Commonwealth Bank of Australia v Newhook [2015] NSWSC 41

Supreme Court New South Wales

Medium Neutral Citation: Commonwealth Bank of Australia v Newhook [2015] NSWSC 41 Hearing dates: 24 September 2014 Decision date: 11 February 2015 Jurisdiction: Common Law Before: Button J Decision: (1)Pursuant to Rule 19.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the plaintiff is granted leave to file and serve a further amended statement of claim in the form annexed to the amended notice of motion of the plaintiff of 24 September 2014. (2)The notice of motion of the plaintiff of 24 September 2014 is otherwise dismissed (3)Pursuant to the provisions of Section 5(1)(b)(ii) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), the proceedings numbered 2013/00332480 commenced in the Common Law Division (Possession List) of this Court are transferred to the Family Court of Australia, Newcastle Registry. (4)The notice of motion of the second defendant of 30 May 2014 is otherwise dismissed. (5)The plaintiff must pay the costs of the second defendant of the two motions. Catchwords: CIVIL – Appropriateness of appointment of trustee for sale of real property when interests of tenants in common are subject to possible adjustment in the Family Court – application for transfer of proceedings seeking possession pursuant to a mortgage when proceedings are on foot between two tenants in common in the Family Court and in which mortgagee has been joined as a party Legislation Cited: Civil Procedure Act 2005 (NSW), s 64, s 135 Conveyancing Act 1919 (NSW), s 7 s 66G Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), s 5, s 5(1)(b)(ii) Uniform Civil Procedure Rules 2005 (NSW), r 13.1, r 19.1 Real Property Act 1900 (NSW) Cases Cited: General Steel Industries Inc v Cmr of Railways (NSW) [1964] HCA 69; 112 CLR 125 Reynolds v Medway [2013] NSWSC 206 Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440 Category: Principal judgment Parties: Commonwealth Bank of Australia (Plaintiff) William Patricia Newhook (First Defendant) Barbara Sabina Newhook (Second Defendant) Representation: Counsel: R Bellamy (Plaintiff) A D Justice (Second Defendant)

Solicitors: Gadens Lawyers (Plaintiff) NPR Legal (Second Defendant) File Number(s): 2013/332480

Judgment 1. Before the court are two notices of motion, one of the plaintiff and one of the second defendant, each seeking more than one order, and each requiring resolution by me.

Chronological Background 1. A concise statement of the background of the matter is as follows. By an amended statement of claim filed on 25 February 2014, the plaintiff (to which I shall refer for convenience as the Bank) seeks possession of land at 5 Milloo Close, located in the township of Windella in the Hunter Region of New South Wales. 2. That claim is based on the following propositions put forward by the Bank. The two defendants (who are husband and wife, and to whom I shall refer by name) are the registered proprietors of the land. By written agreement on 27 August 2007, the Bank provided Mr Newhook with an overdraft facility of $150,000 (the overdraft). That was secured by a guarantee by Mrs Newhook to the Bank (the guarantee). By written agreement on 2 April 2008, the Bank provided a line of credit facility with a credit limit of $100,300 to both Mr and Mrs Newhook (the line of credit). On 10 September 2007, Mr and Mrs Newhook granted a mortgage over the Windella property to the Bank to secure their obligations under the overdraft, the guarantee, and the line of credit. Mr and Mrs Newhook failed to meet their obligations under the overdraft, guarantee and line of credit, and accordingly defaulted on the mortgage. As a result, the Bank seeks to enforce its security by obtaining possession of the real property and selling it. 3. Mr Newhook and Mrs Newhook were joint tenants of the real property at Windella for many years. However, on 28 February 2013 their interests were converted into being tenants in common in equal shares. It is not clear what, if any, notice the Bank as mortgagee was given of that conversion. 4. Mr Newhook was declared bankrupt on 20 August 2013. His trustee in bankruptcy has not resisted the claim of the Bank, and it has obtained default judgment against him for possession of the property. 5. Mrs Newhook filed a defence to the claim on 15 April 2014. In a nutshell, her contention is that she executed neither the guarantee, the line of credit, nor the mortgage. Her implicit contention is that her signature was forged by some person on the relevant documents. The alternative position pleaded in her defence is that, if she did execute the documents, she did so in circumstances in which it would be unconscionable for the Bank to enforce its rights against her. 6. A report of a handwriting expert has been obtained by the solicitors for Mrs Newhook. That report suggests quite strongly that, at least with regard to the mortgage, she did indeed sign it. 7. Separately, on 25 May 2014 Mrs Newhook commenced proceedings in the Family Court of Australia against Mr Newhook. Her claim against him in that forum, in short, is that she has been badly deceived by him, and that their rights in various assets should be markedly adjusted in her favour. She has also joined the Bank in those proceedings. 8. In particular, in that Court she seeks a declaration that she has no liability pursuant to the guarantee, line of credit and mortgage; alternatively, that those instruments be set aside; an order altering the respective proprietary interests of Mrs Newhook, Mr Newhook and his trustee in bankruptcy; and an order restraining Mr Newhook from pursuing the possession proceedings. She also seeks orders restraining the Bank from pursuing the possession proceedings, enforcing any judgment obtained in the possession proceedings, or exercising its rights pursuant to the various instruments. 9. Finally, I was informed from the Bar table on the hearing of the motions that the real property in question is worth between $600,000 and $660,000 and the debt to the Bank was, as at that date, approximately $360,000.

Orders under discussion 1. Mrs Newhook moved upon a notice of motion filed on 30 May 2014. She sought the following three orders: 1. Pursuant to the provisions of Section 5(1)(b)(ii) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), the proceedings numbered 2013/00332480 commenced in the Common Law Division (Possession List) of this Court are transferred to the Family Court of Australia, Newcastle Registry. 2. That an injunction is granted whereby the Plaintiff, its servants and agents are restrained from proceedings to enforce any judgment against the First Defendant and/or the Second Defendant for possession of the property properly described as Lot 10 in Deposited Plan 263829 located at Milloo Close Windella NSW 2320 (the "Home" pending further Order [sic]. 3. An Order that the First Cross-Defendant/Plaintiff, Commonwealth Bank of Australia pay the costs of the Second Defendant/Cross-Claimant, Barbara Sabina Newhook incurred in these proceedings. 1. In an amended notice of motion filed 24 September 2014, the Bank sought the following orders: 1. Pursuant to Rule 19.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the plaintiff be granted leave to file and serve a further amended statement of claim in the form annexed and marked "A". (1A) Pursuant to Rule 13.1 of the Uniform Civil Procedure Rules, summary judgment for the plaintiff against the second defendant for the possession of: 1. the whole of the land comprised in folio identifier 10/263829 situated at and known as 5 Milloo Close, Windella in the state of New South Wales; 1. Alternatively, pursuant to 13.1 of the Uniform Civil Procedure Rules, summary judgment for the plaintiff as against the second defendant in respect of prayers 5, 6 & 7 of the plaintiff's claim for relief in the further amended statement of claim. 2. Costs. 3. Such further or other order as the Court considers appropriate. 1. The three prayers in the amended statement of claim referred to in proposed order 1 of the notice of motion of the Bank are as follows: (5) An order that the plaintiff be appointed a trustee for the sale of the Land (Trustee) pursuant to section 66G of the Conveyancing Act 1919 (NSW); (6) An order that the Land be vested in the Trustee, to be held by the Trustee upon a statutory trust for sale under Division 6 Part IV of the Conveyancing Act; (7) An order that the Land be sold in accordance with s 66G of the Conveyancing Act 1919 (NSW).

Notice of motion of the Bank 1. It is convenient to discuss first the orders sought in the notice of motion of the Bank.

Leave to file amended process? 1. As for order 1, that was opposed by counsel for Mrs Newhook before me on the basis that it was founded upon an inappropriate Rule (although he accepted that there is a clear power to amend in s 64 of the Civil Procedure Act 2005 (NSW)), and also because the amendment was said to be futile in any event. But to my mind, there is no reason why the Bank should not have leave to file in court the further amended statement of claim. Apart from anything else, it is impossible to understand the motion of the Bank without having recourse to that further document. Whether the process is futile depends on the determination of other orders. I propose to make order 1 in the notice of motion of the Bank.

Summary judgment? 1. As for order 1A, it was made clear in the hearing that an order for summary judgment was sought on the basis that the defence filed by Mrs Newhook is so weak as to be untenable, and that it is in truth "doomed to failure": see generally General Steel Industries Inc v Cmr of Railways (NSW) [1964] HCA 69; 112 CLR 125. 2. In seeking summary judgment against Mrs Newhook, the Bank seeks to shut the door of the Court against determination of the question of whether or not Mrs Newhook actually executed the documents, and, if so, whether she did so in circumstances of unconscionability. It may well be that her case is not a strong one with regard to the first question, especially in light of the opinion of her own expert. It is also noteworthy, as counsel for the Bank submitted, that she has not sought recourse against the fund that protects those who are disadvantaged in the Torrens title system by forgery and other malefaction. 3. Having said that, the fact that the defence pleads alternative propositions is not uncommon, and does not detract from the possible validity of her contentions. It is true that the opinion of the expert qualified by the solicitors of Mrs Newhook weakens her case, but to my mind it does not destroy it. Nor does the fact that, at this stage, it seems that she has not filed a claim against the Torrens Assurance Fund. 4. Of course, neither the handwriting expert, nor Mrs Newhook, nor her husband, nor any officer of the Bank was cross-examined on the hearing of the motions. In those circumstances, it is impossible for me to make determinations about the credibility of the contentions of Mrs Newhook. 5. To my mind, the defence filed by Mrs Newhook raises real questions of fact and law; namely, whether in truth she is the person who signed the documents giving rise to her asserted liability to the Bank, and, if so, how the circumstances in which that occurred should be characterised. I do not consider that the very high test for entering summary judgment against a defendant who has filed a defence in proper form has been made out. Accordingly, I do not propose to make order 1A in the notice of motion of the Bank.

Appointment of a trustee for sale? 1. As for order 2, it was explained at the hearing by counsel for the Bank that what is proposed is the sale of the property in order to permit enforcement of the judgment that the Bank has obtained against Mr Newhook, whilst protecting the interests of Mrs Newhook. 2. By the end of the hearing before me, counsel indicated that, in light of the possibility that the Family Court could ultimately determine that the interest of Mrs Newhook in the property should be greater than fifty per cent, the Bank would be content to hold the entirety of the sale proceeds on trust, and not merely fifty per cent of them. 3. Counsel for Mrs Newhook put forward a number of bases upon which he resisted the proposition that the course proposed is a constructive way forward that would justly protect the interests of both the Bank and his client. 4. The first was that it is not clear whether, in truth, Mrs Newhook is indebted to the Bank at all, and yet her home would be sold, presumably with vacant possession. 5. The second basis was that, even if it be accepted that, eventually, the Bank will be able to sell the property (in light of its default judgment against Mr Newhook, and the absence of dispute on the part of Mrs Newhook that Mr Newhook entered into a valid mortgage securing his indebtedness to the Bank), nevertheless it could well be that, at the time of sale, Mrs Newhook would seek to buy the interest of Mr Newhook that the Bank would be selling. The property is, after all, he submitted, the family home of many years' standing. And yet, as things stand, he submitted that Mrs Newhook is incapable of knowing what the purchase price should be. That is for the simple reason that she cannot know at this stage what, if any, adjustment there will be between the interest of her husband and herself. 6. In short, he submitted that it would be precipitous for the property to be sold at this stage, in light of the fact that Mrs Newhook is seeking an adjustment by way of enlargement of her interest in it. 7. The third was that, pursuant to s 66G(3)(a) of the Conveyancing Act, if only one trustee for sale is to be appointed, it must be a trustee company, as defined in s 7 of the same Act. And yet there is no evidence, he submitted, that the Bank falls within that description. 8. In written submissions filed after the hearing, counsel for the Bank accepted the force of the third proposition. Nevertheless, relying upon the approach taken by Sackar J in Reynolds v Medway [2013] NSWSC 206 at [56], he submitted that I should move substantively to make the order sought, but permit the Bank time to comply with the procedural issue identified. 9. To my mind, quite apart from those procedural difficulties successfully identified by Mrs Newhook with regard to compliance with the legislation by the Bank, it would be moving too quickly to permit the property to be sold. In this Court, it has been placed firmly in dispute whether Mrs Newhook signed the essential documents at all. As well as that, in the Family Court Mrs Newhook is asserting that the assets of the marriage should be markedly adjusted in her favour. I consider that those questions should be resolved before a sale takes place. 10. It is clear that the debt to the Bank, even if fully enforced against Mr and Mrs Newhook in due course, is not endangered for the time being by it outstripping the value of the property, thereby calling for expedition to protect its interest. 11. In the circumstances, I accept the submission of counsel for Mrs Newhook that it would be precipitous to make order 2 contained in the notice of motion of the Bank. I do not propose to make it.

Notice of motion of Mrs Newhook

Transfer to the Family Court? 1. Turning to the first order sought by Mrs Newhook, s 5 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) is as follows: 5 Transfer of proceedings (1) Where: (a) a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Supreme Court, and (b) it appears to the Supreme Court that: (i) (Repealed) (ii) having regard to: (A) whether, in the opinion of the Supreme Court, apart from any law of the Commonwealth or another State relating to cross-vesting of jurisdiction and apart from any accrued jurisdiction of the Federal Court or the Family Court, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the Supreme Court and capable of being instituted in the Federal Court or the Family Court, (B) the extent to which, in the opinion of the Supreme Court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the Commonwealth and not within the jurisdiction of the Supreme Court apart from this Act and any law of the Commonwealth or another State relating to cross-vesting of jurisdiction, and (C) the interests of justice, it is more appropriate that the relevant proceeding be determined by the Federal Court or the Family Court, as the case may be, (iii) (Repealed) the Supreme Court shall transfer the relevant proceeding to the Federal Court or the Family Court, as the case may be. 1. It can be seen that there are three considerations that I am required to take into account. The first two were the subject of concessions by counsel for Mrs Newhook; it was the last that founded the real contention before me. 2. As for the first consideration, the proceedings for possession brought by the Bank were perfectly capable of being brought in this Court, even leaving aside cross-vested or accrued jurisdiction. It is incontrovertible that the appropriate forum for proceedings for possession brought by a mortgagee seeking to enforce its security is the Supreme Court of New South Wales. Nor, of course, would it have been possible for the Bank to commence its proceedings seeking possession of real property in the Family Court. Counsel for Mrs Newhook did not submit otherwise; he also accepted that this factor militates against transfer. 3. As for the second consideration, the proceedings of the Bank do not call for consideration of Commonwealth legislation. To the contrary, they are founded on the Real Property Act 1900 (NSW). Nor are they founded upon cross-vesting by any mechanism; they come before this Court by way of its own jurisdiction. The second factor militates against transfer. Again, counsel for Mrs Newhook did not seek to persuade me otherwise. 4. As I have said, the real controversy before me was whether it would be in the interests of justice for the Bank's extant proceedings for possession against Mrs Newhook to be transferred to the Family Court, and linked up with her proceedings against Mr Newhook and the Bank. I was helpfully referred by the parties to a large number of authorities, the most relevant of which was Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440, in which Brereton J engaged, I respectfully consider, in a very learned and useful discussion of the approach to be taken to the question in circumstances such as these. 5. Counsel for Mrs Newhook submitted that, on balance, the interests of justice firmly call for transfer. In particular, he submitted that the powers of the Family Court are broad, and that it will be able to determine the dispute not only between Mr and Mrs Newhook, but also the closely related dispute between the Bank and Mrs Newhook, practically and expeditiously. 6. Counsel for the Bank did not submit that the Family Court does not have the jurisdiction to determine the dispute between his client and Mrs Newhook, in light of the broad powers with regard to property that that Court possesses. He did submit that it is not appropriate for the Bank to become entangled in a dispute between husband and wife that may be protracted. He also submitted that, in terms of showing that she has a real dispute with the Bank that requires determination in the Family Court, Mrs Newhook has done little more than file an originating process in that forum. 7. Counsel for Mrs Newhook submitted that, for various logistical reasons, it would be more convenient for the proceedings to be held in Newcastle (where the Family Court proceedings have commenced) as opposed to in Sydney (where the Supreme Court proceedings have commenced). But to my mind, those logistical considerations are not of great moment: I do not expect any trial of the matter to be a lengthy one, and the distance between those two cities is not great. 8. On the other hand, I think that the other submissions of counsel for Mrs Newhook about the interests of justice have more force. There will be an inevitable overlap with regard to evidential and legal questions if the proceedings remain bifurcated. The two sets of proceedings share the following issues: whether Mrs Newhook did indeed sign the documents in question; whether she has been deceived by her husband, both generally with regard to their financial affairs and in particular with regard to these transactions; whether any officer of the Bank has behaved in some way inappropriately; and what effect, if any, the behaviour of Mr Newhook towards Mrs Newhook should have upon the rights of the Bank against her. 9. In those circumstances, I think that it would be inappropriate, and a potential waste of time and money, for the proceedings to remain separated. It could also lead to inconsistent determinations about credibility, matters of fact, and even inconsistent verdicts. It could be difficult, if not impossible, for the proceedings brought by the Bank against Mrs Newhook seeking possession of her home conveniently to encompass all of the claims that Mrs Newhook has made against her husband. The question of any adjustments in the interests of Mrs Newhook and Mr Newhook in the real property and the question of the enforcement by the Bank of its security are inextricably linked. 10. Furthermore, there is nothing to suggest that transfer to the Family Court would prejudice the interests of the Bank by way of a marked delay, increased expense, or other considerations. And whilst I accept the submission of counsel for the Bank that his client should not become entangled inappropriately in the matrimonial disputes of others, to my mind the Bank is already caught up in the dispute: Mrs Newhook is effectively claiming that her husband forged her signature on documents that found her alleged indebtedness to the Bank. As well as that, the well-known emphasis given by the Family Court to mediation may speed resolution of these interlocking disputes. 11. It is true that the first two considerations argue against transfer. But having reflected on all of the mandatory considerations contained in s 5(1)(b)(ii), and especially the question of the interests of justice as illuminated by decisions of this Court, I consider that that final factor argues powerfully in favour of transfer. It leads me to the conclusion that it is more appropriate that these proceedings be determined by the Family Court rather than this Court. For that reason, I propose to make order 1 in the notice of motion of Mrs Newhook.

Injunction staying enforcement of judgment entered against Mr Newhook? 1. As for order 2, counsel for the Bank assured me from the Bar table that no steps would be taken to enforce the judgment of the Bank against Mr Newhook until my judgment was delivered in this matter. Now that that has occurred, it could be said that perhaps the position of Mrs Newhook should be protected by way of some sort of injunctive relief, as envisaged by that proposed order, or perhaps by the granting of a stay of the enforcement of the judgment of the Bank against Mr Newhook pursuant to s 135 of the Civil Procedure Act. 2. On reflection, however, and having received helpful supplementary written submissions from both parties after the conclusion of the oral hearing, I do not consider that such a step is necessary to protect the position of Mrs Newhook pending the resolution of all of the litigation. That is for the simple reason that the Bank has an order for possession against Mr Newhook. The judgment against him says nothing about a right of possession in the Bank against Mrs Newhook. 3. In short, because I am not persuaded that the existing judgment of the Bank against Mr Newhook derogates from the right to continuing possession of Mrs Newhook, I do not propose to make order 2 sought in the notice of motion of Mrs Newhook.

Costs 1. Neither motion succeeded in its entirety. Nevertheless, the motion of the Bank substantially failed, and the motion of Mrs Newhook substantially succeeded. In the circumstances, I consider that the Bank should pay the costs of Mrs Newhook of the two motions.

Orders 1. Pursuant to Rule 19.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the plaintiff is granted leave to file and serve a further amended statement of claim in the form annexed to the amended notice of motion of the plaintiff of 24 September 2014. 2. The notice of motion of the plaintiff of 24 September 2014 is otherwise dismissed. 3. Pursuant to the provisions of Section 5(1)(b)(ii) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), the proceedings numbered 2013/00332480 commenced in the Common Law Division (Possession List) of this Court are transferred to the Family Court of Australia, Newcastle Registry. 4. The notice of motion of the second defendant of 30 May 2014 is otherwise dismissed. 5. The plaintiff must pay the costs of the second defendant of the two motions.

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