King v Brown

These proceedings commenced by the filing of a statement of claim on 26 March 2020 claiming possession of land known as 203 Thompsons Road, Milbrodale, and seeking judgment for various sums advanced to the defendants and owing by them to the plaintiff. Judgment was sought in Canadian dollars, alternatively in Australian dollars.

The loans were made to the first and second defendants pursuant to a Deed of Loan dated 18 January 2016. The evidence discloses that the plaintiff had made advances to the first and second defendants over some years before the Deed was executed. The Deed recorded the principal sum loaned as “$794,250 (CAD$750,000)”. The loan was repayable on 26 August 2020. The third defendant, Riverpines Vineyard Pty Ltd, a company of which the first and second defendants were shareholders and directors, was the guarantor for that loan. In addition, the first and second defendants provided a mortgage dated 18 January 2016 over the property at Milbrodale to secure repayment of the loan.

The plaintiff and the third defendant entered into what was called a General Security Agreement on 18 January 2016. Under clause 4(a) of this agreement the third defendant was to repay the secured money which, having regard to the definitions of “Secured Money” and “loan agreement” in that Agreement, and to the Reference Schedule, included the moneys the subject of the Deed entered into between the plaintiff and the defendants.

The parties entered into two Deeds of Variation of the loan on 7 June 2016 and 1 November 2016. Under the first Deed of Variation the principal sum was increased to $1,057,555 (CAD$1,000,000.00).

The second Deed of Variation made a number of changes to the arrangement. First, the principal sum was increased to $2,314,093.43 (CAD $2,342,756.00). That increase was principally brought about by the repayment by the plaintiff of the amount due under a first mortgage given by the defendants to the Commonwealth Bank of Australia. Secondly, the term of the loan was shortened so that it became due on 1 November 2017 or whenever the “collateral security” was sold, whichever was earlier. The collateral security was the Milbrodale property together with the present and after-acquired personal property of the third defendant. The collateral security has not been sold. Thirdly, interest was required to be paid by monthly instalments, with the first instalment payable on 1 December 2016. Fourthly, a clause was added which said:

The statement of claim alleged that, in breach of the deed of loan as varied and the mortgage as varied, the defendants had failed to pay to the plaintiff the principal sum and interest. It appears from correspondence from solicitors acting for the plaintiff, that there had been a failure to pay interest payments since 1 December 2016.

Notices under s 57(2)(b) of the Real Property Act 1900 (NSW) were served on or about 18 December 2019. When there was no compliance with those Notices, the present proceedings were commenced.

The defendants, acting for themselves, filed a defence on 23 April 2020. Although no cross-claim was filed, the defence sought the following relief:

In the section of the defence headed “Pleading Particulars” the defendants said that they denied all of the clauses of the plaintiff’s pleadings where they were not in agreement with the paragraphs of the defence. The pleading of the defence is a little difficult to follow but two things emerge from it. The first is that there appears to be a dispute about documents that were provided at the time of a farm debt mediation, and there is a suggestion, as a result of the provision of those documents, that the plaintiff was endeavouring to rely on documents other than the Deeds and Mortgage to which I have made reference. The defendants say in the defence that they believe the governing mortgage document is “variation of mortgage AP82007 dated 1 November 2016 with attached Annexure “A”. That variation of mortgage document and annexure is attached to the defence.

The second matter that emerges fairly clearly from the pleading of the defence is that the dispute on the part of the defendants concerns the amount that is now said to be repayable. Part of the reason for that dispute appears to be because the plaintiff’s claim is said to be one in Canadian dollars, whereas the defendants assert that the plaintiff is only entitled to make a claim in Australian dollars. Paragraph 3(iv)(c) of the defence says in that regard,

I note that paragraph 7(ii) of the defence reads:

The plaintiff filed a notice of motion on 21 July 2020 seeking summary judgment for possession of the Milbrodale property. This judgment concerns that notice of motion.

The defendants verified a further defence on 5 June 2020. A copy was forwarded to my Associate in early July 2020 and was sent by email to the solicitors for the plaintiff on 6 July 2020. It was not filed in the registry. However, I have ordered that today it be filed in court. This document, which I shall refer to as an amended defence, repeated, in substance, a number of matters contained in the earlier defence, including paragraphs 3(iv)(c) and 7(ii).

In addition, the amended defence included a long narrative under a heading “Riverpines Vineyard Pty Ltd”, which appears to deal with the vineyard that the defendants owned, including its history up to the time the third defendant was placed under external administration by the appointment of a Receiver and Manager on 17 April 2020. In the course of that narrative, the defence asserted that the receivers and managers had seized the wine and provided it to the “mortgagee of ‘Riverpines Vineyard’” (who I assume is the plaintiff) at “an unrealistically low value ($3 a bottle and less)”. It asserts that “the chattel debt holder” (who I assume to be the plaintiff) wrote off about $100,000 from “the $3 million debt” from the wine seizure.

The amended defence concluded with the following section under the heading “Pleadings”:

The defence does not plead any matter which, if proved, would provide a defence to a claim for possession. The defence accepts that there is a debt of more than $2.5m owing. Mr Brown, who I have given leave to appear for the other defendants, told me at two directions hearings that he accepts that money is owed to the plaintiff.

I am satisfied from the evidence of the plaintiff that no moneys have been repaid by the defendants. The expiry date for the loan was 1 November 2017. The first and second defendants were under an obligation pursuant to cl 9(c) and (d) of the mortgage to repay principal and interest by that date. The third defendant was under a similar obligation, both by reason of being a guarantor under the Deed of Loan and as a result of the General Security Agreement.

Default is defined in the Memorandum incorporated into the mortgage as including the failure to pay moneys due under the mortgage or any loan agreement in relation to the mortgage. The failure to repay the principal sum (as varied) is such a default. Clause 10(d) of the Mortgage entitles the mortgagee on default to enter upon and take possession of the Mortgaged Property.

The defendants want a determination of what is owing, principally because they say the plaintiff is not entitled to claim the debt in Canadian dollars. They say that doing so overstates the debt by about $300,000. This issue of what currency the loans is to be repaid in appears to be related to the assertion in the defence and the amended defence that, in effect, the operative instrument is the Variation of Mortgage dated 1 November 2016, which does not appear to have a clause requiring payment in Canadian dollars. The second Deed of Variation of that date does contain such a clause.

These matters may entitle the defendants to an accounting. They do not provide any defence to a claim for possession. The defendants may have a cross-claim in relation to the assertion that wine was seized and sold at an under-value. Success on such a claim would probably be offset against what was found owing on any accounting. It also does not provide a defence to a claim for possession.

Accordingly, I make the following orders: