New South Wales Supreme Court CITATION : National Australia Bank v Hain aka McCallum [2000] NSWSC 118 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 10265/99 HEARING DATE(S) : 10 February 2000 JUDGMENT DATE : 8 March 2000 National Australia Bank Limited (Plaintiff) PARTIES : Wendy Hain aka Wendy McCallum (Defendant) JUDGMENT OF : Master Harrison Mr J Stoljar (Plaintiff) COUNSEL : Ms S Kaur-Bains (Defendant) Mallesons Stephen Jaques (Plaintiff) SOLICITORS : Jackson Smith (Defendant) CATCHWORDS : Summary judgment - possession's 84(4) Stamp Duties Act Supreme Court Rules LEGISLATION CITED : Stamp Duties Act 1920 Taxation (Administration) Act (NT) Meagher, Gummow and Lehan, Equity, Doctrine and Remedies 3rd ed (19920 PAR 3709(H) AT 818 Air Services Australia v Zarb (NSWSC unreported, 26 August 1998) Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 Webster & Anor v Lampard (1993) 177 CLR 598 Dent v Moore (1919) 26 CLR 316 Electricity Meter Manufacturing Co v Manufacturer's Products Pty Ltd (1930) 47 WN (NSW) 182 CASES CITED : Westpac Banking Corporation v Mousellis (1985) 37 NTR 1 Wagga Finance Co v Lever (1930) 47 WN (NSW) 18 Shepherd v Felt & Textiles of Australia Limited (1931) 45 CLR 359 National Westminister Bank Plc v Skelton [1933] WLR 72 Mobil Oil Case Ltd v Rawlinson (1981) 43 P & CR 221 Horrobin v Australia & New Zealand Banking Group Ltd (1996) 40 NSWLR 89 Lord v Direct Acceptance Corp (NSWCA unreported, 23 November 1993) Foran v Wight (1989) 168 CLR 385 DECISION : See paras 36, 37 and 38 15 THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER HARRISON THURSDAY, 9 MARCH 2000 10265/99 - NATIONAL AUSTRALIA BANK LIMITED V WENDY HAIN aka WENDY McCALLUM JUDGMENT (Summary Judgment; possession; s 84(4) Stamp Duties Act) 1 MASTER: By notice of motion filed 1 November 1999 the plaintiff seeks pursuant to Part 13 r 2 of the Supreme Court Rules (SCR), firstly, judgment for possession against the defendant of the mortgaged property, known as "Gunyah" Kosciusko Road Cooma in the State of New South Wales (the Mortgaged property), and secondly that the plaintiff be granted leave to issue a writ of possession in respect of the mortgaged property. Paragraph 1(b) and (c) of the notice of motion is stood over generally. The plaintiff relied on the affidavits of Michael John Linton sworn 27 October 1999, 22 November 1999 and 7 February 2000. The defendant opposed the orders sought and relied on the affidavit of John Gazecki sworn 7 January 2000 and her affidavit sworn 8 February 2000. The law in relation to summary judgment 2 The relevant parts of Pt 13 r 2 (SCR) says: "2(1) Where, on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff - (a) there is evidence of the facts on which the claim or part is based; and (b) there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed, the Court may, by order, on terms, give such judgment for the plaintiff on that claim or part as the nature of the case requires. 3 In a recent decision Air Services Australia v Zarb (NSWSC unreported, 26 August 1998) Rolfe AJA found it useful to remind himself of the highly demanding test imposed on a party seeking summary judgment. His Honour referred to Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 and Webster & Anor v Lampard (1993) 177 CLR 598. I have reproduced some of the passages quoted in Zarb. 4 In General Steel Barwick CJ, who heard the application alone stated: "Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed." 5 Barwick CJ also said: "It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of cause of action - if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; be manifest that to allow them' (the pleadings) 'to stand would involve useless expense." 6 In Webster Mason CJ, Deane and Dawson JJ reinforced the rigorous testing stating, at p 602: "The power to order summary judgment must be exercised with 'exceptional caution' and 'should never be exercised unless it is clear that there is no real question to be tried."' 7 According to Rolfe AJA in Zarb: "The demanding nature of the test is in no way lessened in circumstances where there are the potential for difficult factual and legal issues to arise. Rather, as the decision in Webster made clear, it is heightened: see also Wickstead & Ors v Browne (1992) 30 NSWLR 1 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241." 8 The factual background is as follows: (1) On or about 23 February 1982 the defendant gave the plaintiff an "on demand" all moneys mortgage registered number T30781 over her rural property. (2) By 1996 the plaintiff had provided various overdraft and other facilities to the defendant and she was in default under those facilities. (3) On or about 28 May 1997, following a mediation pursuant to the Farm Debt Mediation Act , the plaintiff and defendant entered into a deed of settlement (the deed) under which the defendant borrowed $685,000 under the following facilities on the following terms: "a. Short Term Facilities i. Expires on 31 January 1998; ii. Interest only till 31 January 1998, interest paid quarterly namely on 31 March 1998, 30 June 1998, 30 September 1998 and 31 December 1998; iii. Payment of principal in the amount of $25,000 on 31 January 1998. b. New Facility i. Principal and interest; ii. First payment of principal and interest 31 March 1998." 9 On 28 April 1997 the parties entered into a loan agreement where the plaintiff provided financial accommodation to the defendant in the form of a loan in the sum of $684,670.85. It was a fixed term interest only loan. It was common ground that the plaintiff advanced a loan of $10,000 in 1997 but did not pay stamp duty on the upstamp. This duty was paid in August 1999. 10 The only pleaded issue raised in the further amended defence dated 25 November 1999 is that in answer to the whole of the statement of claim, the defendant says that at the time the plaintiff issued the notices referred to in paragraphs 8, 9 and 11 of the statement of claim the mortgage had not been up stamped in accordance with the Stamp Duties Act 1920 (NSW) (the Act) and therefore at the relevant time the terms of the mortgage could not be exercised as the terms were unenforceable by reason of s 84(4) of the Act. Consequently the notice of demand dated 23 October 1998 and s 57(2)(b) notices of the Real Property Act were not effective. 11 Section 84(4) of the Act states: (4) A loan security referred to in this section is unenforceable unless it has been stamped as provided by this section, whether or not the amount in relation to which the loan security is sought to be enforced is less than the amount in relation to which it is required to be stamped." 12 The plaintiff submitted that it is well established that late stamping cures any defect as at the date of the stamping, or retrospectively, so that the document is valid from the date of execution - see Dent v Moore (1919) 26 CLR 316; Electricity Meter Manufacturing Co v Manufacturer's Products Pty Ltd (1930) 47 WN (NSW) 182. The plaintiff further submitted that the basic principle applies in respect of mortgages, such that a mortgage which has lately been upstamped has "retroactive efficacy" and is enforceable - see Westpac Banking Corporation v Mousellis (1985) 37 NTR 1. The defendant submitted the Mousellis decision could be distinguished on the basis that it did not consider the authorities on the meaning of "enforceable" and that s 84(4) is not expressed to be the subject of any other provision in the Act unlike ss 25, 27 and 29. 13 In Wagga Finance Co v Lever (1930) 47 WN (NSW) 18 the Court of Appeal held that the plaintiff claimed he was entitled to make the demand by virtue of a purported assignment but at that time the assignment was unstamped and inoperative and consequently the plaintiff then had no title enforceable in law and was not entitled to establish a right to immediate possession. The High Court overruled this decision in Shepherd v Felt & Textiles of Australia Limited (1931) 45 CLR 359. 14 In Electricity Meter Manufacturing at p 183 the Court of Appeal held that the court was not constrained by the Act or by judicial authority that an agreement which has been lawfully stamped after its execution is not, on being stamped, as efficacious for all purposes, inter partes, as if it had been stamped immediately on execution. Admitting to the full that unless and until it is stamped it will not be recognized in any court as an effective instrument and that the payment of stamp duty is indispensable to its admissibility in evidence. The court held that an instrument upon being stamped, even after action is brought is as efficacious between the parties to it as if it had been duly stamped when executed. Thus in 1930 there were two conflicting decisions of the New South Wales Court of Appeal. 15 The conflict was resolved by the High Court in Shepherd. The High Court held that documents stamped after execution as envisaged now by s 29 of the Act becomes effective ab initio. In Shepherd Dixon J stated: "Throughout this course of legislation the courts have uniformly acted upon the view that instruments which may upon payment of a fine be stamped at any time are to be received in evidence and enforced although duly stamped after the commencement of the proceedings." 16 and Evatt J stated: "In my opinion the subsequent decision of the Full Court of the Supreme Court in Electricity Meter Manufacturing Co v Manufacturers' Products Pty Ltd is irreconcilable with the Wagga Finance Case and the latter should now be considered as overruled. Unfortunately, the Wagga Finance decision caused many difficulties in the administration of justice in New South Wales. It suddenly brought to an end the recognized practice of stamping documents during the hearing of a case." 17 Thus since 1931 the law has been that the instrument upon being stamped is as efficacious between the parties to it as if it had been duly stamped when executed. 18 As previously mentioned, the defendant submitted that these cases only apply to s 29 of the Act. However in Mousellis Nader J considered the effect of s 69B(3) of the Taxation (Administration) Act (NT) is similar to s 84(4) of the Stamp Duties Act 1920 (NSW). Section 69B(3) provides: "(3) Where the total amount secured or to be ultimately recoverable by or under a loan security is not expressed in the loan security to be limited to a definite and certain sum of money, then - (a) that loan security is enforceable as a loan security only to the extent of the amount in respect of which duty (including any duty which is deemed to have been paid by virtue of section 69a), as duty on a loan security, has been paid on the loan security; …" 19 Nader J stated that he had not been able to find an exception to the generality of where late stamping is possible, such stamping validates the instrument retroactively. His Honour held: "A Loan security upon which some, but insufficient, duty has been paid is not rendered unpleadable or inadmissible by s 121, but its enforceability is limited by s 69B(3), and by implication, only its enforceability. However, by analogy with the reasoning in the cases, the limit to enforceability ought to be able to be retrospectively removed in the same way as the disabilities imposed by s 121 can be removed. A loan security is an instrument upon which additional tax and a penalty can be paid under s 107. I am satisfied that what the cases say about the disabilities imposed by s 121 are equally applicable to the limit on enforceability imposed by s 69B(3)." 20 Sections 107, 119 and 121 of the Taxation (Administration) Act (NT) are similar to ss 25, 27 and 29 of the Stamp Duties Act 1920. 21 Although there is no case in New South Wales on the interpretation of s 84(4) of the Act and the decision of Nader J is not binding on this court, the law in this area is well settled. There is no need to refer to the meaning of enforceability or the second reading speech. Documents once stamped are validated retroactively. The defendant's argument on this issue is hopeless. If the instrument, namely the mortgage, is validated retroactively, the required notices are also valid. - see Electricity Meter Manufacturing. Hence the argument that the notices are invalid also fails. The amended defence is hopeless and should be struck out. 22 The defendant filed a defence on 4 May 1999, an amended defence on 29 July 1999 and a further amended defence on 25 November 1999. It is my view that the defendant has had ample opportunity to put forward a defence. She should not be afforded a further opportunity to file a further defence. In any event, no submissions were put that the defendant had any additional defences. The plaintiff at this stage is only seeking possession of the property. 23 The cross claim remains on foot. In the cross claim, the plaintiff alleges that it is entitled to set-off against the claim of the defendant. The issue of whether a cross claim pleading equitable set-off defeats a mortgagee's right to possession was discussed by the English Court of Appeal in National Westminister Bank Plc v Skelton [1933] WLR 72. 24 In Skelton the Court of Appeal refers to the line of authority which clearly establishes the principle that the existence of a cross claim even if it exceeds the amount of a mortgage debt will not by itself defeat the right of possession of a legal chargee. Slade LJ refers in particulars to the decision of Nourse J in Mobil Oil Case Ltd v Rawlinson (1981) 43 P & CR 221. Slade LJ says that this principle has much to commend it, since it could lead to abuse if a mortgagee was kept out of his undoubted prima facie right to possession by allegation of some connected cross claim which might be wholly without foundation. 25 It was argued that the cross claim in which the mortgagor has rights by way of equitable set-off is an exception to the principle stated above. Slade LJ concludes that he cannot accept the submission that the Mobil Oil principle is not applicable where the mortgagor has a claim to unliquidated damages by way of equitable set-off. 26 Thus Skelton established that a cross claim on foot which pleads equitable set-off will not by itself defeat the right of possession of a legal chargee. 27 In Horrobin v Australia and New Zealand Banking Group Ltd (1996) 40 NSWLR 89 Sheller JA refers to a mortgagees right to possession where there is an equitable set-off. He says: "A legal mortgagee's right to possession is a common law right which is an incident of its estate in the land. In the absence of a term of the mortgage the right to possession has nothing to do with default on the part of the mortgagor. If there is a provision that, so long as certain payments are made, the mortgagee will not go into possession, then the mortgagee has to that extent contracted itself out of its rights. For the position under the Real Property Act 1900, see s 57 and s 60, and Ex parte Jackson: Re Australasian Catholic Assurance Co Ltd (1941) 41 SR (NSW) 285 at 289; 58 WN (NSW) 228 at 230 and United Starr-Bowkett Co-operative Building Society (No 11) Ltd v Clyne (1967) 68 SR (NSW) 331 at 347; 87 WN (Pt 2) (NSW) 204 at 220. The existence of a cross-claim, even if it exceeds the amount of a mortgaged debt, will not by itself defeat a right to possession enjoyed by a legal chargee. In National Westminster Plc v Skelton (at 78), the principle was said to extend to the case where the mortgagor had a claim to unliquidated damages by way of equitable set-off. These general principles underlie the decision of the High Court in Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 165-167, 169." 28 In Horrobin fraud was alleged. Sheller JA said that in the present case before him, the summary judgment went further than order for possession as there was a defence of equitable set-off which went to the root of the respondent's title to recover. That being so there was a triable issue on the defence and summary judgment should not have been given. 29 According to Sheller JA, the existence of a cross claim, even if it exceeds the amount of the mortgaged debt, will not defeat a right of possession even when the mortgagor claims damages by way of equitable set-off. 30 In Lord v Direct Acceptance Corporation (NSWCA unreported, 25 November 1993) Sheller JA wrote the leading judgment with which Kirby P and Meagher JA agreed. Sheller JA discussed the equitable defence of set-off and says that the mere existence of a cross demand is not sufficient. Sheller JA says: "The cases (on equitable set-off) have been extensively examined by Woodward J in D Galambos and Son Pty Ltd v McIntyre (1974) 5 ACTR 10 and Giles J in AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 at 710-712. In Bank of Boston Connecticut v European Grain and Shipping Ltd [1989] AC 1056 at 1102, Lord Brandon of Oakbrook said that the concept of impeaching the title to the legal demand was not one familiar today and referred to the expression used in Government of Newfoundland v Newfoundland Railway Co (1888) 13 App Cas 199 at 212-213 that a claim may be set-off if 'flowing out of and inseparably connected with the dealings and transactions which also give rise to the claim'." 31 However, Sheller JA is of the view that "the concept of equitable set-off is better stated in Meagher, Gummow and Lehane, Equity, Doctrines and Remedies, 3rd ed (1992), par 3709(h) at 818, where the learned authors say that it is an indispensable requirement of equitable set-off that the set-off actually go to the root of, be essentially bound up with, and "impeach" the title of the plaintiff". 32 In the cross claim, the defendant seeks an order that the cross defendant provide to the cross claimant a facility in accordance with clauses 5.1 to 5.3 of the settlement deed, damages, interest and costs. The defendant submitted that the bank cannot rely upon its own breach to take advantage of the resultant breach on the part of the defendant - see Foran v Wight (1989) 168 CLR 385 and paragraphs 3-10 of the cross claim. The bank did not forward a copy of the new facility by 31 January 1999. There were defaults in the short term loan on 30 June 1997 and 31 January 1998. The plaintiff under the loan agreement was obliged to pay $25,000 on 31 January 1998. The balance of $5,672.57 was not paid until 6 February 1998. The short term facility had not been satisfied on 31 January 1998. 33 According to paragraph 5.2(d) of the deed, the bank need not provide the facility amount to the borrower until the short term facility had been satisfied. On 11 March 1998 the bank wrote to the defendant and informed her that as they delayed in preparing the documentation, she was excused from paying the principal due and owing in March 1998 and requested payment of the lesser interest only. This meant the defendant was relieved from the obligation to pay about $23,000 principal due between January and March 1998. The plaintiff has not paid any money due to the bank since 1 April 1998. In these circumstances, the bank cannot be said to have breached its agreement. 34 The mortgage was entered into in 1982 and no complaints have been made about the signing of this document. As the cross claim does not raise a pleading that goes to the root of the title or impeach the title, the plaintiff is entitled to possession of the property. 35 As previously stated, the further amended defence filed 25 November 1999 is struck out. I enter judgment of possession for the land described in paragraph 2 of the statement of claim. Costs should follow the event. The defendant is to pay the plaintiff's costs of this motion to date. The defendant has sought that the writ of possession issue in 3 months time whereas the plaintiff submitted that 4 to 6 weeks was a reasonable period. I have taken into account that the defendant has not made any payments since April 1998. As there are livestock on the property I am prepared to accede to the defendant's request in order to allow the livestock to be removed from the property in an orderly manner. 36 The court orders: (1) The amended defence filed 25 November 1999 is struck out. 37 Judgment It be adjudged that the plaintiff is entitled to possession of the property described in paragraph 2 of the statement of claim. 38 The further court orders: (2) The defendant to pay the plaintiff's costs of the motion to date. (3) Paragraphs 1(b) to (c) of the motion is stood over generally with liberty to restore on 7 days. (4) The plaintiff is granted to leave issue a writ possession such writ not to issue until 9 June 2000. ********** Last Modified: 09/25/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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