BERKEMEIER v COMMONWEALTH BANK OF AUSTRALIA SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, GILES and STEIN JJA 14 December 1998, 17 December 1998 Mason P, Giles and Stein JJA The claimant is an appellant as the executrix of her mother's estate. She seeks the discharge of the order of Powell JA made on 30 November 1998 refusing to stay execution on orders made by Austin J on 17 November 1998. Those orders gave effect to the reasons for judgment delivered by Simos J on 2 October 1998. Austin J ordered that the claimant's proceedings be dismissed with costs; that judgment be entered for the opponent against the claimant in the sum of $4,627,789.57 plus interest; and that the opponent have possession of premises at 17 Whiting Beach Road Mosman with leave to issue a writ of possession forthwith. Austin J also refused a stay application. Upon an application effectively to review the refusal of a stay of execution by a Judge of Appeal, the Court of Appeal applies the principles relating to challenges to the exercise of a judicial discretion (see Australian Consolidated Press Ltd v Baltinos Court of Appeal, unreported, 18 September 1995). The facts relevant to the matter presently in issue are set out in the judgment of Powell JA. We do not understand it to be suggested that his Honour misapprehended basic facts in any way. Since 30 November 1998 the claimant has formulated her notice of appeal and has formally sought expedition of the hearing of that appeal. Powell JA declined to order a stay because: (1) (agreeing with Austin J) he did not consider that the claimant has an arguable case for an appeal; (2) he held in the alternative that, if there were an arguable case for an appeal, the claimant would be put on terms which it is quite clear that the estate has not the slightest capacity to meet; and (3) On the question of balance of convenience, he considered the balance to favour the opponent. In doing so, he indicated that the personal hardship of the claimant and her family (as occupants of the subject property) were matters not relevant to be brought into account as between the opponent and the estate. The appellant challenged a mortgage dated 10 May 1990 executed by Ms Isobel Gidley, the claimant's sister as Attorney for their mother Mrs Madeline Gidley (now deceased) pursuant to an enduring power of attorney dated 23 July 1986. Until shortly before 10 May 1990 Ms Gidley had represented to the bank that the property at 17 Whiting Beach Road Mosman belonged to Ms Gidley and her husband. That and two other properties (which did belong to Ms Gidley) were offered as security for an advance of approx $2.1m being moneys required to discharge existing mortgages over the three properties that had been granted to Mortgage Management Ltd ("MML"). Those mortgages were in default and MML was threatening to sell the mortgaged properties. Shortly before the mortgage was executed the bank discovered that the property at Whiting Beach Road belonged to the deceased. At that time officers of the bank were aware that Mrs Gidley was "severely afflicted... a victim of Altzheimers Disease, who is unable to walk, talk, see, or do anything for herself". 2 UNREPORTED JUDGMENTS The claimant concentrated much of the attack upon the first ground relied upon by Powell JA. She has the difficult task of demonstrating error in a matter upon which minds could legitimately differ (speaking generally, without at this stage addressing the particular case). It is relevant to observe that the case at trial did not challenge the formal validity of any of the ANZ (1986), Mortgage Management Ltd ("MML") (1989) or Commonwealth Bank (1990) mortgages executed by Ms Gidley in reliance upon the 1986 power of attorney for her mother. There was no challenge to the validity of the enduring power of attorney nor its capacity, in law, to sustain the mortgages. Had there been such a challenge one would have expected the circumstances of the execution of that power of attorney to have been explored, along with the precise state of Mrs Gidley's capacity to comprehend information in July 1986. Nor was it suggested that Ms Gidley had practised undue influence upon her mother in 1986. We mention this because of reliance upon Bank of New South Wales v Rogers (1941) 65 CLR 42 in the current application. Rather, the contest was based upon the Contracts Review Act and the doctrines of unconscionability, each of which involved inquiry into the state of the opponent Bank's knowledge in 1990. Each of those bases for challenging an "unjust" or "unconscionable" transaction throw up independent and cumulative issues of remedy. In particular, each gives rise to the application of the principle of requiring a plaintiff to "do equity" (see the judgment of Simos J at p71-p75). We return, as we must, to the challenge to the order made by Powell JA. Counsel for the claimant demonstrated, by reference to the transcript of argument before Simos J on 9 July 1998, that the claimant had raised the question whether the Bank was entitled to rely upon the power of attorney without making enquiries about Mrs Gidley's condition in 1986. This was coupled with the evidence of what was disclosed in April 1990 about Mrs Gidley (severe affliction with Alzheimer's Disease resulting in inability to walk, talk, see or do anything for herself) to ground the submission that Simos J erred in declining to hold the 1990 mortgage to be unjust. But in a case where no evidence was led as to the usual progression of this disease, or its progression in the particular case, and where the power of attorney contained a solicitor's certificate, we see very real difficulties in challenging the learned primary judge's assessment of the various factors relevant to the statutory and equitable challenges to the 1990 mortgage. After all, a major purpose of an enduring power of attorney is to enable its use when incapacity supervenes. Simos J made findings as to the Bank's reasonable perception that the mortgage served the interests of Mrs Gidley as well as those of her daughter, Ms Gidley, and her son in law. This said, there were circumstances surrounding the 1990 transaction that may have excited further enquiry. Ms Gidley and her husband had represented to the Bank officers that the property at Whiting Beach Road belonged to them. The true situation only emerged shortly before settlement. And the information about caring for Mrs Gidley in the "Profile on Richard Shears and Isobel Gidley" furnished in about mid April 1990 did suggest that Mrs Gidley had been in need of intensive care for some (undisclosed) time prior to 1990. These matters are unlikely to tip the scales in the challenge to the findings that the contract was not unjust or unconscionable, but they suggest that the substantive case was not entirely without merit. Accordingly, we prefer to turn to the second ground relied upon by Powell JA, without having to determine if there was any error in the relevant sense of error in the exercise of a judicial discretion. URERKEMEIER v COMMONWEALTH BANK OF AUSTRALIA (Mason P, Giles and Stei& JJA) In our view the refusal of the stay rests firmly upon the remedial impasse which faced the claimant at trial and which continues to do so. There was no offer to do equity, nor does the claimant have the capacity to do so. The claimant repeated her submission at trial that there is no case directly in point, dealing with the situation where the money raised by one mortgage is used to pay out an earlier mortgage in favour of a third party that may itself have been amenable to challenge. Notwithstanding, we agree with Powell JA that this is a case where ultimate relief would be based upon the claimant being put on terms which she is completely unable to meet. It is here that we reiterate that the trial did not involve an inquiry into the validity of the MML mortgage or its predecessor. Validity was assumed. No one explored the state of knowledge of the ANZ Bank or MML when they dealt with Ms Gidley; or the state of knowledge of the Commonwealth Bank in relation to the validity of those earlier mortgages. The claimant's submission that those mortgages can somehow be ignored must be rejected. If, therefore, the MML mortgage was a security which Mrs Gidley had given, then the entry into the Commonwealth Bank mortgage obviously benefited Mrs Gidley because it appears that the moneys borrowed in 1990 were used to pay out MML which was pressing hard. But the benefit went further than release from an earlier debt. The information upon which the opponent relied reasonably conveyed to it the indication that the earlier mortgages were not only valid, but had also been entered into in circumstances where real benefit passed to Mrs Gidley, albeit also to Ms Gidley and Mr Shears. These matters reinforce why a requirement to "do equity" would be an inevitable consequence of overturning Simos J's reasons as regards the "justness" or "conscionability" of the current mortgage. We detect no error in his Honour's handling of the issue of balance of convenience. It is sad to see any family put out of their residence. But the property at all times belonged to Mrs Gidley. As between Mrs Gidley (or her estate) on the one hand and the opponent on the other, there is effectively nothing to put in the balance in the estate's favour. But, lest it be suggested that we have overlooked the evidence about the spiritual connection between the claimant and the subject property, we would indicate that it does not displace the balance of convenience as we assess it. The application should therefore be refused, although we grant a limited extension of time to enable an orderly vacation of the subject property. Accordingly we: 1. Decline to discharge O2 and O3 made by Powell JA on 30 November 1998. 2. Vary O1 by extending the stay of execution upon the orders made by Austin J on 17 November 1998 up to and including 9 January 1998. 3. Order the claimant to pay the costs of this Motion. 1. Decline to discharge O2 and O3 made by Powell JA on 30 November 1998. 2. Vary O1 by extending the stay of execution upon the orders made by Austin J on 17 November 1998 up to and including 9 January 1998. 3. Order the claimant to pay the costs of this Motion. Counsel for the appellant: R Dubler Solicitors for the appellant: Hegarty & Elmgreen Counsel for the respondent: G Burton Solicitors for the respondent: L E Taylor