZ Bank not undertaken dealings with him.

Reasons of the Primary Judge

1. The primary judge dealt first with Ms Woodman's notice of motion seeking leave to amend her defence. His Honour considered that the substance of the proposed amendment was an allegation that ANZ Bank was careless and lax in its dealings with Mr Whitehall. His Honour observed that, although no particulars of that carelessness or laxity were provided, it appeared that the carelessness alluded to by Ms Woodman was carelessness in detecting or otherwise preventing the alleged fraud of Mr Whitehall, as a result of which ANZ Bank was unable to register the ANZ Mortgage. However, his Honour said, without particulars, ANZ Bank would be unable to identify how and in what way it was said to be careless and lax. His Honour accepted that no substance was given to the allegation and that the allegation was embarrassing and would be liable to be struck out if the defence were amended. In those circumstances, his Honour concluded that it would not be appropriate to grant leave to amend the defence to raise the allegation. Accordingly, his Honour ordered that Ms Woodman's motion of 31 March 2020 be dismissed with costs.
2. The primary judge then considered the application for summary judgment. His Honour observed that the payment out of a prior security is one of the well-recognised areas in which the doctrine of subrogation operates. Thus, where a third party pays off a mortgage, that party is presumed, unless the contrary appears, to intend that the mortgage shall be kept alive for the benefit of that party. [3] That principle is based on Equity's concern to prevent one party obtaining an advantage at the expense of another that, in the circumstances of the case, would be unconscionable. The conscience of the mortgagor in such circumstances should be affected so as to cause the mortgage to be kept alive. A third party is so entitled to keep a pre-existing mortgage alive when that party advances the money to pay out the mortgage on the understanding that security would be provided for such advance upon the mortgage being paid out. [4]
3. The reasons why a lender's anticipated security may not have been forthcoming so that he seeks to invoke subrogation are various. Examples include the lender's ineptitude: the fact that the lender's failure to obtain the security for which he bargained was attributable to his negligence is irrelevant and does not prevent the lender from claiming subrogation where there has been a benefit to the mortgagor at the expense of the lender. [5]
4. The primary judge observed that ANZ Bank dealt with Mr Whitehall throughout on the basis that any loan made to him would be secured by a registered mortgage over the Property and that a registered mortgage over the Property was the bargained for security. ANZ Bank advanced funds that enabled the Perpetual Mortgage to be paid out but without receiving the security that it had been promised. His Honour considered that it was well recognised that the doctrine of subrogation operated on the basis that it would be unconscionable for Ms Woodman, who, as mortgagor, has obtained the benefit of being relieved of her obligation to repay Perpetual by dint of ANZ Bank's payment to Perpetual, to deny ANZ Bank's claim to have the Perpetual Mortgage kept alive for its benefit. His Honour said that that principle operated notwithstanding the fact that there were no dealings between Ms Woodman and ANZ Bank. [6]
5. The primary judge said that it was not relevant that the failure to obtain the bargained for security might have been attributable to negligence on the part of ANZ Bank, assuming such negligence were to be established. In any event, his Honour said, Ms Woodman had not clearly identified the asserted carelessness or laxity on the part of ANZ Bank either in her defence or proposed amended defence or otherwise. His Honour held that, even if conduct of that nature had occurred and caused the bargained for security not to be obtained, that would not stand in the way of ANZ Bank's claim to be subrogated to the rights of Perpetual. His Honour distinguished this case from a case where the security bargained for was obtained by the lender but subsequently lost due to negligence on the part of the lender. [7] In such a case, the lender receives what was bargained for and there is at that stage no unconscionable benefit to the mortgagor. The subsequent loss of security has nothing to do with the discharge of the original indebtedness owing to the original mortgagee.
6. The primary judge accepted that it was not necessary to show that a mortgagor who received the benefit of the discharge of obligations owing under the mortgage had been guilty of any wrongdoing or misconduct. Rather, the entitlement to subrogation rests upon the notion of an unconscionable denial of the lender's claim to the benefit of the prior security. His Honour also distinguished the case from one where similar issues might be raised as against different defendants, and said that there was, in effect, no overlap between the claims of ANZ Bank against Mr Whitehall and its claims against Ms Woodman.
7. The primary judge also referred to Ms Woodman's assertion that there was a possibility that she might have obtained unencumbered ownership of the Property following a settlement with Mr Whitehall. His Honour did not accept that the possibility that Ms Woodman might have obtained unencumbered ownership of the Property through a settlement with Mr Whitehall raised a triable issue that was relevant to the question of whether or not ANZ Bank had made out its case for subrogation. His Honour did not see how that could possibly give rise to a defence to the claim for subrogation and observed that it was not explained how that possibility was precluded by the transaction that involved ANZ Bank paying out the Perpetual Mortgage. His Honour did not see how that matter could go to the "proportionality and fairness" of the relief sought by ANZ Bank. Rather, his Honour said, the ANZ Bank Perpetual Payment relieved Ms Woodman of an obligation owed by her to Perpetual that was secured by the Perpetual Mortgage. His Honour said that the remedy afforded by the principle of subrogation is designed to put ANZ Bank in the secured position in relation to the ANZ Bank Perpetual Payment that it expected to be in, but not so as to disadvantage Ms Woodman. Accordingly, his Honour said, the relief would be limited to subrogation to secure to ANZ Bank the amount of the ANZ Bank Perpetual Payment that discharged the obligation owed to Perpetual by Ms Woodman, and no more.
8. The primary judge was satisfied that the pleadings and the evidence adduced by ANZ Bank left little doubt that UCPR 13.1(1)(a) and UCPR 13.1(1)(b) had been satisfied. That is to say, there was evidence of the facts on which ANZ Bank's claim was based and there was evidence in the belief of a responsible person giving the evidence that Ms Woodman has no defence to the claim. His Honour then observed that the power to give summary judgment is one that must be exercised sparingly and with exceptional caution and that the power should only be exercised in the clearest of cases, where there is a high degree of certainty about the ultimate outcome if the matter were allowed to go to trial.
9. Thus, the primary judge considered that the strength of ANZ Bank's case against Ms Woodman, based as it was upon clearly established or admitted facts, was within one of the well-recognised areas where the doctrine of subrogation operates. His Honour considered that the case was a clear one, where ANZ Bank would be certain to succeed were the matter to go to trial in the ordinary way. His Honour considered that Ms Woodman had not shown that there existed a triable issue of fact or law that gave rise to an arguable defence and that, even if some negligence on the part of ANZ Bank caused it to fail to obtain its bargained for security, that would not amount to a defence to its claim to be subrogated to the rights of Perpetual and that even a defence amended so as to raise a properly formulated allegation of carelessness or laxity on the part of ANZ Bank could not possibly succeed. His Honour therefore concluded that it was appropriate to give summary judgment in favour of ANZ Bank against Ms Woodman.

Leave to Appeal

1. Leave to appeal is required because the orders for summary judgment were interlocutory. Ms Woodman asserts in a ground of appeal that the case is of "great public exceptional importance". She asserts that judgment was given for ANZ Bank at first instance "because the elements of the defence being the true facts, evidence and principles were not provided properly in correctness or entirely, due to an incompetent counsel". There is nothing of public importance in the issues raised by the draft notice of appeal.

Proposed Grounds of Appeal

1. By her proposed notice of appeal, Ms Woodman seeks to raise numerous grounds of appeal. The first six grounds are concise although, with one exception, are unspecific in referring to any error on the part of the primary judge. There are several additional grounds, which are somewhat discursive and argumentative and are in the nature of submissions.
2. The exception in the first six grounds is ground 2, which asserts that the primary judge erred in finding that the principles espoused in Highland v Exception Holdings Pty Ltd (in liq) (2006) 60 ACSR 223; [2006] NSWCA 318 do not apply to actions that cause a bargain for security in favour of a lender not to be obtained. That contention is taken up in additional ground eight, which asserts that ANZ Bank had no legal obligation to pay Perpetual and therefore was a volunteer and is not entitled to equitable subrogation because it had no moral or legal duty to pay Perpetual directly for Ms Woodman. Those questions were addressed in some detail by his Honour. It is not possible to discern any error in his Honour's reasoning. Those questions were resolved in accordance with well-established authority.
3. The essence of the first additional ground is that Ms Woodman's legal representation was "flagrantly incompetent" and in defiance of and without proper instructions, giving rise to a miscarriage of justice. It asserts that Ms Woodman's legal representatives did not competently represent or convey to the Court the correct facts, available evidence and corresponding principles that were the basis of Ms Woodman's defence. There is no evidence to support this ground.
4. The second additional ground is that "the hearing" was "under covid restrictions and was required to be on paper with a court book and not in person". Ms Woodman asserts that, although they were requirements at the time, it was a disadvantage for the primary judge and affected his ability to make a fair, equitable and correct decision. There is no substance in this ground.
5. Additional ground five is that the primary judge "indicates unclearness" but still directed the entry of summary judgment in favour of ANZ Bank. Ms Woodman refers to the observation made by his Honour that, "whilst not clear" it appeared that the carelessness relied upon by Ms Woodman may be carelessness in detecting or otherwise preventing the alleged fraud on the part of Mr Whitehall. However, it is clear that his Honour dealt with the matter, in the alternative, on the assumption that there had been fraud on the part of Mr Whitehall and concluded, consistently with sound authority, that that was not a defence to subrogation in circumstances where Ms Woodman received the benefit of the discharge of her obligations to Perpetual.
6. Additional ground six asserts that the primary judge wrongly assessed the evidence adduced on behalf of ANZ Bank. There is no basis for complaint about the adequacy of the affidavits relied upon by ANZ Bank in the application for summary judgment.
7. Additional ground seven asserts that the case was not suitable for summary judgment, in circumstances where there were multiple parties. The primary judge adequately dealt with that contention in his Honour's reasons and correctly rejected it.
8. Additional ground nine refers to mistakes on the part of ANZ Bank in lending money to Mr Whitehall. Ms Woodman asserts that a requirement of subrogation is that the person being substituted must have an interest in the property to which the mortgage relates whereas Mr Whitehall at no stage had any interest in the Property and therefore ANZ Bank could not claim rights by subrogation. However, the ground overlooks the fact that it was the rights of Perpetual to which ANZ Bank claimed to be subrogated. Clearly, Perpetual had an interest in the Property.
9. Additional ground 11 is that, under the true principles of subrogation, a person can only recover what it has paid. Ms Woodman asserts that she did not contribute towards or cause ANZ Bank's loss, which was caused by Mr Whitehall and ANZ Bank itself. That ground appears to lead nowhere in the light of the principles stated above.
10. Additional ground 13 appears to be that the loan agreement between ANZ Bank and Mr Whitehall was void, invalid and unenforceable. That appears to be irrelevant to the question of subrogation.
11. The final ground is that subrogation depends upon the facts, relationships and circumstances of the particular case and that the primary judge only applied the law based on the "inapt facts, defence, evidence and submissions" provided by [Ms Woodman's] incompetent counsel. Therefore, his Honour could not properly consider all of the correct legal principles in accordance with "the full facts of the case". There does not appear to be any separate substance in this ground.

ANZ Banks' Negligence

1. The theme that was emphasised by Ms Woodman in her oral address, which appears in her defence and proposed amended defence, in her written submissions to the primary judge and in her proposed grounds for appeal, is that the alleged negligence and laxity of ANZ Bank, in parting with funds by way of loan to Mr Whitehall on the basis of forged documents received from Mr Whitehall, deprived her of the opportunity of having Mr Whitehall discharge her indebtedness to Perpetual without recourse to the Property. The funds advanced to Mr Whitehall were applied in repaying the indebtedness of Ms Woodman to Perpetual. The question is whether there is any basis for contending that there may have been a causal connection between the alleged negligence of ANZ Bank and the loss by Ms Woodman of the opportunity of having Mr Whitehall discharge her indebtedness to Perpetual without recourse to the Property.
2. Thus, additional ground four is that the primary judge did not know that there were two separate independent agreements and that they were exclusive of each other. The first agreement was between Ms Woodman and Mr Whitehall, whereby Mr Whitehall paid Ms Woodman's mortgage to settle a previous debt such that Ms Woodman became the unencumbered owner of the Property. The second agreement was between Mr Whitehall and ANZ Bank, the terms of which were unknown to Ms Woodman. The difficulty with this ground is that there is no hint of any agreement between Ms Woodman and Mr Whitehall in the defence and no evidence other than the bald assertion in Ms Woodman's affidavit that in October 2016 she was negotiating a division of the assets of her marriage with Mr Whitehall and, at that time, anticipated that that would result in her unencumbered ownership of the Property.
3. Additional ground 12 asserts that Ms Woodman did not unconscionably profit because of the agreement between her and Mr Whitehall. There has been no particularisation of any such agreement and no such agreement was pleaded.
4. In her oral address to this Court, Ms Woodman said that she believed that the Property was unencumbered. When asked why she had that belief, she said that Mr Whitehall told her that he would organise to pay out the Perpetual loan "in accordance with a debt that he had with me". She said that the Perpetual loan was forced into arrears because Mr Whitehall was "hiding and controlling money of mine" and that that could now be proven. She said that it was evidenced by large payments actually made to Perpetual "towards the end of the loan". Ms Woodman said that Mr Whitehall told her that "it was coming from his father" but that she had now been told that his father "didn't actually make that money" and that it was coming from money that Mr Whitehall was withholding. Ms Woodman said that Mr Whitehall owed her money and that he was going to clear the debt that he had. Later, Ms Woodman asserted that, if ANZ Bank had not advanced the money, Mr Whitehall would have discharged her indebtedness to Perpetual because "he was withholding the money from me so I couldn't make the payments to Perpetual". The precise assertion being made by Ms Woodman was not entirely clear.
5. If there were evidence that Mr Whitehall had access to funds from which he could have discharged the Perpetual Mortgage without recourse to the Property and it could be shown that, but for the alleged "negligence, carelessness and laxness and lack of diligence" on the part of ANZ Bank, Mr Whitehall would have used those funds to procure the discharge of the Perpetual Mortgage such that Ms Woodman could have become the unencumbered owner of the Property, there may be a basis for arguing that there was a triable issue as to whether ANZ Bank was entitled to be subrogated to the rights of Perpetual.
6. However, there was no suggestion in Ms Woodman's defence or in her proposed amended defence that Mr Whitehall was under an obligation to discharge her debt to Perpetual with the result that she would be the unencumbered owner of the Property. More significantly, there was no evidence of, and Ms Woodman has provided no particulars as to, Mr Whitehall's source of funds to discharge the debt owing to Perpetual other than an unspecific assertion that Mr Whitehall was keeping funds from her. Thus, there is simply nothing in the submissions and there is certainly no evidence as to how Mr Whitehall may have funded the repayment to Perpetual without recourse to the security of the Property. That conclusion is reinforced by the fact that Mr Whitehall is an undischarged bankrupt.
7. If there were evidence that Mr Whitehall had secreted away funds to which Ms Woodman had some claim, there may be a basis for concluding that there was a possibility that Mr Whitehill could have discharged the debt owing to Perpetual without recourse to the Property, such that there was some causal connection between the alleged negligence and laxity of ANZ Bank and the failure of Mr Whitehall to discharge the Perpetual Mortgage without recourse to the Property.
8. It is clear that there was no pleading of an assertion or evidence to support an assertion that Mr Whitehall had access to funds that would have enabled him to discharge the Perpetual Mortgage without recourse to the Property. If on final hearing, that situation prevailed, it is clear that Ms Woodman could not resist the making of the declaration sought by ANZ Bank. However, the question is whether, where such assertions are made, albeit without evidence, the appropriate course would have been to decline summary judgment and defer the hearing of the application until such time as Ms Woodman had had the opportunity of reformulating an amended defence and providing evidence to support the proposed amendments.
9. Ms Woodman complains about the competence of her legal advice. In oral argument, Ms Woodman asserted that she had given instructions to her solicitors but that the instructions were not recorded in the proposed amended defence or other material. That question has not been explored and there is no evidence of any lack of competence beyond mere assertion on her part.
10. The principal argument advanced to the primary judge was that funds would never have been advanced to Mr Whitehall by ANZ Bank if it had not been negligent and lax in failing to detect the forgeries perpetrated by Mr Whitehall. His Honour concluded that Ms Woodman received a benefit at the expense of ANZ Bank in so far as the funds advanced by ANZ Bank were employed to discharge her indebtedness to Perpetual without any contribution or consideration on her part. There was no error in his Honour's reasoning in concluding that the negligence or laxity on the part of ANZ Bank would not be an answer to its claim to be entitled to subrogation on the part of ANZ Bank if the discharge of the Perpetual Mortgage resulted in a benefit to Ms Woodman that she would otherwise not have obtained.
11. However, as indicated above, the submissions filed on behalf of Ms Woodman asserted that any benefit that ANZ Bank alleged had been obtained by her was a benefit that she otherwise stood to acquire had ANZ Bank not undertaken its dealings with Mr Whitehall. Thus, there was an assertion, albeit not supported by hard evidence, that Ms Woodman did not actually gain a benefit at the expense of ANZ Bank but lost the opportunity of having her indebtedness to Perpetual discharged without recourse to the Property.

Conclusion

1. The orders from which Ms Woodman seeks to appeal were made on 28 May 2020. Under UCPR 51.10(1)(b), the summons whereby Ms Woodman seeks leave to appeal was required to be filed within 28 days after the material date, namely, 28 May 2020. However, the summons was not filed until 24 November 2020. UCPR 51.12(1) relevantly provides that a person seeking leave to appeal must file, in triplicate, the White Folder and serve it with the summons. While Ms Woodman filed the White Folder on 25 November 2020, it was not served on ANZ Bank until 26 April 2021.
2. Under UCPR 51.10(2), the Court may, at any time, extend the time for compliance with the provisions referred to above. Ms Woodman has not formally applied for an extension of time for the filing of her summons or for the service of the White Folder. Nevertheless, in circumstances where Ms Woodman is not represented by lawyers, the time for the filing of the summons seeking leave to appeal and the filing and service of the White Folder should be extended to the times when those events occurred.
3. Ms Woodman should be granted leave to appeal. However, the appeal should be limited to the ground that the primary judge erred in failing to afford her the opportunity of further amending her defence to raise a further issue and to adduce evidence in support of that issue, the further issue being: Whether there was a causal connection between the alleged negligence, carelessness and laxity and lack of diligence on the part of ANZ Bank in accepting forged documents from Mr Whitehall and the failure by Mr Whitehall to discharge Ms Woodman's indebtedness to Perpetual without recourse to the Property, such that the benefit that ANZ Bank alleged had been obtained by Ms Woodman, being unencumbered ownership of the Property, was a benefit that she would otherwise have obtained following a division of the assets of her marriage to Mr Whitehall.
4. The Court orders that: 1. Leave to appeal be granted to Ms Woodman, limited to the issue identified in [47] above. 2. Direct Ms Woodman to file and serve a Notice of Appeal reflecting the grant of leave within 14 days of today's date. 3. Direct the Registrar to enquire whether pro bono legal representation is available to assist Ms Woodman on her appeal. 4. Costs of the application for leave to appeal are the parties' costs of the appeal.

Endnotes

1. See Australia and New Zealand Banking Group Ltd v Whitehall [2020] NSWSC 489.
2. See Ghana Commercial Bank v Chandiram [1960] AC 732 at 745.
3. See Ghana Commercial Bank v Chandiram [1960] AC 732 at 745.
4. See Cochrane v Cochrane (1985) 3 NSWLR 403 at 405.
5. See Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291 at [35] and [39].
6. See Chetwynd v Allen [1899] 1 Ch 353 and Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 232.
7. See Highland v Exception Holdings Pty Ltd (in Liquidation) (2006) 60 ACSR 223; [2006] NSWCA 318. 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: 24 September 2021