Ronan & Anor v Australia & New Zealand Banking Group Ltd & Anor M58/2000 [2002] HCATrans 453 (13 September 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M58 of 2000

B e t w e e n -

JOHN THOMAS RONAN and MARGARET MARY RONAN

Applicants

and

AUSTRALIA & NEW ZEALAND BANKING GROUP LTD

First Respondent

GERARD MICHAEL RONAN

Second Respondent

Application for special leave to appeal

KIRBY J

HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 13 SEPTEMBER 2002, AT 1.01 PM

Copyright in the High Court of Australia

MR P. BINGHAM: May it please the Court, I appear for the applicants. (instructed by Falcone & Adams)

MR M.L. SIFRIS: May it please the Court, I appear for the respondent. (instructed by Minter Ellison)

KIRBY J: I have a certificate from the Deputy Registrar informing the Court that Cinque Morrow, the solicitors from the second respondent, on behalf of the second respondent, have indicated that the second respondent submits to any order of the Court, save as to costs. Yes, Mr Bingham.

MR BINGHAM: Thank you, your Honour.

KIRBY J: Yes, Mr Bingham.

MR BINGHAM: Your Honours, the Court has the written summary of argument.

KIRBY J: Yes, we have that.

MR BINGHAM: Thank you, your Honour. I propose to address argument to the second and the seventh questions.

KIRBY J: Yes, we have read the supplementary submissions as well.

MR BINGHAM: I am grateful, your Honour.

I propose to address argument only as to the second and seventh questions. The second question is as to the interpretation of clause 3(d) of the mortgage deed and the seventh question is as to the mortgagee's duties. If I could turn first to the argument in paragraphs 4 to 9 of the supplementary outline?

KIRBY J: Paragraphs 4 to 9, yes.

MR BINGHAM: That deals with paragraph 3(d) of the mortgage deed. Paragraph 3(d) of the mortgage deed can be found at application book page 79. If the view of clause 3(d) taken by the Court of Appeal to be correct then a personal representative who gave the Bank a death certificate and endorsed it, the estate now terminates any liability under the guarantee would continue to be liable because there is no signature but a personal representative who wrote to the Bank and said, "The testator is deceased but I am compelled by the will to continue the guarantee" and signed it, that would thereby terminate the guarantee. In my submission, that cannot be right.

The purpose of providing in the guarantee mortgage for a notice is, in my submission, merely to give the Bank certainty as to the fact of the death and to avoid an argument that the guarantee mortgage is revoked merely by death and not by the knowledge of the Bank of the death. This is not a provision like Re Silvester where the relevant provision in the mortgage required not notice of the death but actual termination of the liability.

The provision here merely provides the Bank with notice of the death and not - it does not require a specific determination of the liability. In this deed, the guarantee mortgage terminated automatically on notice being given of death under the signature. In my submission, there is every reason to take the view that constructive notice is adequate here as it was in Coulthart v Clementson.

The reason for that, your Honours, is that a personal representative who was unaware of the mortgage, before they could give notice in the appropriate form would have to get the mortgage - they would have to notice clause 3(d), they would have to interpreted it in the way the Court of Appeal did before they could see the necessity for providing not only notice of the death but notice of the death signed by the personal representative.

Such a person, if they did not go through that formula, may well assume that the Bank, having had notice of the death - the guarantee mortgage was thereby terminated and the fact that the Bank did have notice of the death is evident from the fact that the bank wrote to the brothers and asked them to do various things relating to closing the accounts of the deceased, paying off the balance, starting a new account, taking money from that new account and paying off the old account.

KIRBY J: Yes, but you are seeking to argue in this Court the construction and application of a clause in the mortgage in very peculiar factual circumstances of the successive partnerships in this case where the Court of Appeal has gone through the question, given its construction. It does not sound a special leave point to me. Perhaps you can demonstrate why it is a matter of importance but these were very peculiar circumstances of succession. It really is a matter where you have had your trial and you have had your appeal.

MR BINGHAM: Yes.

KIRBY J: To get into this Court you have to show something special. It does not sound special, except that the fats are very special, and that would not really be in your favour.

MR BINGHAM: Yes. Well, perhaps the circumstances here are not so unusual, your Honour. Mortgage for a partnership is not an uncommon thing and what happens when one partnership merges into another partnership is of some significance. There is also the issue, your Honour of the possession of a personal representative and what duties the personal representative has on the death of the testator, so there is that dimension to it as well, your Honour.

KIRBY J: In the old days when the High Court had to receive cases, that might have been the sort of case that would have sparked the interest of some of the Justices but now we have rights or duties to select cases for special leave which implies there is something special about it. It is really just a matter of construction of this particular clause in very peculiar fact circumstances.

MR BINGHAM: There is the issue of the administration of justice in this particular case which your Honour obviously has - - -

KIRBY J: I think there you are on rather shaky ground.

MR BINGHAM: Yes.

KIRBY J: I think you had better pass to your next legal point.

MR BINGHAM: If your Honour pleases.

KIRBY J: The only point I must say to you that struck me as a possibly argument point was your last concerning the sale to the third party, Mr Mayer.

MR BINGHAM: Mr Mayer.

KIRBY J: You develop orally whatever you want to say but that was the only one that I thought there might be something in it. I do not want to hold out too much hope to you.

MR BINGHAM: I will make the submission, your Honour. My submission on this point is that when one looks at the entirety of the deed between the Bank and the brothers, Gerard and John, it is clear enough that even if there was no agreement between the Bank and Ronans, if I could call them that, to the effect that the property would be sold to those brothers at the higher of the two valuations but, nevertheless, the Bank clearly knew that the brothers were willing to pay the higher of two valuations. Now, two valuations were received. The higher of them was $337,000.

KIRBY J: But the Court of Appeal pointed out that the Bank had had "nothing but trouble". That is on page 97 dealing with an earlier ground - from your clients.

MR BINGHAM: Yes. Nothing but trouble in the sense that there was a partnership dispute going - - -

KIRBY J: The amount of difference was trivial. It was $5,000, was it not?

MR BINGHAM: No, your Honour. The sale price, in the end, was $280,000. The offer was $337,000. The Court of Appeal does mention that - - -

KIRBY J: It is not a very large sum in the big picture of this relationship.

MR BINGHAM: Well, $57,000, plus interest, your Honour, because interest accrued on the overdraft amount.

KIRBY J: It still does not sound large to the High Court of Australia.

MR BINGHAM: But, your Honour, in my submission, the amount of dollars is not the final arbiter - - -

KIRBY J: No, it is not and if there were an important principle there, but the Court of Appeal came to the view that your clients had not been reliable persons to deal with; they were asking for a 60-day leeway; there had been years of difficulty with them, and they had the bird in hand with Mr Mayer, so, why was that not a reasonable thing for the Bank or at least why was it not something the Bank could do without being in breach of the Act?

MR BINGHAM: Would that not apply, your Honour, to every mortgagor, essentially? Could not the Bank say - - -

HAYNE J: No, because it is a decision about fact, is it not?

MR BINGHAM: Yes.

HAYNE J: Is that not the principle difficulty that confronts you in the leave application? The principles are well established, are they not?

KIRBY J: That is what the Court of Appeal said.

MR BINGHAM: I am sorry, your Honour. Could I suggest this that in virtually every case where there was a mortgagee sale, the mortgagee would be able to say, "Well, the mortgagor has given me trouble. I am not paying". So that would mean, if the mortgagee was able to, as it were, discriminate against the mortgagor by saying, "Well, because he has not paid, therefore I have had trouble, therefore I will exclude him from being able to bid" and, in this case, the Ronans were essentially excluded from being able to bid because what happened was they offered $337,000 and the response from the Bank was, "We will only sell you this piece of land for $420,000, plus, an indemnity against action from Patrick Ronan".

Now, that is tantamount to saying, "You cannot bid on the property". If a bank can say whenever it has had to take the trouble to sell a piece of property because the mortgagor has not paid, if the bank can say, "Well, because you have given me trouble, because you have not paid in accordance with the mortgage, therefore you can be excluded from essentially bidding on the property", then that will mean that prices of mortgage property sold will thereby be depressed, in my submission.

KIRBY J: I take the force of that submission but at page 103, Justices Ormiston and Batt said:

There was no dispute as to the principles applicable so that the issue is whether the learned judge was correct in not holding that the Bank had failed to act -

in the terms:

of the Transfer of Land Act -

Now, we would not normally bring up a case where there was agreed to be no dispute on the principles because then what are we doing at the third level, we are reviewing concurrent holdings of fact both at trial and on the appeal by way of rehearing.

MR BINGHAM: In my submission, there can be no dispute, in one sense, as to the principles because section 77 of the Transfer of Land Act requires attention to be given to the interests of the mortgagor.

KIRBY J: Yes.

MR BINGHAM: But, as Mr Justice Lush said in Henry Roach (Petroleum), it is the application of the notion of what the interests of the mortgagor - - -

KIRBY J: But what would we be doing? We would simply be going through all the facts of the matter. We could not just confine them to the facts relevant to the eventual transfer, we would have to go back into all of the facts of the relationship because that is what the Bank really was relying on and that is what the Court of Appeal said justified what was done in this particular case. So, again, it is peculiar fact circumstances where the Court of Appeal has said that there was no dispute as to the principles applicable.

MR BINGHAM: Yes.

HAYNE J: Can I ask a question of fact? Was the sale price obtained sufficient to extinguish the debt owed to the Bank?

MR BINGHAM: The answer to that is "No", your Honour.

HAYNE J: Therefore, the complaint you make is a complaint that your client was denied the opportunity - and I am trying to frame it in neutral terms - to offer to pay more in satisfaction of the debt which it owed while at the same time retaining the land. That is what it comes to, does it not?

MR BINGHAM: That is right, and in retaining the land, of course, you can make money from the land.

HAYNE J: And the importance of that to the mortgagors is fundamental. I well understand that. I do not for a moment deny the importance to them of the land but if we are looking at this case as one of asserted injustice in the individual circumstances, is it relevant to take into account that there was a deficiency on realisation of the security?

MR BINGHAM: In my submission, no, because the question one is addressing is what are the duties of the mortgagee in these circumstances and if it is a prerogative of the mortgagee to be able to say, "Well, you, mortgagor, you have given me some trouble and therefore I am not going to allow you to bid" then that, surely, is an alteration of what one understandings by taking into account the interests of the mortgagor.

Could I also put the following points. The Bank says, "Well, we were not going to accept an offer of $337,000 from the Ronans because they were unreliable", why then did they offer to purchase from the Ronans at $420,000? Exactly the same considerations apply. If they did not accept that the Ronans would pay the $337,000, for example, it is quite inconsistent with that to say, "We will sell you the land for $420,000". Also, if I could make the following point, when one looks at the documents purporting to support the notion that the Bank acted as it did because the mortgagors were unreliable, when one looks at those documents one does not find that assertion. It is the sort of assertion that can be made in an ex post facto fashion.

Your Honours, in my submission, the question of what the content of the duty of mortgagees in the very common situation where the mortgagor makes or wishes to make an offer to buy the land, what the content of those duties are is not a matter which is the subject of recent or direct authority.

KIRBY J: The content of the duty is ultimately stated in the Transfer of Land Act, is it not, in very general terms?

MR BINGHAM: Yes, that is the point, it is very general.

KIRBY J: That is simply because every fact situation is going to be somewhat different and then you have to ask, "Well, how did the facts fall out in this case?" There was a long history of difficulty, so I feel the Court of Appeal was entitled to say, "Well, against the background of that long history the bird in hand from Mr Mayer which was certain and sure was worth a little bit more from your client, especially given your client was in any case liable for any undervaluation of recovery.

MR BINGHAM: Your Honour $57,000 is not a little bit more. That is the difference between $337,000 and the $280,000 eventually paid. I would also say, your Honour, that although section 77 sets out the relevant duties in general terms, that is really only useful when one sees it in the context of the particular facts. Your Honour, I cannot take it any further.

KIRBY J: Your written submissions were very helpful to us and we have read those. The Court does not need the assistance of the respondent.

The applicant originally agitated seven special leave questions. Two were withdrawn, leaving five that were argued. They fell into two categories: the first concerned a submission of imputed bias on the part of the trial judge by reason of the fact that before trial the judge revealed a "moderate" and "indirect" shareholding in the respondent Bank. It seems that the judge's wife held a parcel of shares in the Bank.

The learned judge disclosed the fact of the holding. He indicated that he was "minded" to disallow the applicant's objection to his participation in the trial. He offered to give the applicants' counsel more time to look at the cases on the point. Counsel said that that course would not be necessary. Even if this did not amount to a waiver of the objection, the supervening decision of this Court in Ebner v The Official Trustee in Bankruptcy [2000] HCA 63; (2000) 75 ALJR 277 now covers the point. The attempt to distinguish that authority fails. There is no prospect of success on that ground.

The second category of grounds raised questions concerning the rights and duties of the Bank as mortgagee. The decision of the Court of Appeal on those grounds turns on questions of fact for which there was evidence at trial, and the legal issues do not raise sufficient doubt to warrant the grant of special leave.

Accordingly, special leave is refused, with costs.

MR SIFRIS: Your Honour, may I make a submission in relation to costs? There was an application. It was indicated that the Bank was seeking solicitor and client costs. I can articulate the reason very quickly.

HAYNE J: I take it, it is founded in the terms of the mortgage instruments.

MR SIFRIS: In terms of the mortgage and there was an application for a stay before - - -

KIRBY J: Why should the High Court become the instrument of your recovery of entitlements under the mortgage? That is between you and the mortgagor. So, I think we would simply make the ordinary orders as to cost and you may have other separate entitlements which you can pursue, if you choose to do so, in the normal fashion. The order that we made is confirmed. Special leave to appeal is refused with costs.

AT 1.23 PM THE MATTER WAS CONCLUDED