Ferella v Key Nominees Pty Limited

LEEMING JA: This is an application for leave to appeal from the summary dismissal by the primary judge (Darke J) of proceedings commenced on 1 May 2015 by summons. The basis of that decision was that his Honour formed the view that the proceedings had been commenced contrary to an order made in earlier proceedings by Young AJ, which was in the following terms:

It was common ground that leave had not been sought or obtained. The primary judge was of the view that the order applied to the 2015 proceedings.

The primary judge summarised what he described as a “lengthy history of disputation between the parties” culminating in the litigation in which Young AJ made the order as follows (neither party suggested that any aspect was inaccurate):

The decision of the primary judge is plainly interlocutory such that an appeal lies only with leave.

The applicants refer to the duties alleged in the 2013 statement of claim, which is a lengthy document of 65 pages, as including contractual duties arising from the terms of the mortgage and the contract for sale, duties at general law owed by a mortgagee in possession and under the law of trusts, a duty of care and some anomalous rights of indemnity. They submit that the summons filed on 1 May 2015 is outside the scope of the order of Young AJ for the following reasons:

They submit that the duties owed by a mortgagee exercising a power of sale are separate from, differently formulated, and not coextensive with the statutory duty under s 58(3) of the Real Property Act 1900 (NSW) invoked in the summons.

The primary judge did not accept the submission that s 58(3) gave rise to a separate statutory right to account which should be regarded as separate from the general right of a mortgagor to an account, but rather the section operated as part of the regime under which a mortgagee exercising a power of sale is obliged to account for the proceeds of such sale. His Honour noted that in Bofinger v Kingsway Group Ltd [2009] HCA 44; 239 CLR 269 at [35], the High Court observed that “s 58 is to be read in a manner consistent with the equitable duty of the first mortgagee to account to puisne mortgagees as a trustee for any surplus”. His Honour said that the duties and obligations of a mortgagee were determined by the operation of both the statutory provision and the general law, and that that fell within the scope of Young AJ’s order. His Honour also rejected a submission that it was premature to make an order, before the plaintiffs had pleaded their case.

The first way in which the applicants for leave submitted that there was error in the reasons of Young AJ was in the statement referred to above which they described as equating the general law and statutory obligations of a mortgagee. On a fair reading of that statement, there is no such conflation. Moreover, his Honour was correct, as the applicants for leave conceded, to observe that the High Court in Bofinger stated at [35] that the two sources were to be read consistently.

The second error adverted to by the applicants for leave was in two passages of the reasons of the primary judge where his Honour referred not merely to identicality of causes of action, but also to the matters which were the subject of the earlier proceedings. The position is illustrated by the following sentence in the reasons of the primary judge:

In circumstances, however, such as here, where the dispute lies between the same parties, where the plaintiffs seek precisely the same relief arising out of the same facts, no error is disclosed in the reasoning of the primary judge to which criticism attached.

There are therefore two reasons why, in my view, leave should be refused. The first is that, far from establishing a case of arguable error, I am not persuaded that the reasons of the primary judge are attended by any error. As I have said, the 2015 summons is between the same parties and seeks recovery of precisely the same amount, $722,727.27, from the proceeds of sale by the defendant as mortgagee of the same property which was the subject of the 2013 statement of claim. Although the focus of the 2013 pleading was the GST treatment of part of the proceeds of sale, the underlying cause of action was a complaint of breach of contractual and common law and equitable duties by the mortgagee. The reformulated summons falls within the scope of the order made by Young AJ.

Secondly, it was open to the applicants for leave (and remains open to them) to seek leave in the manner contemplated by Young AJ’s order. Indeed, there is no explanation before the Court for why they have sought leave to appeal from the decision of the primary judge, rather than seeking leave in the manner contemplated by the order.

Mr Newton, who appears for the applicants for leave, candidly acknowledged that there was no explanation for the course taken by his clients. It was common ground at the bar table that (a) there is no obstacle to the applicants seeking leave in the event that leave to appeal is refused, and (b) nothing has happened between 1 May 2015 and today which would be relevant to the expiration of any limitation period which would give rise to a difficulty in seeking leave.

It follows that there is no sound basis for the grant of leave to appeal. I propose that the summons seeking leave to appeal filed 28 September 2015 be dismissed with costs.

EMMETT AJA: I agree. Whether or not there were other causes of action in the earlier proceedings that are not necessarily included in the new proceedings, it is clear enough the cause of action relied on in the new proceedings is a cause of action that was relied on in the earlier proceedings. I agree with the orders proposed by Leeming JA.

LEEMING JA: The orders of the Court, therefore, will be the summons filed 28 September 2015 be dismissed with costs.