EVANS v CBFC LIMITED SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL KiRBY P, HANDLEY JA and POWELL JA 22 November 1993 [1993] NSWCA 90 Handley JA. CBFC Limited, is the registered proprietor of a mortgage under the Real Property Act over the country property known as Colmena near Boorowa which is the subject of these proceedings. On 11 March this year Hunt CJ at CL made orders entering judgment for possession of Colmena against the present claimants, Mr and Mrs Evans, and their company Tresare Pty Ltd He also entered judgment against Mr and Mrs Evans for the balance of the debt secured by the mortgage. Mr and Mrs Evans and Tresare appealed as of right to this Court and have applied for a stay of execution on the judgment for possession pending the hearing of the appeal. On 8 November 1993 Meagher JA refused a stay of execution and dismissed the claimants" motion but gave no reasons. The claimants have now applied to a Full Court under s 46(4) of the Supreme Court Act to vary or rescind the order made by Meagher JA. In my opinion, and with all respect to Mr Evans who had the usual difficulties of a practitioner appearing for himself, this is a hopeless application. Mr Evans told this Court that $260,000 out of the secured advance of some $300,000 made by the opponent in 1985 was used to pay off prior registered mortgages over the property in favour of a credit union and the National Westminster Bank. He sought in a number of ways to challenge the transaction with the opponent either for fraud or under the Contracts Review Act. The defence or cross-claim for fraud has never been properly pleaded or particularised. This is required by long-standing ethical and legal practice which is now embodied in the rules of this Court. The reasons for this practice were referred to by the High Court in Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1989-90) 169 CLR 279 especially at 285-296. As late as 20 October 1992 Newman J gave Mr Evans the opportunity of pleading fraud. However, as he indicated in his affidavit of 22 November 1993, Mr Evans declined to take advantage of this offer. The Judge ordered that the defendants" general denial be struck out unless they filed full particulars within fourteen days. Mr Evans" affidavit continues: In the event I did not so particularise after consulting counsel I say that unless the respondent sought their striking out those two points of defence sufficiently comprehended fraud to permit me to cross-examine the respondent's witnesses as to the respondent's notice of fraudulent conduct. As the High Court judgment referred to indicates that it is not an attitude which the courts will allow a party to take who seeks to rely upon fraud in legal proceedings. The defendants" failure to properly plead fraud was again adverted to by Hunt CJ at CL in his reasons for judgment of 11 March 1993. 2 UNREPORTED JUDGMENTS Even if there was some proper basis for a claim for fraud that would at best make the mortgage voidable, not void. Since the advance by CBFC to the extent of at least $260,000 was used to pay off prior mortgages by Mr and Mrs Evans the avoidance of the transaction in equity for fraud would leave them owing at least $260,000 plus reasonable interest less any credits and would leave CBFC entitled to retain their security for at least that amount. This result would reflect both the fundamental principles of rescission in equity and the principle that a person who seeks equity must do equity. These principles were recently referred to by this Court in Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 at 576. Mr Evans conceded both before Hunt CJ at CL and this Court that the claimants were in no position to pay any part of that sum of $260,000. Any case that the appellants may possibly have for fraud, therefore, could not provide a basis for allowing them to retain possession of the property pending the hearing of their appeal. Mr Evans also relied upon the claimants" claims under the Contracts Review Act. Here again as long ago as 9 January 1991 Badgery-Parker J held that the defence under the Contracts Review Act went only to part of CBFC's claim under its mortgage. This arises from the same facts referred to earlier, namely, that at least $260,000 of the sum advanced by CBFC was used to pay off prior valid registered mortgages granted by Mr and Mrs Evans over their property. Mr Evans submitted that the court in such case could declare the mortgage to be wholly void. There is no doubt that the Court has that power under s 7 of the Contracts Review Act. However, it only has that power if the Court considers it just to exercise it and this involves the exercise of a judicial discretion. As a general rule the Court would not exercise its powers under s 7 to declare a mortgage wholly void where substantial moneys lent under it had been used by the borrower to pay off existing mortgages and obligations which were not challenged. Here again authority supports what, in any event, would be clear on the terms of the statute and I refer again to Demetrios v Gikas Dry Cleaning Industries Pty Ltd at 576. In those circumstances in my opinion the claimants have failed to make out a case for a stay of execution under the judgment for possession pending the hearing of the appeal of this Court. I would propose, therefore, that the motion for the stay be dismissed with costs. Kirby P. I agree. Powell JA. I agree and I would not wish to add anything. Kirby P. The order of the Court accordingly is that the motion for a stay is dismissed and the claimants must pay the opponent's costs. OPPONENT: (MR EVANS) I seek a stay pending an appeal in the High Court. KIRBY P: There is nothing for us to say. We have refused a stay and therefore there is no order of this Court to stay. You will have to seek a stay elsewhere, if you can get one. Orders accordingly.