Crawford v Shakespeare Haney Securities Ltd [2008] QCA 363

[2008] QCA 363 COURT OF APPEAL MUIR JA Appeal No 11325 of 2008 JOSEPHINE MARY CRAWFORD Appellant and SHAKESPEARE HANEY SECURITIES LIMITED Respondent (ACN 087 435 783) BRISBANE DATE 20/11/2008 JUDGMENT MUIR JA: The applicant seeks a stay of the order of a Judge of the Trial Division of the Supreme Court, made on 3 November 2008, ordering that the respondent recover vacant possession of land at Admiralty Drive, Paradise Waters. The respondent is the registered mortgagee of the land, which has a large and expensive dwelling house constructed on it. The evidence reveals that, in September 2008 the property was valued at $6,750,000 by a valuer instructed by the respondent. Prior to that, it had been valued at $10,000,000. The evidence reveals that, as at 18 November 2008, the principal outstanding under the subject loan was $6,210,000, and that interest in the sum of $363,577 had accumulated. That evidence also showed the following. The applicant was in default under the mortgage granted by her in favour of the respondent and that, in consequence, the respondent gave the appropriate notices under the Property Law Act 1974 (Qld) with a view to exercising power of sale. The applicant failed to deliver out possession as required. For about 10 to 15 years prior to 2004, the applicant, through a corporate trustee, carried on a business of building and selling dwelling houses on land which -- 1 of 6 -- 2 it acquired for that purpose. The applicant swears that her modus operandi in respect of the subject land was different in that she had purchased the land in her name (as was the case) as her principal place of residence. She was, she swears, an owner-builder and moved into possession with her family. However her intention was to sell the house as soon as she could, although intending to live in it "for however long it took to find the right buyer". Before the primary Judge, the applicant argued that there had been various contraventions of the Consumer Credit Code in respect of the mortgage documentation and further that the respondent had failed to serve the statutory default notices under s 80 of the Code. The applicant's argument was based on the proposition that she acted as a private consumer when negotiating and taking up the loan. However the reasons of the primary Judge point out that the applicant obtained the loan after having provided the respondent with a declaration under s 10 of the Consumer Credit Regulations. It declared that the credit was to be provided "wholly or predominantly for business or investment purposes (or both)". The statutory declaration was witnessed by a solicitor. Officers of the respondent swear that they relied on the declaration in approving the loan and that the respondent's policy was not to make loans regulated by the Code. The applicant contended that, notwithstanding the declaration, the credit was required for purposes which were "predominantly for personal, domestic or household purposes", and that the respondent was aware of this as the applicant had informed Ms Sly, the employee of the respondent with whom she dealt, that this was so. Under s 11(2) of the Code, credit is presumed conclusively not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares before entering into the credit contract that the credit is to be applied predominantly for business or investment purposes. The presumption however, does not apply if the credit provider knew or had reason to believe at the time the declaration was made that the credit was in fact to be applied wholly or predominantly to personal, domestic or household purposes. -- 2 of 6 -- 3 The primary Judge concluded that, even on the applicant's version of the facts, the purpose for the provision of credit was predominantly for business purposes. He remarked, "It is difficult to escape the conclusion that living in the house while a buyer is found is somewhat incidental to the underlying strategy". It does not appear to be disputed that the house was effectively placed on the market once completed. The application is made under r 761 of the Uniform Civil Procedure Rules 1999 (Qld) and is supported by the following grounds. The property, in substance, is the applicant's only asset and its sale will most probably result in her insolvency. It is said by Mr Garlick, who appeared pro bono, that the applicant was "indigent". Other grounds are that: a. The primary Judge overlooked a number of matters which favoured the conclusion that the credit was provided for personal or domestic purposes, or that fresh evidence before this Court would support that conclusion. b. The state of the documentation in relation to the declarations or declaration was such as to support a conclusion that no declaration was made before the credit contract was entered into. Reference in this regard was made to the declaration under section 10 of the regulation, ostensibly signed on 28 April, 2006. A witness certificate in respect of the same declaration baring the date 26 April 2006, the mortgage baring the date 28 April and a loan facility deed dated 3 May 2006. c. Other material, some of which were not before the primary Judge, were pointed to as evidence that the respondent must have been aware that the credit was for private or domestic purposes. d. The provisions of s 103 of the Code, which empower the Court to award civil penalties which may not exceed interest charges payable under the contract from its inception. The original principal sum was $5,200,000. I accept that, if the material not before the primary Judge and before me is received on appeal, the applicant is not without some prospects of success on the appeal. In particular, and -- 3 of 6 -- 4 dependant on the evidence of the applicant's mental condition at the time of the hearing at first instance, it may be argued that she was incapable of properly representing herself and, at least, was incapable of recognising the extent of her disability and incapacity and thus the desirability of seeking an adjournment of that hearing. I mention that the foregoing takes what I think may be justifiably regarded as a somewhat charitable approach to the state of the evidence. Much of the material relied on before the primary Judge was not properly admissible and/or had very little evidentiary value. The same observations can be made of much of the material before me. The arguments advanced by Mr Couper of Senior Counsel, who appears with Ms Magee for the respondent, are that the respondent, having succeeded at first instance, is entitled to the fruits of its judgment. There is little doubt about the correctness of the decision. The amount of the mortgage debt is increasing and, consequently, the value of the respondent's security is diminishing. In that regard, it is submitted that there may well be a shortfall on the sale of the property. Furthermore, it is submitted that the applicant lacks the financial means to meet any shortfall and to pay the respondent's costs. Another submission is that nothing has been pointed to on behalf of the applicant which could deprive the respondent of the right to recover the principal sum, and that the prospects of it not being entitled to recover interest are remote at best. A stay may be granted for good cause, and the applicant bears the onus of showing that the case is an appropriate one for the grant of a stay, Croney v Nind [1999] 2 Qd R 343. An important consideration on stay applications is often a prospect that, unless a stay is granted, the applicant will be unable to be restored to its rightful position, should it be successful on appeal. That does not appear to be the position here, subject to qualifications which I will later make. There is no question of the respondent's financial standing or solvency, save as may be inferred from the general state of economic chaos which prevails. -- 4 of 6 -- 5 The dwelling was intended to be sold by the applicant. The respondent wants it sold. Interest is accruing at the rate of almost $100,000 a month. Nothing has been put forward on the applicant's behalf to lead me to the conclusion that the respondent may not be able to recover the principal sum, nor does it appear that the interest, or most of it at least, will not be payable. If a stay is granted, the marketing of the property will be delayed and both parties may be disadvantaged. As Mr Couper points out, if it appears that the applicant's financial position will be in peril by the sale or by the respondent's financial status, the applicant can make application to this Court on proper material for appropriate relief. To advance that process, I direct that within five days of today's date - and, Mr Couper, I will give you leave to make submissions about this order if you wish - that, within five days of today's date, the respondent serve and file an affidavit by a director of the respondent swearing to its assets and liabilities and those matters known to such director which bear or may reasonable bear materially on the capacity of the respondent to repay or refund the interest on the subject land, should that be ordered. I make that direction not because of any anticipation that such relief may be ordered, but merely by way of a convenient yardstick to be adopted in ensuring that there is some protection for the applicant in being able to recover moneys which may perhaps be lost as a result of the sale of the subject property. I further order that, no less than 24 hours before entering into any contract for the sale of the subject property, the respondent notify the applicant in writing at the address of the applicant (if any) notified to the respondent in writing by the applicant of the respondent's intention to enter into a contract and provide the applicant with a copy of the proposed contract. It seems to me that those matters are capable of providing legitimate protection to the applicant's position, but that otherwise, for the reasons I have given, it would not be -- 5 of 6 -- 6 appropriate to order a stay. I order that the costs of an incidental to this application, unless otherwise ordered on the hearing of the appeal, be the parties' costs in the appeal. ... MUIR JA: I order that the application be dismissed. I also wish to thank counsel for their submissions and note in particular the great amount of work which went into the submissions on behalf of the applicant, which submissions, I think it fair to say, covered every meritorious point which could have been made on the applicant's behalf. MR COUPER: Might we place one thing on the record? Our learned friend raised before we adjourned the suggestion that it was public knowledge that the Shakespeare Haney Securities Limited Fund was in some way frozen. Because we don't know who reads these transcripts, we wish to place on record that our instructions are that there is no such freeze on any fund administered by----- MUIR JA: I see, I wouldn't draw any adverse inference from a freeze in that highly reputable funds have to take that course in order to protect investors in this economic climate. So, it is not something upon which I would have placed any store in any event. MR COUPER: No, your Honour. It might be in commercial sensitivity, I might think, than any inference your Honour might draw. MUIR JA: Well, I won't spread it around, Mr Couper. MR COUPER: Thank you, your Honour. ----- -- 6 of 6 --