ALS 131 Pty Ltd v Rahme

EX TEMPORE Judgment

1. Filed in court today was a notice of motion by the defendant, Ms Tanya Kristin Rahme. Prayer 2 of the notice of motion seeks an interim stay of a writ of possession which was due to be enforced at 9am this morning. Prayer 3 of the motion sought an order to the effect setting aside a judgment of Registrar Jones given on 9 December 2019 and allowing Ms Rahme time to file a defence.
2. The balance of the prayers for relief in the notice of motion was a mixture of submissions and consequential orders.
3. In the events that happened, the Court was advised that the Sheriff attended to execute a writ of possession at the subject premises this morning, but due to various issues associated with access and the like, did not pursue that attempt.
4. The experience of the Court is as stated by Johnson J in GE Personal Finance Pty Limited v Smith [2006] NSWSC 889 at [28] ("GE"), namely, that: "Where a date and time has been nominated for this action, [the execution of the writ of possession], and a stay is granted shortly before that time, it is the experience of the Court that a period of some two to three weeks is required before further arrangements can be made by a Plaintiff for the Sheriff to take possession of the property."
5. These observations also apply to those occasions where for some reason the Sheriff proves unable to execute the writ. Although I would encourage the Sheriff to reconsider the time and place which he can execute the writ of possession over the subject property, in the end that is a matter for him or her. Thus, the application has come before the Court in circumstances where Ms Rahme appears to have obtained a de facto stay for at least a short period.
6. I indicated to the parties when the matter was called on that the only matter I would hear on the notice of motion was the application for the stay of the writ of possession, even allowing for what had occurred when the Sheriff had attended. To the extent the notice of motion may be seeking to appeal against Registrar Jones' orders, or to make a fresh application to set aside default judgment, it will be adjourned and will have to run its ordinary course. For the reasons that will follow, I do not consider there is any significant reason for urgency in relation to that aspect of the notice of motion.
7. Between August and October 2018, a series of loan transactions were entered into whereby the plaintiff, ALS 113 Pty Limited, lent an amount well in excess of $2m to Revolve Ethical Homewares and Furnishings Pty Limited being a company associated with Ms Rahme. Ms Rahme guaranteed the loan. The loan was secured over Ms Rahme's home and principal asset being the subject property, specifically a house in Wahroonga.
8. The stated purpose of the loan was to allow for Ms Rahme to pursue renovations of the property and discharge some existing securities, including a debt of over $1.6 million owed to the ANZ Bank and $500,000 to another lender. Ms Rahme advises that at least the second of those loans was in default. Ms Rahme had also entered into an agreement for a further loan of around $150,000 sometime in around December 2018, which was also for purposes of assisting the renovation. The interest rate was high, being around 21% per annum. There was an amount of prepaid interest deducted from the principal amount.
9. It seems that what was envisaged by the loan agreements was that the renovation would be undertaken reasonably quickly, that the property would be listed for auction in April 2019, and the auction would occur at least by the end of May 2019.
10. The property was not put up for auction in that time, much less sold. Ms Rahme outlined various commercial and personal circumstances that were involved in the entry into those transactions, including concerning her former husband. Ms Rahme has indicated that the plaintiff did not advance the full amount at least under the second loan and that ultimately she was left with a shortage of funds and had to pursue the renovation from her own resources.
11. In any event, the first interest payment due on 11 April 2019 was not paid and the plaintiff's solicitors issued a default notice shortly afterwards. On 5 July 2019, the plaintiff filed a statement of claim which pleaded only the events concerning the first loan. Although, paragraph 18 of the statement of claim recited the level of indebtedness of Ms Rahme to the plaintiff, it is important to note that the only relief sought was for possession of the subject land and leave to issue a writ of possession forthwith. Although it is disputed, according to an affidavit of service filed on behalf of the plaintiff, Ms Rahme was served with that statement of claim. In any event, on 5 September 2019, a default judgment was entered in favour of the plaintiff for possession of the property. I reiterate that no money judgment was entered.
12. On 17 September 2019, the plaintiff filed a notice of motion seeking leave to issue a writ of possession. That order was made on 23 September 2019. It appears that the time for the execution of the writ of possession was listed in late November 2019. On 7 November 2019, Ms Rahme filed a notice of motion seeking orders setting aside the judgment and a stay of the writ.
13. Substantial affidavits were filed by both sides in respect of that notice of motion. Eventually a stay of the writ of possession was granted up to and including 12 December 2019, pending the determination by Registrar Jones of the notice of motion seeking the setting aside of judgment.
14. On 9 December 2019, Registrar Jones published her judgment. The Registrar dismissed Ms Rahme's notice of motion. The next date for the execution of the writ of possession was listed to be today. It seems that Ms Rahme received notice of that fact at least some time during January 2020. She entered into correspondence with the solicitors for the plaintiff concerning the amount necessary to discharge the indebtedness.
15. From the Bar table Ms Rahme has told me that throughout this period, she was under great stress, and was pursuing all of her efforts to complete the renovation of her home to put it in a state where it was suitable for sale. Ms Rahme told the Court that it is now in such a state and what she seeks to do is maintain possession while a sale is pursued.
16. Over the last week, there was correspondence between Ms Rahme and the plaintiff and the plaintiff's solicitors concerning the possibility of the parties entering into a deed of forbearance in relation to the execution of the writ. There is no doubt that the plaintiff's solicitors made it clear that that was being actively considered by their client, but equally they also made it clear to Ms Rahme that, unless and until such an agreement was reached, there was no agreement to any stay of the writ of possession.
17. Ms Rahme told the Court that she had previously objected to the entry into of any such deed because one of its proposed terms required that she acknowledge the level of indebtedness and the legal validity of all the loans and so forth that had been entered into. In the ordinarily course one would not expect a plaintiff lender to agree to forebear its ability to enforce its securities if there was reserved to the borrower some ability to challenge whether those rights of enforcement exist.
18. One basis for the grant of the stay of the writ of possession concerns whether Ms Rahme could establish to a reasonably strong level the likelihood that she has a defence to the statement of claim. One difficulty in doing so is that Ms Rahme failed in an attempt to demonstrate that to Registrar Jones. No real attempt has been made to demonstrate any error on the part of the Registrar.
19. The gravamen of the suggested defence is essentially that, in substance, the purpose of the loan was to lend her, that is Ms Rahme, money to fund the renovations to her property and as such, the plaintiff should have complied with the relevant provisions of the Australian Consumer Law and associated credit legislation, including making an assessment of the borrower's capacity to repay. The short answer to that is the fact that the borrower was a company. Ms Rahme's counter response is that it was in effect a device seized upon by the plaintiff to avoid the legislation. As noted by the Registrar, and as revealed by the affidavits that were filed before the Registrar, it seems that the origin of the proposal to use a company as the borrower came from Ms Rahme's broker, who no doubt was aware of the lending approach that the plaintiff took. In those circumstances, it cannot be said that to the extent that Ms Rahme seeks to rely on that legislation that her case for showing an arguable defence is a strong one. Otherwise, in the brief time that I have had to review the material that was before the Registrar, I note that Ms Rahme was represented by a lawyer and a broker throughout the transaction.
20. From the Bar table Ms Rahme outlined a series of acute personal and financial circumstances she was placed in before she entered into the loans, with a view to suggesting the plaintiff somehow took advantage of that. Equally, however, that circumstance appears to reveal that Ms Rahme was in a reasonably desperate financial position to effect her renovations and persons in that position inevitably end up dealing with lenders who charge high interest rates on strict terms.
21. However, all this can be put aside because at this point it suffices to note there is no arguable basis for contending that Ms Rahme and the principal borrower were not in default of the loan agreement upon which judgment for possession was ordered. Given that it is only judgment for possession that has been entered, there seems to be no arguable case for setting that aside.
22. The balance of the issues raised by Ms Rahme, including those concerning the interest rate and the overall fairness of the circumstances that led to her entering into the transaction, seem to be matters that could be raised on any accounting that may occur in relation to the proceeds of sale. Indeed they appear to be matters that could be brought into account in any negotiations between the parties in advance of that sale. They do not, however, raise an arguable ground for setting aside the judgment for possession that has been entered.
23. Sometimes this Court has considered applications for the stays of writ of possession based both on personal hardship and the related circumstance that the borrower is making efforts to sell the property (GE, supra). Those considerations are usually considered in the context of the delay in making application to stay the writ and the explanation for that delay. I can understand that Ms Rahme has delayed approaching the Court over the last week while the possibility of a deed of forbearance was being floated. It is also perhaps understandable that her first priority was to pursue the completion of the renovation of her home in the months that preceded it. Nevertheless, in circumstances where there has been already one stay granted and Ms Rahme has suffered a significant loss before the Registrar, this application is truly being made at the last hour and in circumstances that place the Court and the Sheriff in an invidious position.
24. When that is considered against the fact that it was envisaged that the property would be sold a year ago, that, as Ms Rahme said, it is inevitable that she will have to leave sometime soon, as well as the fact that at least a stay in a de facto sense has been obtained for a period, then it follows that the application for a stay has not been made out.
25. In coming to that conclusion it must be remembered that, if the plaintiff excludes Ms Rahme from the sale process, then it runs the very significant commercial risk that it will be alleged that it pursued a sale at an undervalue. Although Ms Rahme is coming to the law late, she is doing so with a degree of passion. The plaintiff could expect to find itself litigating for a significant time about what is the appropriate amount it would need to account for in the event of a surplus. In those circumstances, the plaintiff will have to make its own considered commercial decisions about how it deals with Ms Rahme's continued occupation of the premises after any writ is executed and her role and involvement in the sale process. However, they are ultimately matters for the plaintiff. They are not matters for the Court.
26. The plaintiff sought an order directing than any further application for a stay of the writ of possession only be brought within a period well before the time when the Sheriff notifies that the writ of possession is to be executed. I am doubtful that I can make that order or that it would really have any practical effect. Instead I think the only appropriate course is to order that any further application for a stay of the writ of possession must be referred to the Duty Judge who will at least be armed with these reasons and be aware of the background to the matter.
27. Accordingly I order: (1) The defendant be granted leave to file in court a notice of motion dated 25 February 2020 and the notice of motion be heard instanter. (2) Prayer 2 of the notice of motion be dismissed. (3) The balance of the notice of motion stand over before a registrar of this court at 9 am on 19 March 2020. (4) Any further application for a stay of the writ of possession in this matter be referred to the Duty Judge. (5) The defendant pay the plaintiff's costs of the application.