Judith Anne Radin v Commonwealth Bank of Australia [1998] FCA 59 (3 February 1998)

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE - motion to set aside judgment, or alternatively, application for extension of time to file notice of appeal, or application for leave to appeal against interlocutory order - exercise of appellate jurisdiction - motion seeks leave, inter alia, for the applicant to file amended defence to bank's cross-claim raising issue of merger of first and second mortgages in one entity as mortgagee - judgment obtained by mortgagee bank for possession of dwelling house and money judgment - entry of judgment and orders - power to set aside governed by Federal Court Rules, O 35 r 7(2) - whether orders "interlocutory" - orders resolved finally the issues between the parties on bank's second cross-claim - whether relevant that other issues remain in the proceeding - whether orders "reflect the intention of the Court" - relevance of concession made by applicant's solicitor on hearing of bank's cross-claim in ignorance of "merger point" - consideration of merits of "merger point" - effect of Bank Integration Act 1991 (Cth) on two mortgages over the dwelling house - whether doctrine of merger applies - futility of grant of leave to amend defence to Bank's cross-claim.

REAL PROPERTY - Merger - registered first and second mortgages - same entity becoming registered as mortgagee in both cases - not an instance of merger of interests.

Bank Integration Act 1991 (Cth), ss 12(1), 13(1), 24, 28(2)(c)

Federal Court of Australia Act 1976 (Cth), s 24(1A)

Federal Court Rules, O 35 r 7(2)

Real Property Act 1900 (NSW), s 60

Brouwer v Titan Corporation Limited (1997) 73 FCR 241 (FCA/FC), applied

Wati v Minister for Immigration and Multicultural Affairs (1997) 148 ALR 578 (FCA/FC), applied

Heilbronn v Australian Securities Commission (unreported, FCA/FC, 4 November 1997), applied

Zanzoul v Westpac Banking Corporation (1995) 6 BPR 14,142, applied

JUDITH ANNE RADIN v COMMONWEALTH BANK OF AUSTRALIA

NG 985 of 1995

LINDGREN J

SYDNEY

3 FEBRUARY 1998

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 985 of 1995

BETWEEN:	JUDITH ANNE RADIN Applicant
AND:	COMMONWEALTH BANK of australia (ACN 123 123 124) Respondent

JUDGE:	LINDGREN J
DATE:	3 FEBRUARY 1998
PLACE:	SYDNEY

THE COURT ORDERS THAT:

(1) The motion brought by notice of motion filed 23 December 1997 be dismissed.

(2) The applicant and moving party on the motion, Judith Radin, pay the costs of the respondent Bank of the motion.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 985 of 1995

BETWEEN:	JUDITH ANNE RADIN Applicant
AND:	COMMONWEALTH BANK of australia (ACN 123 123 124) Respondent

JUDGE:	LINDGREN J
DATE:	3 FEBRUARY 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

(ex tempore)

(motion for leave to appeal, or extension of time for appeal, and for leave to amend)

BACKGROUND

This proceeding is related to two others before the Court. In proceeding NG 437 of 1996, Michael (or Milosh) Radin is the applicant and the Commonwealth Bank of Australia ("the Bank") is the respondent. In proceeding NG 984 of 1995, Mr Radin's mother, Vladimirka Radin, is the applicant and the Bank is the respondent. In the present proceeding, the applicant is Mr Radin's former wife. (I will not have occasion to refer again to Mrs Radin senior, and, accordingly, I will refer to Mr Radin and his former wife, the present applicant, as Mr and Mrs Radin respectively.)

All three Radins attack various securities given by them to the Bank. There are various cross-claims by the Bank. In the present proceeding, by the second cross-claim, the Bank, as mortgagee, sought a money judgment and judgment for possession of a property at 11 Appian Way, Burwood ("the Property") registered in the names of Mr and Mrs Radin. On 30 April 1997, the Bank obtained that relief against Mrs Radin. At that time Mrs Radin and the two children of the marriage occupied the Property, as they still do.

The orders made on 30 April included an order giving the Bank liberty to issue a writ of possession and a direction that any writ of possession issued lie in the Court office and not be executed prior to 30 June 1997. On 1 August the period of the stay was extended to 31 October. On 20 November that period was further extended to 16 January 1998. On 19 December 1997 it was further extended to 2 February 1998. Yesterday, I extended the stay further to 4 pm on the date of the giving of judgment on this present motion, that is to say, until 4 pm this afternoon.

It is convenient at this point to note that central to the present motion, to which I shall shortly refer in more detail, are two mortgages over the Property and an Act of the Commonwealth legislature, the Bank Integration Act 1991 (Cth) ("the Act"). There is a first mortgage, X381289, registered on 24 February 1988 from Mr and Mrs Radin over the Property to the Commonwealth Savings Bank ("the Savings Bank Mortgage" and "the Savings Bank" respectively). That mortgage was given in respect of a home loan and a home improvement loan. I gave an account of the background to it in Reasons for Judgment in this proceeding dated 8 May 1997 which were in respect of the orders made on 30 April 1997. There is a second mortgage, Y75562, from Mr and Mrs Radin to the Bank registered on 9 February 1989 (the "Trading Bank Mortgage"). Upon the commencement of the Act, the Bank became the successor in title to the Savings Bank. A title search shows that the Bank is now registered mortgagee in respect of both mortgages. Mrs Radin's argument is that there has been a "merger" and that this has had a certain effect.

In the three proceedings the Radins attack various securities, including the Trading Bank Mortgage. It was a third party mortgage so far as Mrs Radin is concerned in that, in general terms, it secured financial accommodation provided to Mr Radin for business and investment purposes. The Savings Bank Mortgage was in a different category. As noted earlier, it was in respect of a home loan and home improvement loan made to Mr and Mrs Radin. No attack was made on it and Mrs Radin conceded on the hearing on 30 April last that the Bank was entitled to exercise its rights under it.

The notice of motion filed by Mrs Radin on 23 December 1997 seeks seven substantive orders. These fall into various categories. First, it seeks an order setting aside the judgment and orders of 30 April last, and, in consequence, (a) a permanent stay of the writ of possession, and (b) leave for Mrs Radin to file an amended defence to the Bank's second cross-claim in the form of a draft defence attached as schedule "A" to the notice of motion and raising what I will refer to as "the merger point".

A second group of orders is found in pars 3 and 4 of the notice of motion. Paragraph 3 seeks, in the alternative to an order setting aside the earlier judgment and orders, leave to appeal out of time against them, and, in consequence, a stay of the writ of possession pending determination of the appeal. Orders 6 and 7 are of a different category and I will say something about them later.

GROUNDS FOR SETTING ASIDE

The first two categories of orders seek, essentially, a setting aside, or, in the alternative, leave to appeal out of time. The twenty-one day period for the filing of a notice of appeal, if there was a right of appeal (see below), has long since expired: see O 52 r 15(1) of the Federal Court Rules. The judgment and orders of 30 April 1997 have been entered. The power to set aside in these circumstances is found in O 35 r 7(2). The Court has power to set aside in those circumstances if, relevantly, an order is "interlocutory" or if it does not "reflect the intention of the Court."

Were the judgment and orders of 30 April last interlocutory? If they were interlocutory, s 24 (1A) of the Federal Court of Australia Act 1976 (Cth) applies to require leave to appeal. I have no doubt that they were final. They resolved finally the issues between the parties on the Bank's second cross-claim (cf Brouwer v Titan Corporation Limited (1997) 73 FCR 241 (FCA/FC)). It is not to the point that other issues remain to be resolved in the proceeding. However, it transpires that it does not matter whether I should take the view that the judgment and orders were final or interlocutory. The reason is that I have formed a clear view that the merger point is untenable, and that whether the present application be regarded as an application for an extension of time to lodge a notice of appeal against a final judgment or order or as an application for leave to appeal against an interlocutory order, the motion should be dismissed for that reason, apart from any other reason.

Did the orders of 30 April 1997 "reflect the intention of the Court"? Counsel for Mrs Radin submits that the solicitor who appeared for Mrs Radin on that occasion made concessions in ignorance of the merger point which he, counsel, who has been only recently briefed on her behalf, has raised. In effect, the submission is that the orders of 30 April did not reflect my intention because they were made on the basis of a concession which was made in ignorance, and that my intention would have been otherwise if the merger point had been raised. I do not think that O 35 r 7(2)(e) applies in such circumstances. But, in any event, as will shortly appear, even if the merger point had been raised, I would have made the orders.

THE "MERGER POINT"

On the hearing of the motion, I raised the question whether I should hear it at all. In the ordinary case, I prefer not to hear an application for an extension of time to file a notice of appeal against a decision of mine or an application for leave to appeal against an interlocutory order of mine. However, the present motion is unusual in that the reasons which I gave for the making of the orders on 30 April last are not challenged. Counsel for Mrs Radin raises one issue and one issue only on the present motion which is, in effect, that down to the time when he, counsel, was briefed, Mrs Radin's solicitor and previous counsel who had appeared for her had not noticed the merger point. I should, in fairness to Mr Duncan of counsel who now appears for Mrs Radin, note that he first raised the merger point a little before Christmas and it has been possible only now for the matter to be dealt with.

Counsel for Mrs Radin urged that I should hear the motion and counsel for the Bank had no objection. Having regard, in particular, to the fact that the merger point was not touched on in my earlier reasons, I thought it proper to hear the motion. In taking that decision, I did not overlook the fact that I would be exercising the appellate jurisdiction of the Court: (see Wati v Minister for Immigration and Multicultural Affairs (1997) 148 ALR 578 (FCA/FC); Heilbronn v Australian Securities Commission, unreported, FCA/FC, 4 November 1997).

I turn now to the merger point itself. As I said earlier, at the time of the passing of the Act, the Savings Bank Mortgage was the first mortgage on the title of the Property followed by the Trading Bank Mortgage. Section 12(1) of the Act provided that, in effect, the Bank became the successor in law of the Savings Bank. Section 13(1) provided that all assets of the Savings Bank vested in the Bank. Section 24 contained a special provision relating to land. It provided for a simple method of noting on title, pursuant to a certificate signed by an appropriate officer, that the Bank was entitled to an estate or interest in place of the Savings Bank. In short, both the first mortgage (the Savings Bank Mortgage) and the second mortgage (the Trading Bank Mortgage) became vested in the Bank as mortgagee.

It is submitted that the effect of this is that while no attack is made in this proceeding against the Savings Bank Mortgage and no order is sought setting it aside, by reason of the various "equities" and statutory grounds of relief sought to be invoked on behalf of Mrs Radin in respect of the Trading Bank Mortgage, those grounds of relief somehow become applicable to the Savings Bank Mortgage as well.

It would be possible to spend much time discussing the doctrine of merger, but it suffices to say that in my view what has happened here belongs to a totally different area of discourse from that to which the doctrine belongs. It is usually said that the doctrine of merger is activated where a lesser and a greater interest become vested in the one legal person, and that its effect is that the lesser is merged in the greater and so ceases to exist as an independent interest. Perhaps a preferable way of describing what happens is to say that where there are two complementary interests, the existence of each depending on the separate existence of the other, which become vested in the one person, they lose their raison d'être as distinct interests and constitute together a greater interest recognised in the law. Examples are the interests of a lessee and a reversioner; of a life tenant and a remainderman; and of a lessor and lessee. In each case the separate interests exist by reason of the existence of the complementary interest. When both become vested in the one person it ceases, at least generally speaking, to be sensible to conceive of the continued existence of the separate interests.

In the present case, however, there are two mortgages, each comprising a bundle of contractual and proprietary rights. They happen to be statutory charges under the Real Property Act 1900 (NSW), but this is not of present importance. They are not complementary, together making a greater interest recognised in the law and the existence of each as a separate interest is not dependent on the existence of the other as a separate interest (nor is one "greater" and the other "lesser" in the sense in which those terms are sometimes used in the present context). The fact that they are both vested in the Bank as a result of the operation of the Act does not activate the doctrine of merger at all. Numerous complications would arise if the doctrine were activated in such a case. For example, a question would arise as to what were the terms of the single resulting mortgage. An analogy can be found in the case of two leases, end on to each other. If the two leases became vested in the one lessee, this would not cause either one or both to cease to exist, or the creation of a new lease for the aggregate of the two terms.

Mr Duncan of counsel for Mrs Radin relies on s 28(2)(c) of the Act which provides expressly that nothing done by or under the Act releases any surety or any of the surety's obligations. I think that that provision is explicable by reference to the position of a third party surety and to the principle that generally where the terms of an obligation undertaken by such a surety are altered without the surety's consent, the surety is released. Section 28(2)(c) is directed to safeguard against the possibility that a surety might be released as a result of having foisted upon him or her a new principal creditor bank. If anything, the provision might be taken to show a general intention of the Act that the rights of the former separate banks are not to be reduced. In any event, I do not think that by the expressio unius principle, a legislative intention is shown that the doctrine of merger is to apply here.

I include in the present Reasons, the Reasons for Judgment which I have given on 30 April 1997, 1 August 1997 and 20 November 1997 in order to show the history of the matter. The one and only ground for attacking the Savings Bank Mortgage is the merger point, a matter of law. It follows from what I have said that the motion should be dismissed in so far as it seeks the relief sought in pars 1 to 5.

PARAGRAPHS 6 AND 7 OF THE NOTICE OF MOTION

I am required now to turn to pars 6 and 7 of Mrs Radin's notice of motion. They should have been the subject of a motion filed in Mr Radin's proceeding, NG 437 of 1996, in respect of the Bank's first and only cross-claim in that proceeding. By par 6, Mrs Radin seeks to introduce new pars 8, 9 and 10 into her defence to that cross-claim.

I need not deal at length with the proposed new par 8 of that defence. By that proposed new paragraph, Mrs Radin would merely have raised expressly any relief which she obtains in her own proceeding, that is, the present proceeding, NG 985 of 1995. But the Bank has made it clear that it accepts that to the extent that Mrs Radin succeeds in obtaining relief in NG 985 of 1995, that relief will, in effect, be available to be invoked by her in proceeding NG 437 of 1996, without being expressly pleaded by her.

By par 9, Mrs Radin seeks to raise again the merger point, although in this case she seeks to do so in relation to the Trading Bank Mortgage. It will be recalled that in relation to the second cross-claim in her own proceeding (NG 985 of 1995), her argument is, as noted earlier, that an effect of the suggested merger is that the equities and statutory grounds of relief which she seeks to invoke in relation to the Trading Bank Mortgage somehow apply, in addition, to the Savings Bank Mortgage, yet her present argument must be that somehow the merger is said to work to the detriment of the Trading Bank Mortgage. It suffices to say that all of the equitable and statutory grounds of relief on which Mrs Radin relies in respect of the Trading Bank Mortgage are available to her, and my decision on the merger point makes it inappropriate to grant her leave to amend her defence to the Bank's cross-claim against her in proceeding NG 437 of 1996, by pleading that point.

This brings me to the final proposed new paragraph (par 10) which relates to a different property at 92 Foreshore Drive, Salamander Bay. In this respect the proposed amendment would raise an altogether different point: that the Bank, as second mortgagee, is not entitled to possession of this property. There is in evidence a title search which shows that in respect of this property, for which the title reference is lot 544 in deposited plan 27353, there is a registered first mortgage to Suncorp Finance Limited, W882052, and a registered second mortgage to the Bank, Y907647. But there are two reasons why leave to amend in this respect should not be given. The first is that the New South Wales Court of Appeal has decided the point sought to be raised in Zanzoul v Westpac Banking Corporation (1995) 6 BPR 14,142, that is to say, it has decided that a second mortgagee is entitled to exercise the rights given by s 60 of the Real Property Act 1900 (NSW). The second is that the evidence shows that the advance made by the Bank under the second mortgage was used to pay out the debt secured by the first mortgage and that the Bank holds an executed discharge of the first mortgage ready for registration. Before or upon completing a sale of the property, the Bank would register, or hand over to its purchaser, the discharge of the first mortgage. The Bank could register the discharge of the first mortgage today. If I were to allow the amendment at this late stage, I would only do so on condition that the Bank be not disadvantaged by the lateness of the amendment. Any prejudice would be overcome by a direction that the fresh proceeding which would inevitably be commenced by the Bank in its new role as first mortgagee, be heard together with the other three proceedings and that the evidence already heard in those proceedings be evidence in the fresh proceeding. In sum, the amendment would have been futile.

CONCLUSION

The motion should be dismissed with costs.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren

Associate:

Dated: 12 February 1998

Counsel for the Applicant:	Mr M B Duncan
Solicitor for the Applicant:	Richard A Licardy & Co
Counsel for the Respondent:	Mr J E Marshall
Solicitor for the Respondent:	Abbott Tout
Date of Hearing:	2 February 1998
Date of Judgment:	3 February 1998