Supreme Court New South Wales

• Medium Neutral Citation: Perpetual Nominees Limited v Catherine Margaret Francis [2011] NSWSC 56
• Hearing dates: 17 February 2011
• Decision date: 18 February 2011
• Before: Schmidt J

Decision

1. In the event that the contract for the sale of the properties known as 2 to 32 Vine Street, Redfern and 32 to 34 Eveleigh Street, Redfern (being the whole of the land in folio identifiers 1/627353, 2/627353, and 1/395992) from the defendants to Shepherd Street Pty Ltd ACN 127078880, which exchanged on 1 December 2010, has not settled by 5.00pm on 14 March 2011, upon application in writing by the solicitor for the plaintiff to the Associate to Schmidt J,

(a) judgment will be entered for the plaintiff for:

(i) possession of the property known as 2 to 14 Vine Street, Redfern (being the whole of the land in folio identifier 1/627353);

(ii) possession of the property known as 32 to 34 Vine Street, Redfern (being the whole of the land in folio identifier 2/627353);

(iii) the amount of $2,147,247.29, being the amount of the debt under the Loan Agreement as at 11 February 2011;

(iv) interest to accrue on the judgment referred to in the preceding sub-paragraph in accordance with the provisions of the Loan Agreement at the rate of $641.76 per day; and

(b) leave will be granted to the plaintiff for a writ of possession for the properties referred to in paragraphs 1(a)(i) and 1(a)(ii) to issue forthwith; and

(c) no order will be made in relation to costs.

2. Grant liberty to apply on 1 day's notice.

• Catchwords: PROCEDURE - Supreme Court procedure - New South Wales - summary judgment sought - whether consent judgment would be held in escrow until completion of sale - no triable issue found - section 52(2)(b) of the Real Property Act 1900 - whether there were technical difficulties with entry of judgment flowing from s 52(2)(b) of the Real Property Act 1900 - hardship - whether judgment and leave to issue writ of possession should be made - orders taking account of hardship made
• Legislation Cited: Real Property Act 1900
• Category: Principal judgment
• Parties: Perpetual Nominees Limited - Plaintiff; Robert Michael Francis - First Defendant; Catherine Margaret Francis - Second Defendant
• Representation: Counsel: Mr DW Rayment (Plaintiff); Mr BAM Connell (Defendants); Solicitors: Gadens - Plaintiff; PMF Legal - Defendants
• File Number(s): 2010/302862

Judgment

1 By statement of claim filed in September of 2010 the plaintiff sought possession of property at Redfern, leave to issue a writ of possession, judgment in the sum of $1,943,758.93, interest under a loan agreement, charges and expenses in accordance with the loan agreement and mortgage and other orders. No defence has been filed.

2 The evidence disclosed that there is no issue between the parties that the defendants have not repaid sums due under the loan and that as a result, the plaintiff sought summary judgment in 2010. There were negotiations between the parties which resulted in the defendants signing consent judgment in December, to be held in escrow. There is a dispute as to the basis of that escrow, namely whether it was agreed that it would continue until a sale of the property was finalised, or that it would cease if the sale was not completed by 27 January 2011.

3 The defendants own three adjoining properties at Redfern. One is a car park and two are factories. The mortgage attaches to two of the properties. The defendants have entered into a contract for the sale of all three properties, thereby hoping to maximise their returns so that they can repay the plaintiff and their other creditors. It is anticipated that the sale will now complete on 25 February, that having been complicated by caveats on the title and other matters. The plaintiff is not confident that completion will then occur and seeks to pursue its rights.

4 The parties have been unable to come to any agreement on terms which will resolve the issues lying between them. In part the difficulty stems from the fact that one of the defendants is terminally ill and the other suffering from a serious psychiatric illness.

5 Attempts at settlement have failed, even though they continued during the course of the hearing. The result was that the plaintiff has very fairly offered to accept orders which will accommodate the defendants' unfortunate circumstances, on terms which I floated and which the defendants' legal representatives acknowledged would do much to accommodate their difficulties. It proved impossible, however, to obtain instructions from the defendants to consent to those orders. The orders proposed were:

"1. In the event that the contract for the sale of the properties known as 2 to 32 Vine Street, Redfern and 32 to 34 Eveleigh Street, Redfern (being the whole of the land in folio identifiers 1/627353, 2/627353, and 1/395992) from the defendants to Shepherd Street Pty Ltd ACN 127078880, which exchanged on 1 December 2010, has not settled by 5.00pm on 11 March 2011, upon application in writing by the solicitor for the plaintiff to the Associate to Schmidt J,

(a) judgment will be entered for the plaintiff for:

(i) possession of the property known as 2 to 14 Vine Street, Redfern (being the whole of the land in folio identifier 1/627353);

(ii) possession of the property known as 32 to 34 Vine Street, Redfern (being the whole of the land in folio identifier 2/627353);

(iii) the amount of $2,147,247.29, being the amount of the debt under the Loan Agreement as at 11 February 2011;

(iv) interest to accrue on the judgment referred to in the preceding sub-paragraph in accordance with the provisions of the Loan Agreement at the rate of $641.76 per day; and

(b) leave will be granted to the plaintiff for a writ of possession for the properties referred to in paragraphs 1(a)(i) and 1(a)(ii) to issue forthwith; and

(c) no order will be made in relation to costs.

2. Grant liberty to apply on 1 day's notice."

6 The defendants opposed judgment being entered, or possession being given, on a number of bases:

- there is a triable issue on the question of the terms on which consent judgment was agreed to be held in escrow

- that the Court has a discretion in relation to the orders which it would make in favour of the plaintiff, given the evidence of the defendant's hardship

- that there are technical difficulties with the entry of judgment, flowing from the s 59(2)(b) notice and the notice to occupier on which the plaintiff relies

- that account would be taken of the possibility foreshadowed by the defendants that in the event that the sale of the three properties does not settle, they would approach the Court for orders that there be a judicial sale

The escrow argument

7 The defendants have not put on any draft pleadings, but have tendered evidence to establish that there is a triable issue as to the nature of the agreement reached in relation to the entry of a consent judgment in favour of the plaintiff. It is argued that what was agreed is ambiguous and that the dispute between the parties should be resolved on the basis that it was agreed that the consent judgment would be held in escrow until completion of the sale.

8 Having considered the arguments advanced and the evidence on which it rested, I am not satisfied that there is any triable issue.

9 The consent judgment was signed by the defendants in December, at a time when they were represented by Mr Buterin of Eakin McCaffery Cox, solicitors. On 3 December, there was an offer made by the plaintiff's solicitor on certain terms:

"If your clients can provide evidence, to our client's satisfaction, that your clients can discharge the debts owing to our client in full on completion of the contract for sale, we are instructed that our client will agree to refrain from enforcement action on the conditions set out below.

1. Your clients must execute a Consent Judgment in the attached form and return it to us prior to Court on Monday 6 December 2010.

2. Our client will agree to hold the Consent Judgment in escrow and to refrain from taking any steps in the enforcement of the Consent Judgment pending completion of the contract for sale but in any event no longer than 27 January 2011.

3. On 6 December 2010 when the proceedings are next listed, our client will agree to the proceedings being stood over until the first available date after 27 January 2011.

4. If our client does not receive payment in full on completion of the contract for sale, then our client will be entitled to immediately file the Consent Judgment at Court and take such enforcement action as it considers appropriate, without further notice to your clients."

10 That offer was not accepted. The consent judgment executed by the defendants was provided by Mr Buterin under cover of an email which provided:

"Please find enclosed the signed consent judgment. The consent judgment is being provided to you on the basis that you agree to hold it in escrow and your client refrains from taking any steps in enforcing the consent judgment pending the completion of the contract for sale of the Vine and Eveleigh Streets, Redfern properties."

11 That was not accepted. Instead, the response was:

"We confirm our discussion this afternoon that our client is willing to adjourn the proceedings on Monday 6 December 2010 to the earliest possible date after 27 January 2011 and to hold the consent judgment in escrow pending completion of the sale as set out in our letter of 3 December 2010.

We further confirm that your client has been unable to produce documentary evidence of the debts owed to the secured creditors (other than our client) and the caveators of the properties which have been sold.

We note that your client has agreed to produce the requested evidence, to the reasonable satisfaction of our client, by 13 December 2010.

As discussed with you, if your client does not produce that evidence, to our client's reasonable satisfaction, our client will have the right, at its sole discretion, to re-list the proceedings and seek to enforce the consent judgment.

We will prepare some short minutes of order and provide them to you before Monday's court appearance.

We note that you have requested that we mention your appearance by consent. We are content to mention your appearance on the basis that the matters between our clients have been agreed.

Our client continues to reserve all of its rights"

12 That this was the basis of the agreement reached between the parties was evidenced firstly, by the consent orders made in on 3 December, when Ms Rae appeared and also mentioned the matter before the Registrar for Mr Buterin, on 6 December. Secondly, on 13 December Mr Buterin provided information and later enquired whether the plaintiff was satisfied that this provided the proof dealt with in the offer, which had to be provide by 13 December. The plaintiff confirmed on 23 December that it did not.

13 The defendants' current solicitor Ms Wu has sworn an affidavit in which she deposed to conversations with Mr Buterin, in which he advised her as to his understanding of the agreement. Mr Buterin also swore an affidavit but did not himself deal with his understanding of the agreement, nor did he corroborate Ms Wu's account of their conversation. Even what Ms Wu recollected Mr Buterin telling her, finally does not support the case now advanced for the defendants. Her account was that on 2 February Mr Buterin advised that the consent judgment 'was to be held pending completion of the sale, not until a certain date'. He was reluctant to provide an affidavit, at that point. When he and Ms Wu spoke again on 10 February, their conversation concluded with Mr Buterin's advice that:

"Well it has always been my understanding that the consent judgement was pending completion of the sale. At the time the sale was to take place in early January on 7 or 11 January or something. I don't recall any sunset date being discussed. If it is mentioned in any letter then the document speaks for itself"

14 In his affidavit Mr Buterin gave no account of what was discussed, or of his understanding of what was agreed. His understanding of what was agreed, would in any event, have but little relevance to the construction of the correspondence which evidences the agreement. On Ms Wu's account Mr Buterin had no clear recollection of that correspondence, but he was correct to say that the documents would speak for themselves. They do. They are not ambiguous. The plaintiff was only prepared to proceed on the basis it outlined in its final advice on 3 December. That was accepted and the parties acted accordingly. It follows that it is not seriously arguable that the consent judgment was to be held in escrow until completion of the sale.

Notices

15 The reliance placed on various notices was admittedly technical, particularly in relation to the notice to occupier. In evidence are affidavits attesting to service. I am satisfied that no foundation has been established for relief being refused the plaintiff, on this basis. As to the notices given under s 57(2)(b) of the Real Property Act 1900, they were not annexed to the affidavits, but when a copy of the notices was shown to the defendants' counsel, it was confirmed that there was no inadequacy. The evidence permits the inference that the notice served had no deficiency and, in any event, as was submitted for the plaintiff, a s 57(2)(b) notice is concerned with the exercise by a mortgagee of the power of sale, dealt with in s 58, not with possession.

16 It follows, in my view, that the defendants have not established any basis on which they could resist judgment for the plaintiff being entered.

Discretionary matters

17 The plaintiff has established that it is entitled both to judgment and possession. The plaintiff conceded, however, that the circumstances were such that as a matter of discretion the Court would make orders which it proposed.

18 For the defendants it was submitted that the date specified in the orders should be 14 March and that some account should be taken of the possibility that the defendants might make an application for judicial sale of the properties, if the sale does not complete. There was a concern that the plaintiff would resist such an application, on the basis that it would traverse orders already made.

19 I am satisfied that it is sufficient to note the possibility that there might be such an application. That could only arise as a possibility, if the sale did not complete. If such an application were to be made, clearly it would have to be made before the writ of possession is enforced, if it were to have any prospects of success. In the circumstances I take the view that it is sufficient to note the possibility which has been raised, but am satisfied that no specific order in that respect needs to be made, in order to justly accommodate the parties' competing interests.

Orders

20 For the reasons given I am satisfied that justice demands that as a matter of discretion the following orders should be made:

1. In the event that the contract for the sale of the properties known as 2 to 32 Vine Street, Redfern and 32 to 34 Eveleigh Street, Redfern (being the whole of the land in folio identifiers 1/627353, 2/627353, and 1/395992) from the defendants to Shepherd Street Pty Ltd ACN 127078880, which exchanged on 1 December 2010, has not settled by 5.00pm on 14 March 2011, upon application in writing by the solicitor for the plaintiff to the Associate to Schmidt J,

(a) judgment will be entered for the plaintiff for:

(i) possession of the property known as 2 to 14 Vine Street, Redfern (being the whole of the land in folio identifier 1/627353);

(ii) possession of the property known as 32 to 34 Vine Street, Redfern (being the whole of the land in folio identifier 2/627353);

(iii) the amount of $2,147,247.29, being the amount of the debt under the Loan Agreement as at 11 February 2011;

(iv) interest to accrue on the judgment referred to in the preceding sub-paragraph in accordance with the provisions of the Loan Agreement at the rate of $641.76 per day; and

(b) leave will be granted to the plaintiff for a writ of possession for the properties referred to in paragraphs 1(a)(i) and 1(a)(ii) to issue forthwith; and

(c) no order will be made in relation to costs.

2. Grant liberty to apply on 1 day's notice.

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Decision last updated: 22 February 2011