KING v ST GEORGE COMMERCIAL CREDIT CORPORATION LTD SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL MAHONEY P and PRIESTLEY JA 24 June 1996 [1996] NSWCA 305 Mahoney P. This application comes before the Court primarily as an application for leave to appeal. There is an accompanying application for a stay should leave be granted. The circumstances are set forth in the documents before the Court and I shall summarise them so far as is necessary to explain what this Court is doing and why. The Court is informed that guarantees were given by, if I may so describe them, the King interests to the mortgagee company St George Commercial Credit Corporation Limited in relation to an indebtedness by another person or persons. Ultimately proceedings were taken against the King interests for possession of the property that was given by way of security for the guarantee and also for the debt said to be due. It is said that the amount owing by reason of the guarantee now exceeds the value of the property in question. The matter came before Hulme J earlier in the year. They were complicated and were before his Honour for a considerable time. His Honour mentioned in hisjudgment that the hearing proceeded before him for some two weeks at the beginning of the year. Ultimately he reserved his decision. On 26 April 1996 his Honour made an order having the effect that the issue of whether the company should have possession of the guarantee security, their residential premises, be dealt with as a separate matter and he made an order that the company have possession of that security. He then made observations in relation to other issues which were outstanding and were to be decided consequent upon the hearing of the matter before him. His Honour indicated that to give judgment in the matter, it being a matter of some complication, he would have to consider the detail of the evidence and he said that the judgment might not be given for some little time. His Honour, I think, took this into account in determining to make an order for possession as he did by his judgment of 26 April 1996. It is proper to record that in the proceedings before his Honour, out of which the claim to possession arose, there were various defences raised by the King interests. It has been said that the defences raised or the claims made included claims under the Contracts Review Act, claims under the Trade Practices Act and claims based upon damages said to flow from breaches of duty committed by the company. Whether those defences would be made out did not appear from his Honour's judgment of 26 April 1996. His Honour made clear that those matters were undecided. However, he indicated that, if and insofar as relief was to be given by reference to, for example, the Contracts Review Act, the Trade Practices Act or otherwise, that relief would not be such as would make it wrong for him to make an order for possession as he then did. 2 UNREPORTED JUDGMENTS Subsequently on 26 April 1996 an application was before the judge for leave to issue a writ of possession. At that time he made orders consequent upon the order for possession which he had previously made. On 29 May 1996 the matter came before the learned judge again and there was then raised, as I may describe it, the discharge of guarantee point. It was pointed out to his Honour that in the proceeding before him the King interests had raised as one of the defences to the company's claim a defence that the guarantee had been discharged by reason of, as they were described, acts injurious to the surety. Reference had been made to the decision in Watts v Shuttleworth (1860) 5 H & N 235 and no doubt to other decisions in that regard. His Honour's attention was drawn to the fact that in his judgment of 26 April he had not made reference to that defence. His Honour acknowledged this was so and indicated the context in which that had occurred. It is not necessary for me to set forth the whole of the relevant parts of his Honour's judgment of 29 May 1996, in which he dealt with this aspect of the matter. However, it would appear from what his Honour then said that his Honour accepted the possibility that he overlooked making a decision upon the discharge of guarantee point when he was considering whether an order for possession should be made and presumably considering whether that matter should be dealt with as a separate issue. If his Honour had in fact found the discharge of guarantee point in favour of the King interests, then it may be that no order for possession would have been made. The effect of it may well have been that the guarantee was discharged and accordingly that the company was not entitled to have possession under the security given in support of the guarantee. His Honour was then faced with the difficult problem of deciding what he should do in the circumstances. He took the view that he should not act upon the assumption that his earlier reasons were incorrect, that is that the order for possession should not have been made. What his Honour did was to indicate what had been the situation, namely that it was possible that he had overlooked the discharge of guarantee for the defence. His Honour granted a stay of the order for possession andleft the matter, as he indicated, to this Court, he having been informed that an application for leave to appeal was to be made to this Court later in the month of June. That application has come before the Court today and it is necessary to determine what course should be followed. If it is apparent that his Honour overlooked a defence of the kind referred to and if that defence was such that, had it been made out, then an order for possession would not or probably would not have been made, then that goes I think to the correctness of the decision that his Honour made in directing the possession point to be argued as a separate issue and in making the order that he did. If his Honour overlooked that matter or otherwise did not decide it, then it would appear proper that the proceeding be returned to the judge in order to deal with that matter. If he did not deal with that matter, then he may have to reconsider the orders that he made for possession. In these circumstances the Court considered, with the assistance of the representatives of the parties, what was the best course to be followed in order to bring the matter to an appropriate determination and to avoid the unnecessary expenditure of time and costs. In the end it was, as I understand, agreed between the parties that it would be appropriate for this Court to make an order setting aside the order for possession which the judge made. This was agreed upon the basis that the setting aside of URJKING v ST GEORGE COMMERCIAL CREDIT CORPORATION LTD (Mahoney P) 3 the order for possession was entirely without prejudice to the rights of the company. The order is set aside only because of the fact that the judge overlooked or may have overlooked the discharge of guarantee point and because, in order to ensure that he will be able to determine that matter and to determine it free of the effect of the order for possession, it is felt that the order for possession should properly be set aside. As I have said, that order having been set aside and the matter being returned to the judge, it will be open, of course, to the company and to the King interests to claim such rights as to possession or otherwise as may be appropriate and it will be for thejudge in the context of the proceeding to determine what further argument, if any, he proposes to allow in relation to the matter. I think this is a very sensible and practical approach for the parties to adopt. I propose that an order be made setting aside the order made by the judge. I note that the Court is informed judgment has been entered for possession of the property and for issue of a writ of possession, those being the orders made on 26 April 1996. The effect of this will be that the proceeding will be returned to the judge. As I understand the position as indicated in the reasons which the judge has given, his Honour is still considering his decision in relation to the proceeding heard by him. He has to consider, apart from the orders that had been made today, the matters referred to in his judgment in relation to the defences, cross claims and otherwise and it will be necessary for his Honour to give a final judgment. It may be that his Honour in the circumstances which now have arisen may feel it appropriate to decide the whole of the matters together and come to a final conclusion in relation both to the matters outstanding, as referred to in the judgment, and the questions of possession at the same time. To do that may avoid unnecessary complications. However, the matter going back to his Honour, it will be a matter for him to decide the issues of practice and procedure which will govern what follows from the orders that have been made by this Court. In my opinion, therefore, the orders which this Court should make are that leave to appeal should be granted insofar as it is necessary to do so, that the order for possession and the issue of a writ for possession be set aside upon the basis to which I have referred and that the matter be returned to the judge to be determined in due course in the context of the proceeding which is pending before him. The question of the costs of the present application may be the subject of further consideration, if the parties desire. Priestley JA. I agree. Mahoney P. As to the costs of the matter today, as they have arisen, it may be emphasised as a matter of possibility that the judge overlooked this particular question. There is a provision in the Suitors Fund Act I think for something to this effect and you may think it more appropriate to reserve the costs to be dealt with by the judge in the course of his decision. Do the parties have any submissions to make in that regard? TZOVARAS: If the decision on costs is reserved, is it then possible, and 'm sorry to ask the question of your Honours, for his Honour the trial judge to make an appropriate direction or order relating to the Suitors Fund? MAHONEY P: I doubt that it is. I think probably Suitors Fund orders are orders that we have to make. It may be as the parties have sensibly agreed to leave to appeal and setting aside of the order that the respondent, which is the 4 UNREPORTED JUDGMENTS company, pay the costs of today but that it have a certificate under the Suitors Fund Act in relation to the costs. I'm not sure that that will cover the whole of your costs but it should go a long way towards it. Have you any observations on that Mr Forster? It's a difficult situation and therefore we are inviting observations of counsel. FORSTER: It ought to be simply from our point of view that there's no reasonable justification that the opponent ought to be out of pocket at the end of the day in relation to costs. MAHONEY P: Were the matter free from all law, that might be an observation which would be attractive but an order for costs has got to be made. We can make an order that each party bear his own costs in this proceeding but that seems unfair. FORSTER: There's another alternative which means that the costs of this application to be costs in the principal proceeding. MAHONEY P: Do you have any objection to that Mr Tzovaras? TZOVARAS: Yes. Although there are special circumstances, it was necessary for this application to be made. It could have been consented to but the basis — MAHONEY P: I'm asking you whether you object to such an order being made. TZOVARAS: Yes. MAHONEY P: The order of the Court is that the costs of the present application be borne by the respondent company but that it have a certificate under the Suitors Fund Act in respect of those costs. Orders accordingly.