Citibank Savings Ltd v Stergiou & Anor [2004] ACTSC 31 (21 May 2004)

Last Updated: 23 June 2004

CITIBANK SAVINGS LIMITED v STANLEY STERGIOU and

EKATERINE STERGIOU [2004] ACTSC 31 (21 May 2004)

REAL PROPERTY - mortgages - mortgage over residential property enabling right to possession upon default - whether mortgagors in default of payments - mortgage establishes default at time ejectment proceedings commenced.

Land Titles Act 1925, s 93

Citibank Savings Limited v Stanley Stergiou and Ekaterine Stergiou [1995] ACTSC 43

Citibank Savings Limited v Stanley Stergiou and Ekaterine Stergiou (unreported, Supreme Court of the Australian Capital Territory, 28 August 1997)

No SC 80 of 2003

Judge: Connolly J

Supreme Court of the ACT

Date: 21 May 2004

IN THE SUPREME COURT OF THE )

) No SC 80 of 2003

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: CITIBANK SAVINGS LIMITED

Plaintiff

AND: STANLEY STERGIOU

First Defendant

AND: EKATERINE STERGIOU

Second Defendant

ORDER

Judge: Connolly J

Date: 21 May 2004

Place: Canberra

THE COURT ORDERS THAT:

1. The plaintiff be granted an order for possession of the property being Block 6 Section 46 of the Division of Hackett known as 80 Mackenzie Street, Hackett in the Australian Capital Territory.

2. The defendants pay the plaintiff's costs of this action.

1. This is an application by the plaintiff bank for possession of certain real property being Block 6 Section 46 of the Division of Hackett known as 80 Mackenzie Street, Hackett in the Australian Capital Territory. The plaintiff alleges that by memorandum of mortgage dated 8 April 1988 registered on 25 May 1988 the defendants mortgaged all of their estate and interest in the land to the plaintiff to secure to the plaintiff the payment of certain monies advanced to the defendants or at the request of the defendants. The plaintiff alleges that certain monies were advanced, and that the defendants are in default of repayment, entitling the plaintiff to an order for possession of the land pursuant to s 93 of the Land Titles Act 1925 (the Land Titles Act).

2. This matter has a very long and very litigious history. The plaintiff has made two prior applications in this Court for possession, and on each occasion has been unsuccessful because in neither case could the judge be satisfied that the defendants were in default of their loan repayments at the time the ejectment proceedings commenced. When the plaintiff commenced these proceedings, the defendants joined issue with a cross-claim alleging a conspiracy against them. The plaintiff has commenced fresh proceedings, claiming default from a point in time where it says there can be no doubt that the defendants are in default. The two earlier decisions are of significance because certain findings of fact were made by Higgins J (as he then was) that the plaintiff accepts that it is bound by, and which the plaintiff in fact relies on in the present proceedings.

3. In Citibank Savings Limited v Stanley Stergiou and Ekaterine Stergiou [1995] ACTSC 43, his Honour held that the plaintiff's claim for possession failed because it was not able to prove, on the balance of probabilities, that as at 7 February 1992 there had been any default on the part of the defendants. His Honour also dismissed the cross-claim. His Honour however made a number of findings upon which the plaintiff now relies, and which were also supported by documents tendered in these proceedings. The findings are that -

* The mortgage was executed on 8 April 1988 and entered on the certificate of title on 25 May 1988, and secured a credit line facility to a limit of $100,000 (at [9]-[10]).

* On the date the mortgage was executed a prior mortgage to Natwest Finance was discharged, the plaintiff charging to the defendant's line of credit a sum of $62,375.40 to cover the discharge of the prior mortgage and associated costs (at [10]).

* The line of credit was increased, on the application by the defendants, to $140,000 on 31 October 1989 and a variation to the mortgage to reflect the increase in the line of credit was entered on the Certificate of Title on 11 December 1989 (at [13]).

* An additional account was opened by the plaintiff in the defendants' names on or about 24 November 1989 with an additional line of credit of $40,000 (at [14]).

* The original line of credit was again increased, on the defendants' application on 23 July 1990 to $160,000, and this was reflected in a variation to the mortgage entered on the Certificate of Title on 18 October 1990 (at [15]-[16]).

* By 15 November 1991 the original line of credit had been fully drawn down to its credit limit of $160,000. The second account was also drawn down to the limit of $40,000 (at [19]).

* Up until 30 November 1991 the defendants met the credit charges demanded by the plaintiff. His Honour found, and it was not disputed in the proceedings before me, that (at [87]) -

It is common ground and, in any event, the evidence demonstrates that, after 30 November 1991 they made no further payments on either account regarding themselves as then in dispute with the plaintiff.

4. Although it was found that there had been no further payments by the defendants from 30 November 1991, there was a range of disputed items shown in the banking records. These items, going to certain bank charges, and disputed cheques were taken into account by the bank in asserting a default. His Honour was not satisfied that, as at the date of the s 93 Notice, being in his view 7 February 1992 the plaintiff had demonstrated that the defendants were in default. Although the plaintiff was then pursuing the defendants for monies advanced to the full credit limit of $200,000, and further items relating to interest, his Honour found, and the plaintiff does not now dispute, that due to an administrative error by the plaintiff in setting up another account with the $40,000 limit in November 1999, this line of credit was not secured by mortgage. This sum of money could give rise to an ordinary claim for debt, but the plaintiff acknowledges that the basis of its claim for possession on this application is the amount secured by the mortgage, being the line of credit to $160,000, which it says was fully drawn down.

5. The plaintiff appealed against that decision, and on 13 June 1996 a Full Court of the Federal Court allowed the appeal. The appeal turned on the question of the appropriate date on which the plaintiff needed to show that the defendants were in default, and the matter was remitted to Higgins J to determine, in effect, whether the plaintiff could establish that the defendants were in default in the payment of interest on the sum secured by the mortgage at the time the ejectment proceedings were commenced on 23 March 1992. The matter proceeded before his Honour on this point, with the parties being allowed to bring additional evidence, and his Honour made certain findings which again the plaintiff relies on. His Honour found that although the plaintiff claimed that the defendants were in debt to them for unpaid credit charges in the sum of $7,253.34, there were a number of discrepancies and overcharges that, on the defendants' case, would have left them in credit at the relevant date to the sum of $1,725.02. His Honour was not satisfied that the plaintiff had established that there was a default at the relevant date: Citibank Savings Limited v Stanley Stergiou and Ekaterine Stergiou, 28 August 1997. It did not seem to be in dispute that the defendants had drawn down the secured line of credit to its full extent, and had made no repayments since November 1991, which remains the case.

6. The defendants had, as well as denying the default, joined issue by counter-claiming that the plaintiff was engaged in unlawful action against them. They represented themselves, and although this counter-claim had been rejected at first instance, this lead to prolonged and protracted proceedings in which the defendants claimed the plaintiff had been involved in a form of conspiracy against them with various members of the legal profession. There was a separate claim for damages for "mental anguish" in respect of certain errors made by the bank, which had been found by Higgins J. There were actions against various firms of solicitors. These claims involved various proceedings in this Court, the Federal Court, and attempts to get special leave, or to institute proceedings, in the High Court. Although the defendants were always unsuccessful, it was many years before the proceedings were finally disposed of. The plaintiff did not seek to re-open its claim until these proceedings were finally over.

7. In an affidavit of 25 July 2003 Mr L Simonis, who was an employee of the plaintiff from February 1979 to January 2002, and then as a contractor to the plaintiff from April 2003 to the present time in the position of Collections Manager, deposed that -

As a result of the findings of the Full Federal Court and the Supreme Court in respect of the default alleged against the defendants in the prior proceedings the plaintiff decided to give the defendants the benefit of any doubt and to not rely upon any failure to pay it up until 1 July 1992 and to only claim as principal the sum of $160,000 even though the defendants had borrowed more than that sum.

8. The plaintiff indicated this intention to the defendants by letter of 20 December 2002 from their solicitors to the defendants. The letter, evidenced before me, stated -

Under the terms of the mortgage number 608104 given to you by Citibank Savings Limited ... you are in default in that no payments of interest have been paid to the Bank in respect of account 767016983 since 31 October 1991.... In accordance with the terms of the mortgage, the decisions of the Full Federal Court of 13 June 1996 and of Mr Justice Higgins of 28 August 1997, the default did not occur until some time after 23 March 1992 but occurred in the year 1992 within one or two months after 23 March 1992.

The terms of the mortgage also provide that if there has been a default in respect of the payment of interest the full amount of principle [sic] becomes due and owing. There were two principle [sic] amounts secured, the first of $160,000.00 and the second of $40,000.00. In accordance with the Full Court decision of the Federal Court the limit of principle [sic] secured by the mortgage is $160,000.00. Interest has continued to run in respect of the unpaid principle [sic] and remains payable.

...

Although the amount owing on the first mentioned account exceeds $350,000.00 we are instructed by Citibank Savings Limited that any amount in excess of $350,000.00 will not be pursued and demand that you now pay the sum of $350,000.00.

9. There was no response from the defendants to this letter of demand.

10. Accordingly, on 13 January 2003 the plaintiff executed a notice pursuant to s 93 of the Land Titles Act which recited the mortgage and the identity of the land, and stated -

Default has been made in payment of the principal sum and interest secured by the above mortgage and such default has continued for a period of one (1) month.

YOU ARE HEREBY requested to pay the money due and owing under the mortgage which as at the 13^th of January 2003 was in excess of $350,000.00 but in respect of which the Bank will accept the sum of $350,000.00.

TAKE NOTICE THAT if money due and owing under the mortgage remains unpaid for a period of one (1) month after the service of this Notice CITIBANK SAVINGS LIMITED will exercise its power of sale under the mortgage without further notice to you.

11. Attached to the notice was a schedule calculating the sum claimed starting from an amount of $160,000 at 1 July 1992. I am satisfied from the evidence before me that this sum, being the maximum amount secured by the mortgage, had been drawn down fully by that date, and indeed this is consistent with all prior judicial determinations. It then calculates interest only (that is, without any bank charges), and for the period up to 13 November 1994 the interest is calculated at the Reserve Bank Cash Rate, which I am satisfied is lower than the standard bank rate. The standard bank rates are used beyond this date. The schedule leads to a calculation of an amount owing as at 13 January 2003 of $381,773.15.

12. It seems to me that the plaintiff has demonstrated that the defendants were in default under the terms of the mortgage at the relevant time in respect of the s 93 Notice issued on 13 January 2003. I am satisfied that the notice complies with formal requirements, and was properly served. The reality here is that the defendants, then operating a business, succeeded in obtaining a line of credit secured by a mortgage against their house in the period 1988-1990 for $100,000. The line of credit was expanded to $160,000 in 1990, and fully drawn down, with no repayments since November 1991, some 12½ years ago. The defendants have on two occasions successfully avoided an order for possession, due to the plaintiff's inability to prove default at the relevant dates, but it was established that the amount had been drawn down, and not repaid, and that no repayment of interest had been made since November 1991. Protracted and convoluted proceedings against the plaintiff have taken many years, and during this time the plaintiff did not re-institute proceedings for possession.

13. The plaintiff has now availed itself of its right to do so and has, in my view, established default at the relevant time. The plaintiff is entitled to the relief it seeks, being an order for possession, and costs of this action.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 21 May 2004

Counsel for the plaintiff: Mr B Meagher

Solicitor for the plaintiff: Phelps Reid

Counsel for the defendant: Mr S Stergiou in person

Date of hearing: 6 May 2004

Date of judgment: 21 May 2004