NAGHTEN v NATIONAL AUSTRALIA SAVINGS BANK LIMITED; NAGHTEN v NATIONAL AUSTRALIA BANK LIMITED SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL SHELLER JA 28 June 1993 [1993] NSWCA 187 Sheller JA. These are applications by the appellants, Mr and Mrs Naghten, for a stay of the execution of writs of possession in two proceedings brought against them, one by the National Australia Savings Bank Limited and the other by the National Australia Bank Limited for possession of certain premises. In both these proceedings on 16 December 1992 Master Greenwood made orders for summary judgment for possession of the land. The appellants appealed from these orders. The appeal came on for hearing before Levine J who dismissed the appeal on 26 May 1993. The appellants have appealed from his Honour's judgment and order. This is an application for stay of execution pending the hearing and determination of that appeal. On 9 June 1993 the Sheriff gave notice requiring the appellants to vacate the property. The notice of appeal was filed on 11 June 1993. In evidence given by affidavit by Mr Naghten the property, which is referred to as Bellbird Glen Stud, Little Valley Road, Mandalong, is said to be of an area of just under twenty-two hectares with a house inwhich the appellants live with their stepson. The property is apparently being run as a horse stud and has facilities for the spelling of injured and pre-training thoroughbred horses. The claimants/appellants say that unless this stay is granted the appeal, even if successful, will be of limited value to them and further, that cross claims which they filed in the proceedings would be of limited value if they were to proceed. It has been agreed and I have ordered that both applications should be heard together and the evidence in one taken as evidence in the other. The claims were bases upon failures to comply with notices of demand given under two mortgages. The first, 90-755-8934, was a mortgage by the appellants over the property in favour of the Savings Bank and is conveniently described as the home loan mortgage. The second, 50-701-6685, in favour of the National Australia Bank is conveniently described as the trading bank mortgage. In respect of the first of these mortgages — the home loan mortgage — notices of demand were given to each of the appellants, the sum said to be due as at the date of the notice being $495,850.65. In respect of the trading bank mortgage notices of demand were given and a number of sums was set out as being due at the date of demand. One of those was an amount of $256,672.80 said to be due under the trading bank mortgage. In the affidavit material placed before me on behalf of the opponents there are included two letters written by Mr Naghten, one of 21 October 1991 and the other of 25 September 1991 which acknowledge, in the case of the home loan mortgage, a principal sum due under the mortgage of $400,000 and, in respect of the trading bank mortgage, a principal sum of $100,000. Further, in the letter of 25 September 1991 there is an acknowledgment that at that date the amount 2 UNREPORTED JUDGMENTS owing underthe home loan mortgage was $460,000 approximately and under the trading bank mortgage $244,000 approximately. The Master in his judgment referred to the cross claims that the appellants relied upon, based upon the Contracts Review Act, the Trade Practices Act, misrepresentation and unconscionable conduct. He described these in general terms and then went on to say that the level of indebtedness between the parties, the reliance on representations made by the agents of the plaintiff, that is to say, the bank, and the circumstances in which the mortgages were signed and the nature of the documents of which the defendants, that is to say, the appellants, contend they were unaware, were all pointed to by the appellants. The gravamen of the defendants" complaint is that they find themselves indebted in a large amount of money of which they say they were unaware because they were unaware of the nature of the securities into which they had entered. The learned Master said that in the light of these cross claims he approached with particular caution the matter whether the Contracts Review Act and the Trade Practices Act raised a discretionary consideration on the basis of which the relief being sought before him should be refused. He then, however, said: I can say now and it is conceded by the plaintiffs" side that the cross claims of the defendants raised triable issues which need to be determined by the court. The cross claims do stand and must go to trial. However, with respect of two of the mortgages, one by the savings bank account and the other the trading bank, there is evidence so far as both the offences (sic) are concerned that the defendants were aware that the sums were advanced; aware of the purpose for which the money was made available and aware that they entered into securities for the purpose of securing repayment of these moneys. Levine J in his judgment of 26 May 1993 referred to the Master's judgment and the evidentiary aspects of the case which I have justquoted. After saying that he proposed to dismiss the appeals, his Honour continued: The respondents concede that there may be a triable issue as to whether some of the various amounts claimed to be due are secured by the respective mortgages. There cannot be and is not a triable issue as to the substantial issue under each mortgage in the light of the admissions made by the appellants. Further, if the appellants succeed in their cross claim, either on some equitable basis or under the Contracts Review Act, founded upon some absence of knowledge that "all moneys" were secured, the remedy is to relieve the security for some part of the debt. In conclusion his Honour said: On my view of the evidence the respondents [that is to say, the banks] have proved the existence of the mortgages, the execution, the default and are the more strengthened by reason of the admissions of the appellant mortgagors. It is quite apparent that that was fundamental to the decision of the Master who was correct in making the orders he made. Mere existence of the potential exercise of a discretion which, whilst it might affect the extent of liability when it does not, in my view as it does not in this case, affect the nature of the liability is insufficient in itself to disturb the orders hitherto made. The notice of appeal, as a matter of central challenge to his Honour's judgment, in ground 8, asserts that his Honour and the Master were in error in failing to address the central issue that arose in the proceedings. To this extent I summarise what appears thereafter: that the plaintiffs" entitlement to possession was based upon the mortgage and securities and the defendants, by their cross UWEAGHTEN v NATIONAL AUSTRALIA SAVINGS BANK LIMITED; NAGHTEN v NATIONAB AUSTRALIA BANK LIMITED (Sheller JA) claim, sought to set aside the mortgages and securities by seeking relief under the Contracts Review Act or the Trade Practices Act. In the course of submissions, the first and second cross claims, that is to say, the cross claims by Mr Naghten and the cross claim byMrs Naghten, in the National Australia Bank proceedings were handed up to me. So far as the cross claim by Mr Naghten is concerned, that is directed to the point that prior to the execution of the home loan mortgage an officer of the bank allegedly said to Mr Naghten that the effect of the mortgage was to secure only the sum of $400,000 or thereabouts advanced or to be advanced by the bank against the property and no other amounts. So far as the cross claim by Mrs Naghten is concerned, it is alleged that Mr Naghten, and the bank, by its officer, arranged with her that she would execute a mortgage over her interest in the property as security for the loan which she believed to be in the order of $400,000. It is said that at the time of executing that mortgage she did not have advice and a number of other grounds are set out relying upon s 9 of the Contracts Review Act. There is in this case, as I understand it, no real debate that the appellants are indebted to the opponents in amounts at least of the order of those claimed in the notices of demand in relation to these two particular mortgages which I have set out above. Having looked at the two judgments that have been delivered in this matter already and the notices of cross claim with some care, it is apparent that no defence is raised which could have the effect of invalidating the mortgages to the extent that they would be treated as void ab initio. There are clear findings of fact that the appellants were aware that the principal amounts which have been referred to would be secured by the mortgages. Those principal amounts were demanded and have not been paid and the default in paying them seems to give ground for the orders which were made by the Master. An appeal has been lodged against the judgment of Levine J. I recognise that it is not my part to pass upon whether or not that appeal will succeed. However, having as I say carefully considered thejudgments and the arguments that have been put to me and bearing in mind the consequences, which have been described in the affidavit of Mr Naghten, of this application's being refused, I am of the opinion that both applications should be refused. I should say in this regard that I take into account, amongst other things, what seems to me to be the very considerable prejudice to both opponents flowing from the holding back from them of such actions as would otherwise be available to them for securing the payment of moneys about which there seems, as I have said, to be no real debate. Accordingly, the order of the Court is that both applications are refused with costs. Orders accordingly.