SUPREME COURT OF QUEENSLAND CITATION: PARTIES: HBU Properties Pty Ltd & Ors v Australia and New Zealand Banking Group Limited [2015] QCA 95 HBU PROPERTIES PTY LTD AS TRUSTEE FOR THE SHANE MUNDEY FAMILY TRUST ABN 58 827 619 535 (first appellant) SHANE IAN MUNDEY (second appellant) JODIE NYREE MUNDEY (third appellant) v AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ABN 11 005 357 522 (respondent) FILE NO/S: Appeal No 8866 of 2014 DC No 3887 of 2013 DIVISION: PROCEEDING: Court of Appeal General Civil Appeal ORIGINATING COURT: District Court at Brisbane Unreported, 22 August 2014 DELIVERED ON: 29 May 2015 DELIVERED AT: Brisbane HEARING DATE: 18 May 2015 JUDGES: ORDERS: CATCHWORDS: Holmes and Philippides JJA and Mullins J Separate reasons for judgment of each member of the Court, each concurring as to the orders made 1. Appeal dismissed. 2. The first and second appellants pay the respondent s costs of the appeal and the costs against the first appellant be assessed on the indemnity basis. TORTS TROVER AND DETINUE POSSESSION OR RIGHT TO POSSESSION RIGHT TO POSSESSION GENERALLY where first appellant rented a motor vehicle from the respondent for a monthly rental over five years and a final payment amount to obtain ownership of the vehicle where obligations of first appellant under the rental agreement were guaranteed by second and third appellants where first appellant defaulted under the rental agreement by not making monthly payments and by the appointment of receivers and managers where respondent terminated the
COUNSEL: SOLICITORS: 2 rental agreement and made demand for possession of the motor vehicle where primary judge ordered the respondent recover possession of the motor vehicle where appellants claimed that the debt under the rental agreement had been discharged as a result of funds received by the respondent in enforcing a loan to a subsidiary of the first appellant whether respondent entitled to possession of the motor vehicle Uniform Civil Procedure Rules 1999 (Qld), r 209, r 242 Lee v Australia and New Zealand Banking Group Ltd [2013] QCA 284, considered S I Mundey in person for the appellants D S Piggott for the respondent S I Mundey in person for the appellants DibbsBarker for the respondent [1] HOLMES JA: I agree with the reasons of Mullins J and the orders she proposes. [2] PHILIPPIDES JA: I agree with orders proposed by and the reasons of Mullins J. [3] MULLINS J: HBU Properties Pty Ltd as Trustee for the Shane Mundey Family Trust entered into a rental agreement with the respondent bank dated 12 April 2010 for the hire of a Porsche motor vehicle for which monthly rental of $3,500.06 was to be paid for 60 months with a final payment of $93,182 upon which the bank would transfer the ownership of the vehicle to HBU Properties. The obligations of HBU Properties under the agreement were guaranteed by its directors Mr and Mrs Mundey pursuant to a written guarantee and indemnity which was also dated 12 April 2010. [4] HBU Properties did not make the monthly payments pursuant to the rental agreement from October 2012 onwards. On 4 June 2013 receivers and managers were appointed to HBU Properties. [5] The bank served a notice of termination of the rental agreement and a notice demanding possession of the vehicle on HBU Properties on 5 September 2013. The bank claimed the amount owed under the rental agreement as at 5 September 2013 was $189,871.97. [6] When HBU Properties did not deliver up the vehicle in response to the notice, the bank on 10 October 2013 filed an originating application in the District Court against HBU Properties and Mr and Mrs Mundey seeking an order that it be granted possession of the vehicle. The bank relied on affidavits from two employees that dealt with the history of the transactions under the rental agreement, the default, the termination and the unsuccessful demand for possession of the vehicle. [7] That application was heard by the learned primary judge on 22 August 2014. Mr Mundey (who is not a lawyer) appeared on behalf of HBU Properties, his wife and himself and applied for an adjournment which was refused. Mr Mundey did not seek to cross-examine the bank s deponents. After hearing submissions, the primary judge ordered that the bank recover possession of the vehicle and that HBU
3 Properties and Mr and Mrs Mundey pay the bank s costs of the application on an indemnity basis. The primary judge s reasons [8] The primary judge noted that provided there was default within the meaning of clause 10.1 of the rental agreement, the bank had an entitlement to terminate the agreement. The primary judge found two grounds for default under the rental agreement either of which would support termination: the failure to make the monthly payments and the appointment of receivers and managers. [9] In respect of Mr Mundey s argument that payments had been received by the bank from another company Moreton Bay Developments No. 5 Pty Ltd (which was wholly owned by HBU Properties) that should have been credited by the bank to the rental agreement, the primary judge found, if there had been surplus moneys as a result of the transactions with Moreton Bay Developments, those surplus moneys belonged to Moreton Bay Developments. [10] The primary judge concluded the bank was entitled to terminate the rental agreement, had done so, and was therefore entitled to possession of the vehicle as the owner of the vehicle. The primary judge also noted that there was no claim in the proceeding other than for possession of the vehicle, so no question of any set-off in respect of any money claim arose. Grounds of appeal [11] There was no challenge to the primary judge s construction of the terms of the rental agreement. The grounds of appeal were directed at the conduct of the bank and can be summarised as: 1. the bank had received surplus funds on account of the debt owed by Moreton Bay Developments that should have been applied by the bank in full repayment of the debt owing under the rental agreement; 2. the primary judge erred in refusing to adjourn the hearing of the application due to the failure of the bank to provide the documents requested by Mr Mundey; 3. the bank breached its obligation under clause 31.14 of the Code of Banking Practice. Full repayment of the debt under the rental agreement [12] The main argument pursued by the appellants was the bank had received sufficient funds from its enforcement of securities granted to it by Moreton Bay Developments which it was bound to apply to repay the debt of HBU Properties under the rental agreement. [13] In June 2012 Moreton Bay Developments had borrowed $1,340,000 from the bank under a business loan for which the securities included an existing mortgage over real property situated at Eight Mile Plains, a guarantee and indemnity from Mr Mundey and a corporate guarantee and indemnity from HBU Properties. Moreton Bay Developments defaulted under the business loan on 30 October 2012 and the bank appointed agents to exercise its power of sale over the property at Eight Mile Plains. That property was sold on 20 June 2013 for $2,450,000.
4 [14] There was a settlement statement in the material before the primary judge (together with supporting bank statements and emails) that showed the disbursement of the proceeds from the sale of the Eight Mile Plains property. Even though the mortgage granted by Moreton Bay Developments was not in evidence before the primary judge, Mr Mundey was permitted on the appeal to provide the court with a copy of the mortgage and standard conditions to which references had been made in the appellants outline of argument. [15] It is mere assertion on Mr Mundey s part that the funds that were applied by the bank in discharge of the mortgage granted by Moreton Bay Developments must have been sufficient to cover the debt under the rental agreement and that the bank was obliged by the terms of the mortgage to pay out the debt of its parent company HBU Properties under the rental agreement. [16] First, the mortgage granted by Moreton Bay Developments did not secure the debt owed by HBU Properties under the rental agreement. Even though HBU Properties was a guarantor of Moreton Bay Developments debt under the mortgage, Moreton Bay Developments was not liable under its mortgage for the separate debt of HBU Properties under the rental agreement. That debt did not fall within the definition of secured money under the mortgage. [17] Second, there is no provision in the mortgage that placed any obligation whatsoever on the bank to apply any funds from the sale of the Eight Mile Plains property to the debt owed by HBU Properties under the rental agreement. At the settlement of the sale of the Eight Mile Plains property, a bank cheque of $141,288.35 in favour of HBU Properties was handed to Mr Mundey. There was also an amount of $93,500 from the deposit paid into court by the bank s agents pending resolution of a dispute between Moreton Bay Developments and the third mortgagee Prime Mortgages Pty Ltd as to the entitlement to those funds. There is no inference that can be reasonably drawn in HBU Properties favour that these transactions showed that the bank must have already applied funds in full discharge of HBU Properties debt under the rental agreement, when the availability of these funds arose, as a result of the enforcement of the security granted by Moreton Bay Developments that supported the business loan granted to that company. [18] This main argument of the appellants is speculation on their part. It is for Moreton Bay Developments to pursue any accounting that it wishes to against the bank in respect of the disbursement of the proceeds from the sale of the property at Eight Mile Plains. Failure to adjourn the application [19] The bank elected to file an originating application and supporting affidavits, rather than commencing a proceeding by claim and statement of claim. That is explicable, because of the relatively straightforward nature of the bank s claim to recover possession of the vehicle on the termination of the rental agreement, without complicating the proceeding with a claim for debt. HBU Properties and Mr and Mrs Mundey filed a notice of intention to defend on 26 May 2014. That was irregular and did not have the effect of changing the nature of the proceeding to one conducted on pleadings. On 19 August 2014 Mr Mundey filed a document entitled List of Documents that purported to seek from the bank full disclosure of legal files relating to costs charged to Moreton Bay Developments and HBU Properties by the bank s solicitors and a notice of non-party disclosure against a solicitor
5 employed by the bank s solicitors and employees of the bank seeking the documents described in the notice, including the valuation of Moreton Bay Developments property that was sold by the bank and all records relating to that sale. [20] Mr Mundey s complaint to the primary judge was that he had not received any documents or assistance from the bank, was seeking disclosure through the documents that had been filed on the eve of the final hearing of the application, and sought the adjournment to enable that to occur. The solicitor who appeared on behalf of the bank before the primary judge opposed the adjournment. [21] The primary judge was aware that the application had been adjourned on numerous prior occasions and was not prepared to adjourn the hearing any further to enable HBU Properties and Mr and Mrs Mundey to obtain the documents they were seeking in their documents filed on 19 August 2014. [22] Disclosure of documents does not apply to a proceeding started by application, in the absence of a direction from the court: r 209(1)(c) of the Uniform Civil Procedure Rules 1999 (Qld). There were no pleadings to distil the issues that circumscribe non-party disclosure under r 242(1)(a) of the UCPR. In view of the limited nature of the relief sought by the bank in its application and the inappropriateness and lateness of the disclosure requests, there was no error on the part of the primary judge in requiring the final hearing of the application to proceed. Code of Banking Practice [23] The relevant provision of the Code of Banking Practice on which the appellants rely is concerned with the enforcement of judgments against guarantors after a judgment debt has been obtained against, and not been paid by, the principal debtor. It therefore does not relate to this proceeding which was to pursue recovery of the vehicle the subject of the rental agreement and resulted in judgment for possession of the subject vehicle. Orders [24] It follows the appeal must be dismissed. The bank sought costs against all parties on an indemnity basis. [25] Although Mr Mundey announced at the outset of the hearing of the appeal that he appeared on behalf of all appellants, the notice of appeal was not signed by Mrs Mundey, there was no written authorisation given by her in favour of Mr Mundey to appear on her behalf, and there was no appearance by her on the appeal. As there is a doubt whether she is, in fact, a party properly joined to the appeal, it is appropriate not to make any costs order against her. [26] The bank is entitled to claim costs on an indemnity basis under clause 11.1.2 of the rental agreement with HBU Properties. The contractual entitlement of a party to indemnity costs is relevant to the exercise of the discretion whether to order costs on the standard or indemnity basis in favour of that party: Lee v Australia and New Zealand Banking Group Ltd [2013] QCA 284 at [9]. The schedule to the guarantee and indemnity signed by Mr and Mrs Mundey was in evidence, but the terms referred to as being attached to the schedule were not. It is therefore not possible to confirm the basis of the contractual entitlement of the bank to costs against Mr Mundey. The exercise of the discretion to order costs on an indemnity basis in reliance on the
6 bank s contractual entitlement should therefore be limited to the costs payable by HBU Properties. [27] The orders which should be made are: 1. Appeal dismissed. 2. The first and second appellants pay the respondent s costs of the appeal and the costs against the first appellant be assessed on the indemnity basis.