Baker-Crooks v Separovich

1. [1]

   Between November 2012 and 15 January 2016 the Plaintiff advanced monies to the Defendant totalling $1.1 million. Perhaps by reason of friendship with and the trust that the Plaintiff had in the Defendant no documentation of the arrangements between the parties was made until a Deed of Loan was executed on 15 January 2016. The monies were lent to assist the Defendant purchase a property at 51 Barry Street, Neutral Bay.

2. [2]

   The documentation included the Deed and a mortgage over the Neutral Bay property. The mortgage has not been registered because part of the arrangement was that the Defendant would provide the Certificate of Title to the Plaintiff to enable that to happen. The Certificate of Title has not been provided by the Defendant.

3. [3]

   In addition, the Defendant had an obligation set out in the Deed to revoke all previous wills and execute a will which appointed the Plaintiff as executrix of the Defendant’s will and leave the property to the Plaintiff to hold in trust for the Defendant’s children and remoter issue. There is no evidence indicating that such a will has been executed.

4. [4]

   Demands were made on the Defendant that culminated in notices purporting to be under s 57 of the Real Property Act 1900 (NSW) and s 111 of the Conveyancing Act 1919 (NSW) requiring the Defendant to carry out her obligations under the Deed. Those notices were not complied with.

5. [5]

   The Plaintiff filed a Statement of Claim in or about December 2016 seeking judgment for possession of the property and, in the alternative, a declaration that the Plaintiff is entitled to exercise a power of sale and for various orders for specific performance of the agreement contained in the Deed and the mortgage. No Notice of Appearance nor defence has been filed on the part of the Defendant nor has the Defendant appeared at any time when the proceedings have been before the Court. She did not appear at the hearing before me.

6. [6]

   By Notice of Motion filed 19 April 2017 the Plaintiff seeks a default judgment pursuant to r 16.10 Uniform Civil Procedure Rules 2005 (NSW). Because the Plaintiff is not a registered mortgagee, as she accepts, default judgment cannot be given in the usual way for possession of the land.

7. [7]

   Rule 16.10 provides:

8. [8]

   At the hearing of the Notice of Motion Mr Newton of counsel appeared for the Plaintiff. Service of the Statement of Claim, a Notice to Occupiers, the Notice of Motion with supporting documents, and an email informing the Defendant of the date of hearing of the Notice of Motion was satisfactorily demonstrated from the affidavits of Michael Guest sworn 6 February 2017 and 26 May 2017, Bruce Andrews sworn 11 April 2017 and Stephen James Lynch dated 2 June 2017.

The Deed and mortgage

1. [9]

   The Deed of 15 January 2016 relevantly provided:

2. [10]

   A mortgage was also executed by the parties on 15 January 2016. That mortgage was in registrable form. In addition to incorporating the provisions set out in Memorandum registered number 860000 filed with the LPI the mortgage contained a number of conditions marked annexure “A” to the mortgage. Two clauses relevant on the present application are clauses 3 and 9 which relevantly provide:

3. [11]

   The Defendant has failed to comply with clause 3 of annexure “A” because she has not taken all steps reasonably required on her part to place the Plaintiff in a position to register the mortgage and in particular she has not arranged for the certificate of title to be produced at the LPI. There is evidence of emails forwarded by the Plaintiff to the Defendant on 13 and 27 May 2016 and 1 June 2016 containing requests for the production of the CT being ignored by the Defendant.

4. [12]

   Although there has been a failure on the part of the Defendant to execute the will required by clause 6.1 of the deed, that breach was not pursued by the Plaintiff at the hearing.

5. [13]

   In addition, the Plaintiff through her solicitors has served a notice said to be made pursuant to s 57(2)(b) of the Real Property Act and s 111(2)(b) of the Conveyancing Act requiring the Defendant (inter alia) to produce the original certificate of title of the property within one month after service of the notice. That notice was not complied with and the result must be pursuant to clauses 3 and 9 of annexure “A” to the mortgage that the whole of the loan monies have become due and payable to the Plaintiff.

6. [14]

   Clauses 6 and 11 of Memorandum Q860000 then provide for what happens in the circumstance of a failure to pay what is due and owing. Clause 6 of the Memorandum provides:

7. [15]

   Clause 11 relevantly provides:

8. [16]

   In King Investment Solutions v Hussain [2005] NSWSC 1076 Campbell J (as his Honour then was) was sitting on an appeal from a judgment of an Associate Justice in favour of an unregistered mortgagee against the mortgagor. In setting aside the judgment for possession given Campbell J said:

9. [17]

   That reasoning was followed by Hidden J in King Investment Solutions Pty Ltd v Fahmi Mustafa Hussain & Meraj Ather Hussain [2010] NSWSC 821 at [31].

10. [18]

    The LPI title search of the property dated 1 May 2017 demonstrates that the Defendant is the registered proprietor of the property. The only encumbrance on the property, apart from easements, is a caveat lodged by the Plaintiff pursuant to her rights under the mortgage. There is no prior encumbrancer to whom notice needs to be given before the Plaintiff can seek the orders in respect of which relief is sought. Moreover, the Defendant’s assertion (recorded in the Plaintiff’s affidavit) that the caveat lodged made the certificate of title null and void, with the result that there was no point in handing it over, has no basis.

11. [19]

    In that way, the Plaintiff has become entitled to exercise the power of sale provided in the mortgage. The Plaintiff is, therefore, entitled to a declaration that she is entitled to exercise the power of sale. Such a power is provided in s 109(1)(a) of the Conveyancing Act. She has complied with the statutory requirements of that Act by serving a notice under s 111.

12. [20]

    It must next be determined whether the Plaintiff is entitled to possession of the land, particularly in the light of the discussion set out above in King Investment Solutions.

13. [21]

    Clause 6 of Memorandum Q860000 as a matter of contract between the Plaintiff and the Defendant gives to the Plaintiff the right to exercise all or any of the powers of a mortgagee under the Real Property Act and the Conveyancing Act. Section 60(c) of the Real Property Act gives to a mortgagee upon default in payment of the principal sum the right to bring proceedings in this Court for possession of the land. Although in the judgment of Hidden J in King Investment Solutions his Honour concluded at [31]-[34] that s 60 did not apply to a mortgage unless it was registered, that view was not followed by Johnson J in Harden Shire Council v Richardson [2012] NSWSC 622 at [191]-[193]. With great respect to Hidden J, I agree with Johnson J for the reasons that he there gives.

14. [22]

    Although Johnson J does not refer to Mills v Lewis (1985) 3 BPR [97205], the discussion by Priestley JA (Hope and Glass JJA agreeing) at 9431.1 tends to support the view to which Johnson J came. The significant point made by Priestley JA, and not referred to by Johnson J, was that there could not be a judgment for possession pursuant to s 79 Supreme Court Act 1970 (NSW). Nevertheless, Priestley JA appeared to accept the United Kingdom decisions such as Antrim Land Co v Stewart [1904] 2 IR 357 and General Finance Co v Liberator Benefit Building Society (1878-9) 10 Ch D 15 which decided that an equitable mortgagee entitled to a judgment of ejectment (or judgment for recovery of land as it came to be called), as well as the views of HWR Wade in 71 LQR 204 that an equitable mortgagee is in as strong a position as a legal mortgagee in regard to entitlement to possession against both mortgagor and third parties. However, Priestley JA pointed out that he difference with England was that in its Judicature Acts the law of ejectment was not preserved as it was in s 79 SCA.

15. [23]

    The point concerning a judgment pursuant to s 79 SCA was picked up by Campbell J in King Investment Solutions at [127]. There can, however, be an order for specific performance of a contractual covenant to give possession of the land to the Plaintiff. Although there is, therefore, a different basis for the order, it is difficult to see what practical difference such an order would produce in most cases. It does not produce a difference in the present case because a person believed to be an occupier has been duly served and has not applied to be joined to the proceedings.

16. [24]

    In any event, there is a further basis upon which it is appropriate that possession be given to the Plaintiff. In Richardson Johnson J said:

17. [25]

    Having determined that the Plaintiff is entitled to exercise the power of sale, it follows from Richardson that the Plaintiff is also entitled to an order for possession so that the power of sale can be properly exercised. I note that Johnson J ordered “judgment…for possession” in Richardson. I consider that s 63 of the Supreme Court Act is a sufficient justification for such an order. The section was not referred to in any of the cases discussed but, by its terms, it applies to the relief being sought here so that a judgment for possession can be given. That does not convert the judgment into one made pursuant to s 20 of the Civil Procedure Act 2005 (NSW) about which Mills v Lewis and King Investment Solutions are clear.

18. [26]

    Clause 5 of the Memorandum gives the Plaintiff the entitlement to costs on a solicitor client basis. In Sutherland v Ghougassian (No 2) [2012] NSWSC 325 White J (as his Honour then was) held at [10] that such an entitlement was analogous to indemnity costs.

19. [27]

    Accordingly, the declaration and orders I make are these:

    1. (1)

       Declare that the Plaintiff has, and is entitled to exercise, a power of sale in respect of the property comprised in folio identifier 1/748041 and known as 51 Barry Street, Neutral Bay in the state of New South Wales (the Property);

    2. (2)

       Declare that the Plaintiff is entitled to possession of the Property;

    3. (3)

       Order that the Defendant within seven days of the service of these orders upon her deliver up the Certificate of Title for the Property to Somerville Legal, Level 10, 32 Walker Street, North Sydney, NSW;

    4. (4)

       Judgment for the Plaintiff for possession of the Property;

    5. (5)

       Leave to the Plaintiff to issue a writ of possession forthwith to enforce the judgment of the Court;

    6. (6)

       Grant liberty to the parties to apply generally on 2 days’ notice.