Charub Pty Ltd v Triandafyllou

In these proceedings the plaintiff seeks judgment for possession of the whole of the land in folio identifier 701/1231641 being the land situated at and known as 5A Clareville Avenue, San Souci. Proceedings were commenced on 24 December 2018 and the present iteration of the claim is an amended statement of claim filed 18 March 2019.

The plaintiff relies on default under a mortgage given by the defendants as guarantors of a loan agreement made 11 May 2018 between Pacific 8 Pty Ltd (Pacific) and Spartan Sport Services Pty Ltd (Spartan). The third defendant was the sole director and company secretary of Spartan. Pursuant to that loan agreement, Pacific lent to Spartan the sum of $1,125,000.00. The defendants guaranteed Spartan’s obligations and provided a registered mortgage over the Sans Souci property by way of security.

On 7 June 2018 Pacific’s interest in the loan agreement and mortgage was transferred to the plaintiff by Deed of Assignment. On 13 June 2018, the transfer of the mortgage from Pacific to the plaintiff was registered in the NSW Land Registry Services. No notice of the assignment was given to Spartan or to the defendants. The plaintiff accepts that Pacific did not provide a notice of assignment in accordance with the Deed of Assignment, with the result that the earliest date that the defendants became aware of the Deed of Assignment was on 19 March 2019 when it was served as part of exhibit SP-1 to the affidavit of Samantha Gabrielle Parsons sworn 19 March 2019.

On 23 April 2018 each of the first and second defendants appointed the third defendant as their attorney pursuant to general powers of attorney executed on that day. In each case the power of attorney was said to operate whilst the donor was overseas. The condition attached to each power of attorney was as follows:

The loan agreement and mortgage were relevantly executed by the third defendant for himself and pursuant to the powers of attorney given by the first and second defendants. The third defendant received independent legal advice prior to executing the documents.

The loan agreement was executed on 11 May 2018 and the mortgage was executed on 14 May 2018. The period of the loan agreement was for six months after the commencement date, being 11 May 2018.

On 11 November 2018 Spartan failed to repay the principal and thereby became in default of the loan agreement and the mortgage. The proceedings were then commenced.

A defence was filed by the third defendant on 7 February 2019 and by the first and second defendants together on 14 March 2019.

The first and second defendants, in their defence, apart from admitting and denying various paragraphs of the statement of claim, plead that they had no knowledge of the agreement with Pacific, that they at no time agreed to provide any guarantee, indemnity or security by way of registered mortgage, and at no time executed any of the documents. They also answer many paragraphs in the amended statement of claim by pleading that they “cannot admit or deny” the paragraph. Such a pleading is embarrassing. Some of the allegations are within the knowledge of the defendants. The affidavit annexed to the pleading requires enquiries to be made before it can be pleaded that an allegation is not admitted: see also Duke Group Ltd (In Liq)) v Arthur Youn (Reg) and Peat Marwick Hungerfords (Third Party) (No 13) (1991) 5 ACSR 212 at 222.

The third defendant pleads three substantive defences. The first is that he was not notified of the assignment and he asserts that s 12 of the Conveyancing Act 1919 (NSW) has not been complied with. Secondly, he says that Spartan is attempting to refinance the loan, that the refinance is expected to settle in the near future, and that Spartan would be ready, willing and able to repay the principal. In that regard the third defendant pleads that he has a right to redeem under the equitable principle of redemption to prevent the plaintiff from exercising its right to take possession of the property. Thirdly, the third defendant pleads that the plaintiff is not entitled to relief as it has not pleaded the requirement to issue a s 57(2)(b) notice under the Real Property Act 1900 (NSW).

The plaintiff, by notice of motion filed 19 March 2019, seeks summary judgment pursuant to r 13.1 Uniform Civil Procedure Rules 2005 (NSW), alternatively, that the defences filed by the defendants be struck out pursuant to r 14.28 UCPR.

I am satisfied of the following matters from the affidavit of Samantha Gabrielle Parsons sworn 19 March 2019 and from the documents in SP-1 exhibited to her affidavit:

The principles in respect of summary judgment are well established and are well known. In terms of what has been said in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129, Spencer v The Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28 at [20]-[25] it would have to be shown that the defences were so obviously untenable that they could not possibly succeed, that they were manifestly groundless or that their prospects of success were only fanciful. It is further accepted that the power to enter summary judgment should be exercised with great care and an order should only be made where it is clear that there is no real question to be tried.

In relation to the defence of the first and second defendants, although those defendants may establish that they had no knowledge of the loan agreement and mortgage and that they did not execute the documents, in the face of the powers of attorney, the specific matter to which those powers of attorney were directed, and the execution of the loan agreement and mortgage by the third defendant pursuant to the specific power in the powers of attorney, the first and second defendants do not establish any defence to the claim. In substance, the first and second defendants expressly authorised the third defendant to enter into the loan and mortgage arrangements which he did. Indeed, the express limitations on his authority lead to a strong inference that the arrangement he entered into, or some similar arrangement, was expressly contemplated by the defendants before the first and second defendants left for overseas.

The remaining matters denied in the first and second defendants’ defence are proved by the affidavit of Ms Parsons and the documents which she exhibits.

As far as the third defendant’s defence is concerned, the second matter relied upon (the proposed refinance) is now widened, since the filing of this defence, to rely on the fact that the third defendant has put the property on the market for sale. This matter was relied upon by the third defendant at the outset of the hearing of the motion for an adjournment so that the auction process could be completed. I refused the adjournment, and said that I would give reasons in my judgment on the motion.

The evidence disclosed that a Sales Inspection Report and Exclusive Agency Agreement was signed by the third defendant with McGrath on 11 April 2019. The Agreement provides that the property is to go to auction on 25 May 2019 and the agent estimates a selling price of between $1.8 million and $1.9 million.

The third defendant said this in an affidavit sworn 20 April 2019:

When the motion was first listed for hearing before me on 29 March 2019, counsel for the third defendant sought an adjournment on the basis that there was a lender who was willing to lend sufficient money to pay out the plaintiff and a caveator within two weeks. Mr Soon of counsel for the third defendant said that if his client was given the opportunity to pay out the loan, and it did not happen, complete fairness had been shown to him.

On that occasion, nothing was said about any desire on the third defendant’s part to sell the property himself. Nor does the affidavit dealing with that desire say anything about what happened to the lender in respect of whom I granted the adjournment on the last occasion.

Default occurred on 11 November 2018 and the statement of claim was filed on 24 December 2018. The third defendant has had ample opportunity to sell the property so that the money could be repaid. The third defendant was given an adjournment so that the loan could be repaid. That did not come to fruition, and there is no further evidence about the matter. The plaintiff has moved for summary judgment. Where the third defendant’s own evidence is that he could not seemingly make a decision about selling the property until April 2019, no basis is shown for adjourning the matter further.

The third defendant, nevertheless, relied upon the same material to suggest that summary judgment ought not to be given because of the third defendant’s right to redeem the mortgage. The third defendant accepted that it was unusual for the matter to be raised by way of defence rather than by the seeking of an injunction to prevent a mortgagee’s sale. The third defendant accepted, however, that if he was permitted to raise the matter by way of defence, he would need to establish the two requirements for the obtaining of an interlocutory injunction, namely, that there was a serious question to be tried and that the balance of convenience favoured the defendant.

Even if it were to be accepted that there was a serious question to be tried because a genuine agency agreement had been entered into by the defendants for the property to be sold, the matters I have dealt with above concerning my reasons for refusing an adjournment point against the balance of convenience favouring the defendant. The plaintiff was entitled to the repayment of its loan in November 2018. Failures on the defendants’ part to repay the loan whether by way of refinancing or sale of the property, especially when viewed in the light of the apparent indecision on the third defendant’s part to embark on a particular course, means that the matter should be brought to a head as soon as possible to enable the plaintiff to take expeditious steps to recover what is owing to it. The amount now outstanding is $1,314,964.62 on a loan of $1.125 million.

The defendant is not in any position to redeem the mortgage at the present time and has not been in such a position since default occurred. A mere desire by the defendant to sell the property himself on the basis that he would try harder to obtain the best price (according to his counsel’s submission) cannot alter the fact that there is no immediate prospect of his being able to redeem the mortgage. I accept that an ability to redeem may in some circumstances enable the granting of an injunction to prevent a sale or completion of a sale (Harvey v Perpetual Nominees Ltd [2009] NSWSC 1379), but that is not the position here. The defendants do not have the ability to redeem. The position might have been different if a contract for sale had already been entered into for an amount that would pay out the amount owing to the plaintiff.

The desire to redeem does not constitute a defence.

As to the defence that the plaintiff did not plead the requirement to issue a s 57(2)(b) notice, two things may be said. First, service of a s 57(2)(b) notice is not a pre-condition to the bringing of proceedings seeking possession for mortgage default: Suncorp-Metway Limited v Nam Property Holdings Pty Limited [2010] NSWSC 1078; (2010) 16 BPR 30,859 at [40]; Commonwealth Bank of Australia v ACES Sogutlu Holdings Pty Ltd [2013] NSWSC 1184 at [37]. Secondly, if it were necessary to serve a s 57(2)(b) notice, it would not be necessary to plead the service of such a notice because it would be condition precedent necessary for the party’s case: see r 4.11 UCPR. I note that, in any event, a s 57(2)(b) notice had been served.

As far as the defence concerning the lack of notice of the assignment, it may be accepted that no notice of the assignment was given by Pacific.

Sections 51 and 52 of the Real Property Act relevantly provide:

In Nemeth v Reachcord Pty Ltd (1998) 9 BPR 97729, Young J said at p16,559:

In Property Builders Pty Limited v Adelaide Bank Limited [2011] NSWCA 266; (2011) 15 BPR 29,411, Bathurst CJ (Allsop P and Sackville AJA agreeing) said at [40]:

In Gilmour v Pyramid Building Society (In Liq) (1995) 6 BPR 97,531 a mortgagee assigned a mortgage to a building society, but the mortgagee did not give notice of the assignment either to the borrower or to the guarantors. When the building society brought proceedings against the guarantors, one of their defences was the absence of a notice of assignment. The judge at first instance found in favour of the building society. On appeal, Meagher JA (with whom Priestley and Clarke JJA agreed) said (at p.13,982):

The defendant pointed to Meagher JA’s statement, that “perhaps anomalously” notice was not necessary under the Real Property Act, to suggest that this cast doubt on what Young J had said in Nemeth. He also made a formal submission that the decision of the Court of Appeal in Property Builders was wrong in upholding Nemeth. He accepted, however, that I was bound by Property Builders and, for that matter, the holding in Gilmour.

Accordingly, the failure of Pacific to serve a notice of assignment is no bar to the validity of the assignment which is perfected by the registration of the Transfer of Mortgage on 13 June 2018.

As with the defence of the first and second defendants, the other paragraphs which are denied or not admitted by the third defendant are proved by the matters in Ms Parsons’ affidavit and the exhibited documents.

For the above reasons, the defendants disclose no defence to the claim for possession made by the plaintiff and, accordingly, there is no real question to be tried.

I make the following orders: