Jackson & Associates, Solicitors in The Rocks, Sydney | Local service

Jackson & Associates, Solicitors

Locality: The Rocks, Sydney

Phone: +61 2 8076 6020

Address: Level 13, 111 Elizabeth Street 2000 The Rocks, NSW, Australia

Website: http://www.jacksonassoc.com.au

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24.01.2022 Gambling debts that did not lead to the loss of the home ... Mrs. Swed stole money from her husband's bank account to support her gambling addiction. Because of her activities, Mr. Swed was not able to make home loan repayments as required, and the Bank sought possession of his property. The judge was required to decide whether or not the wifes misappropriation of money was done without Mr. Sweds knowledge. The second issue to be decided by the court was whether Mr. Swed w...as in breach of the Telephone Banking Terms and Conditions that formed part of his contract with the bank. The bank claimed that he acted carelessly in allowing his wife to have the PIN. In relation to telephone banking and electronic transfers the bank is governed by an Electronic Funds Transfer Code of conduct issued by ASIC. Mr. Swed denied that he had given his password or PIN to Mrs. Swed or any of his children, or any other person. Mrs Swed admitted taking the money from her husbands account. His Honour found that Mr. Swed had kept the key card safe and that he did not contribute to the unauthorised transactions of his wife. The Judge found also that he was not careless in the way that he conducted the account with the NAB. In those circumstances his Honour found that the bank was not entitled to the judgement against Mr. Swed. for the possession of his property. The Supreme Court of NSW delivered this judgment in the case of National Australia Bank v Swed on 18 September 2015.

23.01.2022 Has the Court power to order that the lender bank, in a claim for debt, take property in full satisfaction of the debt? The debtor was a farming family that borrowed money to run their farming enterprise. The family defaulted on the loans, and in an appeal during the recovery action commenced by the Bank argued that the court should have ordered foreclosure, rather than giving judgment for the debt and an order for the Bank to take possession of the property. Foreclosure woul...d have meant the property would go to the Bank in full satisfaction of the debt meaning in practical terms a large forgiveness of debt. Their Honours in this appeal found that the argument of the borrower was misconceived. The Court made the point that the Bank had the right to seek recovery of the debt and possession of the property, and any claim by the borrower/debtor to seek an order that the Bank accept the property in full satisfaction of the debt must fail. The appeal was from a decision of Master Sanderson ordering that the Bank customer was indebted to the Bank for approximately $1.7 million, and should deliver up its land to the Bank. The Supreme Court of Western Australia delivered judgment in this case, Kennedy v Commonwealth Bank, on 15 March 2016.

21.01.2022 Financial help given to children when they are buying a home does not always go smoothly ... Before they purchased an apartment together in 1999 Justine and Adrian Chaudhary entered into a co-habitation agreement that was designed to protect Adrian's personal wealth should the relationship end. Adrian was an accountant in practice with his father Vincent and his sister. In 2004 after their marriage Justine and Adrian purchased a home together. The ownership was worked out in ...accordance with their separate contributions. To help with the purchase Adrian's father Vincent put in $1,200,000. Vincent told the bank that it was a gift. Later, Vincent thought it advisable that the advance be a loan to his son, but secured by a mortgage over the family home of Justine and Adrian. Justine and Adrian signed a mortgage that was registered after the breakdown of their marriage. After the marriage between Justine and Adrian broke down, Vincent started proceedings seeking an order that the property be sold so that he could recover his money. Justice Campbell looked at all of the evidence including the documents and found that the $1.2 million was a gift to Adrian alone. In reaching this conclusion, his Honour looked at the financial agreements that had been entered into between Justine and Adrian, the statements made to the bank that it was a gift and the desire of Vincent and Adrian to protect family wealth in the case of a marriage breakdown. He found that the mortgage was part of this overall strategy. His Honour reached the conclusion that there was no loan and the mortgage secured nothing, therefore it should be discharged. Vincent was left with having given a gift to his son Adrian.

21.01.2022 News from Jackson & Associates

20.01.2022 If a receiver is appointed to your company you do have rights ... In August 2015 Judge Hammerschlag of the Supreme Court of New South Wales delivered his judgment in Westpac v Sayah. Mr Sayah was a director of Green Alliance Pty Ltd, a company that borrowed more than $1M from the bank. Mr Sayah had guaranteed the debt. The debtor was in the business of the supply and installation of energy saving products under schemes operating in New South Wales and Victoria. ... It was claimed against the receivers that they sold business assets for less than their proper value, that they settled an insurance claim for less than its true value, and finally that they ran the business badly while they were in control of it. His Honour said that a receiver's duty when exercising power of sale is similar to the duty that a mortgagee owes to a mortgagor. That is, to act in good faith without willfully or recklessly sacrificing the interests of the borrower. A sale, not caring whether a proper price is obtained, omitting to take obvious precautions to ensure a fair price, or being absolutely careless whether a fair price is obtained or not, is reckless and shows a lack of good faith. If a borrower can make out this case, the borrower is entitled to offset the amount of any damages against the debt owing to the bank. The Corporations Act, s 420, sets out a statutory duty for receivers. When exercising power of sale a receiver must take reasonable care to sell the property of the mortgagee for not less than the market value if it has one, or for the best price reasonably obtainable. In his Honour's opinion this section enlarged the duty described above. His Honour also expressed the view that s 420A did not give a Guarantor a direct right against a receiver. His Honour carefully examined all of the transactions complained of and concluded that the bank was entitled to judgment against Mr Sayah for over $1.4 mil. The claims by the company and Mr Sayah against Westpac were dismissed. This case highlights the importance of knowing how the judges of the court are thinking about issues that concern you. Feel feel to call Peter Jackson or Kieran Kelly at 02 8076 6020 for an obligation free chat.

17.01.2022 Code of Banking Practice and guarantees ... In 1992 a bank customer, Mrs Hunter, signed a mortgage in favour of National Australia Bank to secure a loan. The mortgage included an all monies clause that secured money borrowed at any time. In 2005 Mrs Hunter took out a personal loan and in 2009 she gave a personal guarantee for a business loan. In 2013 the bank started proceedings to recover all money owing. Mrs Hunter conceded that she owed the balance of the monies under the...Continue reading

14.01.2022 Doggett v CBA is an important decision that may assist guarantors who have guaranteed debts that, on the facts, could never have been repaid ... The Code of Banking Practice requires banks that have signed up to the Code to form an opinion about the capacity of the borrower to repay the loan The same obligation extends to protect a guarantor ... The terms of the Code of Banking Practice are incorporated into the customer's contract with the bank as contract terms. Breaches of any of the terms by the bank will be a breach of the contract with the customer. Clause 25.1 of the Code provides that the bank has an obligation to exercise the care and skill of a diligent and prudent banker in forming an opinion about the ability of the borrower to repay the loan. The question before the court in the case of Doggett v Commonwealth Bank of Australia was whether that clause of the Code was incorporated into the guarantees given by the directors to secure the loan. Each of the guarantees stated : Relevant provisions of the Code of Banking Practice apply to this Guarantee." The bank argued that in circumstances where there were specific provisions in the Code dealing with guarantees, and the obligation in clause 25.1 was to the borrower, not the guarantor, the obligation on the bank in clause 25.1 did not extend to protect a guarantor. The Court of Appeal held that to decide whether clause 25.1 is incorporated into the guarantee you needed to look at the wording of the incorporating clause in the guarantee, and then whether the incorporated words are inconsistent and should be rejected. The court found that the borrowers capacity was relevant to the guarantor's obligation and was therefore relevant. On the inconsistency point the court referred to clause 28.4(d) that provides that the bank must provide to a guarantor information relevant to the borrower. The court acknowledged that this suggests that a guarantor will make their own enquiries and decide themselves about the borrowers ability to repay the loan. Notwithstanding this the court found that there was no inconsistency. The court said that had the bank acted to the required standard the loan would never have been given.

14.01.2022 Can a secured creditor become a Shadow Director, with all the risks and potential consequences If a company, or the directors of a company, is/are accustomed to act in accordance with a persons instructions or wishes, that person can become what is termed a Shadow Director. A Shadow Director then is a Director like any other, and has all of the responsibilities and risks of a Director. One of these risks might be liability for the debts of a company if it traded while ins...olvent. This issue was recently examined in the case of Buzzle Operations Pty Ltd (in liquidation) v Apple Computer Australia Pty Ltd. Six retailers had merged to form Buzzle. Apple held a charge and in fact had the right to stop the merger . Apple gave advice on the structure of the merger and accounting systems. Buzzle began to have cash flow difficulties and Apple stepped in and gave further advice. The Directors of Buzzle generally followed this advice. Ultimately, a liquidator was appointed to Buzzle and that liquidator sued Apple (as an alleged Shadow Director of Buzzle) for the trading debts incurred by Buzzle whilst it was insolvent. The court said that a secured creditor , such as Apple in this case , is not a Shadow Director merely because they impose conditions on their commercial dealings with a company, even if the company feels it has no choice but to comply with those conditions. This is an important decision for companies to consider , whether they are secured creditors or debtors . A party is entitled to protect their commercial interest and in doing so will not automatically become a Shadow Director .

11.01.2022 A claim by a son for compensation based on a promise by the parents fails in court ... On 20 April 2016 Judge Stevenson of the Supreme Court of New South Wales delivered judgment in a claim by Joseph Manno against his mother, Gaetana and the estate of his late father, Salvatore. His claim was for compensation because he had not been given a plot of land in a subdivision that he claimed that they had promised to give him when he was younger. ... Joseph claimed that he worked in the family business for a low wage because of the promise of his parents. His Honour looked at the evidence carefully and found that Joseph worked in the business for as long as it suited him, and not at the low wage that he claimed. His Honour did find that it was the intention of the parents to subdivide the land, and if they were financially secure to give a lot to each of their children. However, there was no subdivision, and, after the death of her husband, Gaetana sold the land to pay debts. His Honour found that even if the parents said to Joseph that they intended to give him a lot in the subdivision. However, this promise did not induce him to join the business or to stay working there. His Honour went further and said that, even if Joseph was induced to do the things he claimed, there was no evidence that he suffered any detriment because he did them. Finally, His Honour pointed out that Joseph must have known that the subdivision was conditional on Council approval. Council did not give its approval and there was no subdivision. Josephs claim was therefore dismissed. This decision highlights the need to carefully review the facts before starting any proceedings. For example, if a promise is relied on was it conditional as in this case.

05.01.2022 If a facility is novated then the guarantee given to secure the debt remains in place ... Mr. Roderick Butterss guaranteed M$1,350 plus interest and costs of the debts of his company Beyond Sportswear International Ltd. By agreement the facility was novated to a new company BSI 2 Ltd in December 2012. A novated agreement is one where the obligations and benefits of an agreement are transferred to a new party with the consent of all involved.... Mr. Butterss argued that the novated facility agreement was not secured by his guarantee. He claimed that he did not sign any guarantee document in respect of the novated facility, nor did he have the opportunity to seek financial or legal advice. His Honour analysed the transaction document and found that the relevant clause of the Guarantee was broadly drafted and stated that it would be continuing and irrevocable. His Honour quoted the Case of McMahon, where the Court of Appeal found that it could be inferred from the conduct of parties to a novation that they had agreed that a guarantee given in relation to the obligations of the original debtor would extend to the obligations of the new debtor. His Honour Judge Digby gave judgment in this case, Investec v Butterss and Another, on 7 March 2016, and ordered judgment against the Guarantor.

05.01.2022 A claim by a borrower that a bank debt was satisfied by delivery to the bank of a promissory note failed ... On 15 August 2016 Justice Campbell of the Supreme Court of NSW delivered judgment in Maksacheff v Commonwealth Bank of Australia. The borrowers prepared a promissory note and in the proceedings claimed that the delivery of this promissory note satisfied the debt. Included in the documents delivered to the bank was a statement that if there was a default in the promiss...ory note agreement by either party liquidated damages of $2.8 mil was payable. The plaintiffs sued the bank for the $2.8 mil. The promissory note document stated that if the note was not returned to the plaintiffs within three days it was agreed between the parties that a contract had been entered into. The bank did not return the promissory note. Justice Campbell had to decide whether any contract had been entered into. He decided no. His Honour pointed out that silent acceptance of an offer is generally insufficient to create any contract. He did acknowledge that silence in conjunction with other circumstances may indicate an acceptance of an offer. He said that was not the case in the matter before him. His Honour dismissed the claim.

02.01.2022 Court finds that a bankrupt cannot make an application to stay execution of a writ of possession of land ... Justice Dart of the Supreme Court of South Australia delivered judgement in the case Bendingo & Adelaide Bank ltd v Capotondi on 10th February 2016. On the application of an unrelated third party Mr. Capotondi was declared bankrupt in July 2015. ... In October 2015 the bank started proceedings for possession of Mr. Capotondi's property to recover its debt. Mr. Capotondi applied to the Supreme Court to prevent the bank taking possession of the property. Justice Dart pointed out that all property of the bankrupt vests in the trustee in bankruptcy, and it is only the trustee who can make an application for a stay. In this case the trustee supported the bank in its application for possession of the property. The application of Mr. Capotondi was dismissed.