Catalyst Provisional Lending Pty Limited and Ors v Dick-Telfar and Anor

1. [1]

   JOHNSON J: Before the Court are Notices of Motion filed in Possession List proceedings between the Plaintiffs, Catalyst Provisional Lending Pty Limited, Oxygen Funding Solutions Pty Limited and John Ramsay and the Defendants, Robert William James Dick-Telfar and Kristin Lorna Cashman Venae-Telfar.

2. [2]

   The principal proceedings between the Plaintiffs and the Defendants involve a claim for possession of land at 164-164A Prince Edward Street, Malabar (“the Malabar property”) arising from alleged mortgage default.

3. [3]

   The Plaintiffs’ claim for relief is contained in an Amended Statement of Claim filed on 17 April 2019. The Defendants have filed a Statement of Cross Claim on 23 August 2019. The final hearing of the proceedings is listed on 12 and 13 May 2020.

The Present Notices of Motion

1. [4]

   By Notice of Motion filed on 17 September 2019, the Plaintiffs seek summary judgment under Rule 13.1 Uniform Civil Procedure Rules 2005 (“UCPR”) for possession of the Malabar property with leave to issue a writ of possession forthwith. The summary judgment application is confined to the claim for possession. Summary judgment is not sought with respect to the Plaintiffs’ monetary claim, which would require determination at a later hearing.

2. [5]

   By Notice of Motion filed on 4 September 2019, the Defendants sought an order restraining the Plaintiffs from taking any steps to exercise their power of sale of the Malabar property under the mortgage together with an order that a signed power of attorney given by the Defendants be revoked.

Hearing of the Notices of Motion

1. [6]

   The hearing of the Notices of Motion proceeded before me on 4 February 2020.

2. [7]

   Mr Edney of counsel appeared for the Plaintiffs. The Defendants were unrepresented at the hearing. However, written submissions were provided to the Court by Mr Levet of counsel who had, until recently, represented the Defendants. The Defendants relied upon Mr Levet’s submissions at the hearing.

3. [8]

   A Court Book comprising two volumes was prepared for the purpose of the hearing. The first volume of the Court Book (Exhibit A) contains affidavits and other documents filed for the purpose of the final hearing of the matter. The second volume of the Court Book (Exhibit B) contains affidavits and documents prepared for the purpose of the hearing of the Notices of Motion.

4. [9]

   The parties agreed that the Court should have all of this material before it on the present application for summary judgment and it was clearly appropriate to do so.

5. [10]

   Written submissions of Mr Edney dated 7 January 2020 were relied upon for the Plaintiffs at the hearing (Tab 16, Exhibit B). As noted earlier, written submissions of Mr Levet dated 4 February 2020 (MFI1) were relied upon by the Defendants.

6. [11]

   No oral evidence was given at the hearing of the Notices of Motion and the hearing proceeded by way of oral submissions.

The Defendants’ Notice of Motion

1. [12]

   The unrepresented Defendants sought to press their Notice of Motion filed 4 September 2019. It is not at all clear that there is any utility in the Court determining the claim for relief in this Notice of Motion. The evidence indicated that the Plaintiffs had entered into a contract in 2019 to sell the Malabar property for $2,325,000.00, but that given delays arising from these proceedings, the purchasers had rescinded the contract. In those circumstances, there is no utility in separately determining the claim for a restraining order under that Notice of Motion given that the issue is essentially subsumed by the Plaintiffs’ claim for summary judgment under their Notice of Motion.

2. [13]

   With respect to the second issue in the Defendants’ Notice of Motion concerning a power of attorney, I am not satisfied that there is utility in the Court determining that claim either. It is sufficient to observe, in any event, that none of the circumstances referred to in s.28 Powers of Attorney Act 2003 arise in this case.

3. [14]

   In my view, the appropriate course is to dismiss the Defendants’ Notice of Motion. The resolution of the Defendants’ interlocutory application in this way should not be an impediment to any later application which might be made by the Defendants based on other evidence.

The Plaintiffs’ Application for Summary Judgment

1. [15]

   Rule 13.1 UCPR provides as follows:

2. [16]

   The principles to be applied on an application for summary judgment are well known. In O’Brien v Bank of Western Australia (2013) 16 BPR 31,705; [2013] NSWCA 71, Macfarlan JA (Beazley P agreeing) said at [3]:

3. [17]

   A very clear case is required before summary judgment is granted and the power to order summary judgment should be sparingly employed: Dey v Victorian Railway Commissioners (1949) 78 CLR 62 at 91; [1949] HCA 1; General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125 at 129; [1964] HCA 69; Webster v Lampard (1993) 177 CLR 598 at 602-3; [1993] HCA 57.

4. [18]

   The Plaintiffs have adduced evidence of the facts on which the claim for possession of the Malabar property is based together with evidence from Paul William Stone, a director of Oxygen Funding Solutions Pty Limited, of his belief that the Defendants have no defence to the Plaintiffs’ claim for possession of the Malabar property (paragraph 31, affidavit of PW Stone sworn 17 September 2019).

5. [19]

   Accordingly, the formal requirements of Part 13.1(a) and (b) UCPR have been met, leaving the question as to whether the discretionary power of the Court should be exercised to take the exceptional step of granting summary judgment to the Plaintiffs.

6. [20]

   It is common ground that the Defendants executed a mortgage over the Malabar property in favour of the Plaintiffs and that they are presently in default under that mortgage with the principal ($691,000.00) remaining outstanding and with no interest payments having been made since May 2018.

7. [21]

   As the documentary evidence demonstrates and the Defendants acknowledged at the hearing, the loan agreement secured by the mortgage over the Malabar property was for business purposes (and to discharge an existing security) and no interest has been paid to the Plaintiffs since May 2018 with the principal remaining outstanding (T18-19, 22, 25-26, 4 February 2020). The First Defendant, Mr Dick-Telfar, informed the Court that he was living part time at the Malabar property and part time at a hotel in Paddington where he is the publican (T3-4). Mr Dick-Telfar said that some persons also live at the Malabar property and pay rent although there is no lease (T4).

8. [22]

   The Defendants seek to resist the claim for summary judgment for an order for possession by reference to subsequent events surrounding efforts on their part to discharge the mortgage, with complaints being made concerning the conduct of the Plaintiffs and the solicitors for the Plaintiffs in varying respects.

9. [23]

   Counsel for the Plaintiffs submitted that some further legal principles applied in this case. He submitted that the Plaintiffs are the registered mortgagee and are attempting to exercise their rights in the face of admitted default and non-repayment of the debt by the Defendants. He submitted that the defences and Cross Claim advanced by the Defendants, and the relief which they seek, do not attack the foundation of the mortgage, but rather seek to rewrite the loan agreement and enjoin the Plaintiffs from enforcing against the secured properties.

10. [24]

    Mr Edney submitted that the Defendants’ claims, on their face, would not stand in the way of the Plaintiffs’ claim for possession of the Malabar property: Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164-165, 166-167, 168; [1972] HCA 74. Counsel submitted that this case fell within the description given by Morrison JA (Holmes and Fraser JJA agreeing) in Morel v Bank of Queensland Limited [2015] QCA 58 at [25]:

11. [25]

    Mr Edney relied upon the decision of Davies J in Commonwealth Bank of Australia v MLD Financial Services & Management Pty Limited [2015] NSWSC 1476. Davies J said at [18]:

12. [26]

    Davies J referred (at [35]) to well-known passages from the judgment of Walsh J in Inglis v Commonwealth Trading Bank of Australia.

13. [27]

    The following statements of Davies J at [38]-[39] are pertinent to the present application:

14. [28]

    After referring to a number of other decisions, Davies J stated at [45]:

15. [29]

    I am satisfied that the principles in Inglis v Commonwealth Trading Bank of Australia, Morel v Bank of Queensland Limited and the helpful analysis of Davies J in Commonwealth Bank of Australia v MLD Financial Services & Management Pty Limited are applicable to the circumstances of the present case. The issue to be determined is whether the Defendants have an underlying defence or cross claim which provides them with more than a fanciful prospect of success in impeaching the title of the Plaintiffs under the mortgage on which the Plaintiffs seek possession of the Malabar property.

16. [30]

    With those principles in mind, I turn to the evidence adduced at the hearing of the claim for summary judgment.

Factual Issues

1. [31]

   Given the nature of the application made by the Plaintiffs, Mr Edney accepted that, to the extent that there are any genuine factual disputes between the parties, the Court would, for the purpose of the present application, assume that the Defendants succeed on those matters.

2. [32]

   In accepting that this was the correct approach, Mr Edney made clear that there were substantial factual disputes with respect to a number of the matters asserted by the Defendants. The affidavits filed for the Plaintiffs (contained in Exhibit A) confirm that there are significant areas of dispute with respect to factual matters raised by the Defendants.

3. [33]

   The following factual narrative is based upon the premise accepted by counsel for the Plaintiffs. I will not purport to make findings of fact in any contested area. Rather, the chronology of events, much of which is undisputed, will provide a sufficient foundation for the resolution of the Plaintiffs’ application for summary judgment.

4. [34]

   On or about 3 January 2018, the Plaintiffs and the Defendants (as guarantors) as well as KRV Enterprises Pty Limited (“KRV Enterprises”), entered into an agreement whereby the Plaintiffs agreed to provide a loan to KRV Enterprises in the sum of $691,700.00. According to the evidence, KRV Enterprises was engaged in the business of running a café at Bronte Beach and a business loan was sought by the Defendants for that purpose.

5. [35]

   In January 2018, the Defendants were the registered proprietors of the Malabar property. The Defendants guaranteed the loan to KRV Enterprises from the Plaintiffs which was secured by way of a second registered mortgage over the Malabar property.

6. [36]

   As at January 2018, a first registered mortgage over the property was held by La Trobe Financial. At the hearing, the Defendants confirmed that the loan principal in excess of $1 million remained outstanding under that first mortgage. The Court was informed that the Defendants have lodged a complaint against La Trobe Financial with the Australian Financial Complaints Authority (T7-8, 22, 25-26).

7. [37]

   It was a term of the agreement that KRV Enterprises was required to repay the loan on or before the due date of 3 April 2018. It was a further term of the agreement that, following an event of default, the Plaintiffs may take possession and sell the Malabar property. It was a further term of the agreement that the Defendants would pay interest on the third day of each calendar month at a rate of 10% per month of the amount owing under the agreement, with that rate being reducible to 4% per month where there was no event of default under the agreement.

8. [38]

   On settlement in January 2018, the sum of $430,230.60 was directed to the discharge of an existing mortgage which the Defendants had over the Malabar property with $4,215.23 being used to pay rates owing to Randwick City Council and the sum of $115,554.17 being paid to the Defendants. An amount of $83,004.00 was retained by the Plaintiffs by way of three months’ prepaid interest.

9. [39]

   By written agreement made on or about 21 March 2018, the Plaintiffs and the Defendants agreed that the term of the agreement would be extended until 3 June 2018 on condition that the Defendants paid interest at the rate of 4% per month for each of April and May 2018. The Defendants paid interest in this respect.

10. [40]

    However, the loan was not paid out by the Defendants on 3 June 2018 as required and it has gone entirely unserviced since then.

11. [41]

    On 16 October 2018, the Plaintiffs commenced proceedings in this Court seeking possession of the Malabar property.

12. [42]

    The areas of controversy raised by the Defendants in their Defence to the Amended Statement of Claim and their Statement of Cross Claim relate to events in July and August 2018.

13. [43]

    The evidence filed by the Defendants and their pleadings contend that they attempted to refinance the loan on various dates in July and August 2018, but that settlement could not occur for reasons which the Defendants seek to sheet home to the Plaintiffs.

14. [44]

    The Defendants contend that the Plaintiffs prevented any refinancing of the loan occurring before 5 July 2018 because the Plaintiffs had possession of the Certificate of Title to the Malabar property and failed to make it available for refinancing. The Defendants contend that the refinancing would have occurred on 2 July 2018, but for the absence of the Certificate of Title.

15. [45]

    The Plaintiffs deny ever possessing the Certificate of Title, let alone withholding it. However, consistent with the approach taken by the Plaintiffs to the application, the argument proceeded upon the basis that the Defendants’ account may be accepted.

16. [46]

    A problem for the Defendants with respect to alleged refinancing on 2 July 2018 is that there were other caveators on the title who had not consented to the transaction. As Mr Levet’s submissions indicate, the Defendants seek to sheet home responsibility in this respect to the Plaintiffs upon the basis that the same firm of solicitors (Summer Lawyers) was acting for the Plaintiffs and other caveators of the Malabar property.

17. [47]

    It was submitted for the Defendants that on 6, 11 and 25 July 2018, other caveators (Prospa Advance Pty Limited and Ancat Investments Pty Limited) did not provide consent and that each of these companies was represented by Summer Lawyers. It was submitted for the Defendants that the effect of the actions of third parties, all of whom was represented by the solicitors for the Plaintiffs, had the effect of thwarting refinancing and therefore settlement which could otherwise have occurred. If settlement had occurred, the Defendants submitted that the mortgage to the Plaintiffs would have been discharged with the Malabar property being refinanced at a lower rate with a different lender.

18. [48]

    It was contended that inferences were available which could rise to a proper argument of equitable fraud, or at least unconscionable conduct, in the Plaintiffs allowing their solicitors to act for other parties with potentially disparate interests.

19. [49]

    With respect to the potential refinancing on 3 August 2018, Mr Levet’s submissions indicated that there was an issue between the parties as to whether or not on 1 August 2018, the Plaintiffs agreed to accept the amount of $749,606.00 in satisfaction of the loan so long as it settled on 3 August 2018, but that the Plaintiffs changed their minds on 2 August 2018 and insisted on payment in full.

20. [50]

    It was submitted by the Defendants that it was open to them to raise claims of equitable fraud, or misleading or deceptive or unconscionable conduct, and that these were not merely cross claims of set-offs for a particular amount that can be resolved following the sale of a mortgaged property. Rather, it was submitted by the Defendants that these claims invoke the equitable jurisdiction of the Court so that the matters were appropriate to be determined at trial and not by way of a summary judgment application.

21. [51]

    In oral submissions, the Defendants asserted that the Plaintiffs sought to obstruct the Defendants efforts to refinance the loan as the Plaintiffs intended to obtain possession of the property so that it could be sold.

22. [52]

    Mr Ebney rejected this contention and submitted that vague and generalised allegations had been made against the Plaintiffs which did not provide a proper basis for the Defendants to resist the application for summary judgment.

Decision on Application for Summary Judgment

1. [53]

   I bear in mind the exceptional nature of the remedy which the Plaintiffs seek in this application for summary judgment. The Court must approach such an application with exceptional caution applying the principles set out at [15]-[17] above.

2. [54]

   It is clear and undisputed that the Defendants entered into the mortgage with the Plaintiffs over the Malabar property in January 2018. A substantial proportion of the principal of $691,000.00 was advanced to the Defendants which they used to advance their own interests, including the discharge of an existing security. The Defendants were well aware of the interest rate applicable to the business loan arrangements and received independent legal advice for the purpose of entering into the mortgage and loan arrangement.

3. [55]

   Between January and June 2018, there was no controversy as between the Plaintiffs and the Defendants with respect to the mortgage and loan with an extension until 3 June 2018 being granted to the Defendants by the Plaintiffs.

4. [56]

   In July and August 2018, the Defendants were seeking to take steps to discharge the mortgage to the Plaintiffs. This did not happen for a number of reasons. On some occasions, other caveators would not consent to the transaction. The fact that caveators were represented by other solicitors working for the firm Summer Lawyers (who also represented the Plaintiffs) does not, it seems to me, advance the Defendants’ case on this application. Neither the case as pleaded by the Defendants or articulated in argument operates to sheet home any responsibility for this state of affairs to the Plaintiffs in a way which allows the Defendants to impeach the Plaintiffs’ title pursuant to the mortgage.

5. [57]

   It is necessary to keep firmly in mind the issue on this application. The Defendants may well have triable issues to be pressed with respect to the quantum of money to be paid to the Plaintiffs. However, as the authorities referred to earlier make clear (see [23]-[30]), a contestable issue as to quantum does not constitute a basis upon which the Defendants can impeach a mortgagee’s title and entitlement to possession. This aspect extends to the Defendants’ dispute concerning refinancing attempts in July 2018.

6. [58]

   With respect to the Defendants’ claim that they were thwarted in their desire to refinance on 1-2 August 2018 because the Plaintiffs changed their mind and insisted on payment in full, this does not assist the Defendants in seeking to impeach the Plaintiffs’ entitlement to possession under the mortgage. It is settled law that, absent consideration or a deed (neither of which is alleged here), an agreement by a creditor to accept a lesser sum than what is already due is not binding on that creditor.

7. [59]

   There is a significant factual contest on this issue with the Plaintiffs challenging the Defendants’ account. However, even on the Defendants’ version, the controversy raised by this issue does not constitute a basis upon which they can impeach the Plaintiffs’ entitlement to obtain possession under the mortgage.

8. [60]

   Having considered the evidence and the submissions made and applying the relevant legal principles, I am satisfied that the Plaintiffs have made good their claim for summary judgment for possession of the Malabar property. It is appropriate to make orders as sought by the Plaintiffs in their Notice of Motion.

9. [61]

   The hearing scheduled for 12 and 13 May 2020 may be utilised for remaining aspects of the litigation concerning the quantum to which the Plaintiffs are entitled, an issue which falls to be determined by reference to all the evidence adduced at that hearing.

Conclusion

1. [62]

   For these reasons, I propose to dismiss the Defendants’ Notice of Motion filed on 4 September 2019. Costs should follow the event concerning that Notice of Motion.

2. [63]

   I propose to make orders in favour of the Plaintiffs on their Notice of Motion filed 17 September 2019. Costs should follow the event with respect to the Plaintiffs’ Notice of Motion and an order will be made that the Defendants pay the Plaintiffs’ costs of the Notice of Motion filed 17 September 2019.

3. [64]

   I make the following orders: