Australia and New Zealand Banking Group Ltd v Kavia Holdings Pty Ltd

Mortgage not secured debt 17As I mentioned, the Mortgage is expressed to secure, in effect, "all moneys". On the face of it, the words of the Mortgage are apt to capture the advances made pursuant to the Letter of Offer. 18However, Mr Ogborne, who appeared for Mr and Mrs Crawley, submitted that because the Letter of Offer was not expressly incorporated into the Mortgage (unsurprisingly as it was executed some 19 years before), Kavia's admitted obligations under the Letter of Offer are not secured by the Mortgage. Mr Ogborne submitted that the Mortgage does not, and he adds did not at any time, secure any obligation of Kavia to the Bank. Not the amounts advanced by the Bank to Kavia concurrently with provision of the Mortgage. Not the amounts now due by Kavia to the Bank under the Letter of Offer. Nothing. 19Mr Ogborne accepted the effect of this submission is that execution of the Mortgage by Kavia did not confer on the Bank any right beyond the personal covenants in the Mortgage. 20In support of this alarming proposition, Mr Ogborne relied on a line of authorities summarised recently by Simpson J in Perpetual Trustees Victoria Ltd v English [2009] NSWSC 478; and in particular, on the decision of the Court of Appeal in Provident Capital Ltd v Printy [2008] NSWCA 131. 21However, those cases were concerned with the circumstances where, although the Mortgage was registered, the signature purporting to be that of the mortgagor was a forgery. 22In those cases, the mortgagor, in truth, had made no promise to the mortgagee. 23Because the mortgagor's signature was forged, the mortgagee's entitlement under the mortgages in question was entirely dependent on the registration of the mortgage and such rights of indefeasibility which arose thereby (see, for example, Printy at [14]). 24In each of those cases, Campbell J's familiar question in Small v Tomassetti [2001] NSWSC 1112 arose for consideration: "Notwithstanding that registration confers indefeasibility on a mortgagee there is still a question, 'Indefeasibility for what?'" (at [9]). 25The effect of this line of cases was summarised by Simpson J in English at [121] to [128]. 26In summary the position is that, in the case of forgery of the mortgagor's signature, the indefeasibility provisions of the Real Property Act 1900 will only protect the mortgagee if the promise of repayment of the particular debt relied on is actually incorporated in the mortgage. 27But that is not this case. 28Here, there is no dispute that Kavia gave the Bank the promises in the Mortgage. Thus, the questions which arose in the cases to which I have referred do not arise here. Here, the Bank does not rely merely on the registration of the Mortgage. It relies on the promises made by Kavia in the Mortgage. 29The Bank moves for an order under s 60 of the Real Property Act for possession of the Property. The matters arising in cases such as Printy have no bearing on the question. The fact that the Bank is relying on an "all moneys" clause in the Mortgage, which does not, in terms, incorporate by reference the Letter of Offer is beside the point. 30I therefore reject the submission that the debt is not secured by the Mortgage.

Proper construction of the Mortgage 31Mr Ogborne also submitted that, on the proper construction of the Mortgage, the Bank was not entitled to possession, unless there was default "under the Mortgage" (and not merely under the Letter of Offer). 32I have mentioned that cl 1 of the Mortgage provides that Kavia "will on demand in writing" pay the Bank the amount due. 33Mr Ogborne submitted there had been no "demand in writing" made by the Bank to Kavia. 34In support of that submission, Mr Ogborne pointed to the fact that the notice of demand of 5 February 2013, after reciting the identity of the various members of the Aldonet Group (including Kavia), referred to them as "together the Aldonet Group". Nonetheless, it appears to me from the form of the demand that it is addressed to Kavia, albeit as one of a number of other companies. It appears to me plain on the face of the demand that it is addressed to each of those companies, severally, and it is a demand sufficient to enliven cl 1 of the Mortgage.

Section 125 of the Residential Tenancies Act 2010 35Alternatively, Mr and Mrs Crawley seek an order under s 125(4) of the Residential Tenancies Act 2010. 36Section 125 provides that if, as here, a party who is not a "landlord" commences proceedings for recovery of land, a tenant under a "residential tenancy agreement" may apply for an order under s 125(4). 37Section 125(4) is in the following terms: "The court or Tribunal may, on such an application, and if it thinks it appropriate to do so in the special circumstances of the case, make an order vesting a tenancy over the residential premises in the applicant." 38There is no dispute that Mr and Mrs Crawley are tenants under a "residential tenancy agreement". 39However, to enliven s 125(4), Mr and Mrs Crawley must show that it is "appropriate" to make an order vesting a tenancy in the "special circumstances" of the case. 40In Perpetual Finance Corporation Ltd v Blain (1996) 9 BPR 16, 243, Giles J said, in the context of s 76(3) of the former Residential Tenancies Act 1976: "The word 'special' invites comparison so that it may be asked special in relation to what. There must be more than the fact that the tenant must otherwise give up possession...; not all tenants who have to give up possession will qualify, and the successful tenant must provide grounds for taking his position out of the ordinary to the extent that the circumstances attract the description of special". 41The authors of Anforth et al, Residential Tenancies Law and Practice New South Wales, 5th ed (2012), point out that there are few cases in the tenancy jurisdiction which discuss the concept of "special circumstances" but that the expression has received a great deal of consideration in the context of the Social Security Act 1991 (Cth). For example, in Re Beadle and Director-General of Social Security (1984) 6 ALD 1, Toohey J said: "An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special." (at 3). 42Mr Ogborne relied upon a number of matters which, he submitted, amounted to "special circumstances". 43First, he submitted that Mr and Mrs Crawley had entered into a lease for a "substantial term". It is true that Mr and Mrs Crawley entered into the Lease for a period of two years and eleven months. But they did so after the term of the loan had expired. And they did so as directors of Kavia, as well as tenants. 44The "substantial term" was one month short of the date by which Mr and Mrs Crawley would be obliged to cause the Lease to be registered for the purposes of s 42(1)(d) of the Real Property Act. In cross-examination, Mr Crawley accepted he had caused the Lease to have a term of two years and eleven months for that reason. Mr Crawley also said that he had no recollection of giving any notice to the Bank of entering into the Lease. 45Mr Ogborne pointed to the fact that Mr and Mrs Crawley had paid rent in advance. That is true, but the manner in which the rent was paid in advance was by the giving by Mr Crawley of instructions (evidently not implemented until well after the Lease was commenced) to some person within the Aldonet empire to set-off the rent against Mr Crawley's loan account with Kavia. 46Mr Ogborne submitted it is unlikely Mr and Mrs Crawley will be able to recover the rent. That may be, although there is no evidence before me as to Kavia's financial position. 47Further, Mr and Mrs Crawley have no other available place of residence. Mr Crawley's evidence does establish that. But that is not a weighty consideration (see the observations of Giles J at [40] above). 48Mr Ogborne submitted that the Bank has not established the necessity for possession, in that it has not proved that sale of such other securities, as the Bank has, will not be sufficient to cause repayment of the overall amount due. There is no evidence either way on that subject. 49The legislation is plainly beneficial legislation designed to protect tenants who find themselves in a vulnerable position because of action taken by a mortgagee in circumstances not connected with their tenancy of the property. 50Here, Mr and Mrs Crawley are not in that position. In no sense are they at arms length from the mortgagor. 51The circumstances before me are quite unlike those which were recently considered by Slattery J in O'Neill v Commonwealth Bank of Australia [2013] NSWSC 836. In that case, the mortgagor, without notice to the mortgagee, leased premises for three months to an arms length tenant. Unbeknownst to the tenant, the mortgagee had by then obtained judgment for possession and had been granted a writ of possession. The matter came before Slattery J urgently because, after the tenant had been in possession for about a month, the mortgagee levied execution and caused the tenant to be locked out. It was under those circumstances Slattery J granted the tenant a s 125(4) tenancy until the expiry of the three month term. 52The circumstances before me are a far cry from those. 53In my opinion, the legislation is not directed to give effect to what I would conclude was a device adopted by Mr and Mrs Crawley to thwart what they must have anticipated to be the Bank's intention, ultimately, to move for possession. 54In those circumstances, I am not prepared to find the existence of special circumstances such as to warrant the creation of a s 125(4) tenancy. 55The Bank is entitled to the relief it seeks.

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