Avahlon Pty Ltd v Kellas-Sharpe

Negotiation and dispute 12On the motions, I have received affidavits from the defendant, her solicitor, and the plaintiff's solicitors. The defendant describes the commercial background to the taking out of the loan and the difficulty she has experienced in repaying. This appears in large part to be due to her being embroiled in commercial litigation in Queensland. The defendant also describes the steps that she has undertaken to negotiate a payout figure with the plaintiff's solicitors, commencing from late 2011 when she received notification of the statement of claim until May 2012, being the time that she instructed her present solicitors. 13 For present purposes, it is only necessary to note two matters about this material. First, a number of matters have been identified by the defendant which raise questions as to the asserted payout figure sought by the plaintiff. In broad terms, they are the charging of interest, which is said to be a penalty, as well as various costs and expenses. Without descending into the detail of those disputes, I am proceeding on the basis that arguable claims are raised in respect of those matters. For the sake of completeness, I should indicate that there does seem to be some substance in the defendant's submissions in that they raise arguable questions. 14Second, nothing in the affidavit material raises any matter which would undermine the legal entitlement of the plaintiff to obtain possession of the entirety of the mortgaged property. Leaving aside all other matters, the defendant defaulted on repayment of the principal which was due after six months. There is nothing in the defendant's affidavits which attack the underlying transaction in any way which would remove or qualify either her obligation to repay the principal or the plaintiff's entitlement to obtain possession (cf Horrobin v Australia and New Zealand Banking Group Ltd (1996) 40 NSWLR 89 at 100D per Sheller JA).

Slip rule 15I have already described the difficulties with the description of the property in the default judgment and the difficulties in paragraphs 1, 2 and 10 of the statement of claim upon which the default judgment was based. In logical order, the first matter for me to consider is the plaintiff's application to address the difficulties in the identification of the property in the default judgment pursuant to the slip rule, now found in UCPR r 36.17. It provides: "If there is a clerical mistake, or an error arising from an accidental slip or omission, in a judgment or order, or in a certificate, the court, on the application of any party or of its own motion, may, at any time, correct the mistake or error." 16Ms Allen for the defendant pointed to UCPR r 14.15 concerning the requirements for pleading a claim for possession. In particular, she adverted to the requirements to identify the proper instrument as well as the necessity to properly identify the property in question. 17I was referred to a number of decisions concerning the scope of the slip rule. In Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446 at 453, McHugh JA stated: "However, if a claim is made in respect of a matter which does not relate to an issue in the original proceedings, there is no power under the slip rule to vary the order: cf Brew v Whitlock (No 3). Notwithstanding the decision in Coppins or the dictum in L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) the cases to which I have referred indicate that amendments under the slip rule are not confined to subsidiary or consequential matters. The requirement that the proposed amendment must relate to a matter which was in issue in the proceedings or what was incidental thereto merely serves to emphasise that it is only omissions or mistakes which are accidental which can be rectified. It would be contrary to the rationale of the slip rule to allow judgments and orders to be amended to deal with matters which were not in issue in the proceedings. Such matters must be dealt with by way of appeal and in accordance with the principles which govern the raising of new matters on appeal: cf Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438 and Piening v Wanless (1968) 117 CLR 498." 18Since Storey & Keers, the Court of Appeal has considered the scope of the slip rule in light of a change in regime effected by the Civil Procedure Act in Newmont Yandal Operations Pty Ltd v the J Aron Corp [2007] NSWCA 195; (2007) 70 NSWLR 411. Although that decision perhaps adopted a wider operation of the slip rule than had previously been the case so as to give effect to the objectives set out in s 56 of the Civil Procedure Act 2005, I do not understand their Honours to have overruled the statement of principle enunciated by McHugh JA in Storey that I have extracted above. In particular, the need to differentiate between amendments of orders under the slip rule so as to reflect the issues in the original proceedings, compared with allowing parties to make substantive applications to raise new issues, needs to be respected. 19In this case, it has to be remembered that there was no hearing that led to the default judgment. An ascertainment of what was in "issue" can only be undertaken by reference to the statement of claim. I do not consider that an ascertainment of what was in issue in the proceeding that led to the issue of the default judgment can be ascertained by looking to the wider commercial relationship between the parties to the statement of claim. In my view, bearing in mind the terms of paragraphs 1, 2 and 10 of the statement of claim which identify the "issues" that were resolved by the default judgment, it is not open the slip rule to amend the default judgment that was issued to seek possession of parcels of land that were not the subject of the proceeding defined by the statement of claim. 20Accordingly, I decline the plaintiff's application to amend the default judgment under the slip rule. The necessary consequence of me doing so is that I accede to the defendant's application to set aside the default judgment as well as the writ. Uncorrected, the default judgment is clearly an irregularity which must be set aside pursuant to UCPR r 36.15.

Statement of claim 21The next issue that arises concerns the form of the statement of claim. The defendant sought to strike it out by reason of the two defects that I have identified above. To meet this, the plaintiff sought to amend the statement of claim to correct the description of the mortgages as well as the property the subject of the claim for possession. Quite rightly, the defendant did not seek to argue that that amendment should not be allowed. The proposed form of the statement of claim is that set out in MFI 1 before me and I will make an order granting the plaintiff leave to file an amended statement of claim in that form.

Further judgment for possession 22There remains the claim in prayer 4 of the plaintiff's notice of motion, which seeks judgment for possession of the subject property, this time properly described by reference to all of the portfolios of land. In substance, this aspect of its motion is a claim for summary judgment on so much of the amended statement of claim as seeks an order for possession. It is a claim that is sought to be done in anticipation of the usual time for the filing of an amended defence. Although I queried this aspect with the parties, it seems to me that UCPR r 14.3(2) clearly contemplates that such an application can be made prior to the filing of any defence. 23During argument, I raised a concern that to grant possession at this point would nevertheless have the effect of upsetting the usual court timetable and deny the defendant the opportunity and time that is usually proffered by the rules to consider her defence and, in the case of defendants to possession proceedings, to negotiate a payout figure. However, in this case that question of time does not in my view warrant the refusal of the application. It is to be remembered that it is now over two years since the defendant went into default under her mortgage and the plaintiff's right to possession arose. It is to be further remembered that in that time the defendant, even with the assistance of competent legal representation, has not been able to identify any legal defence to the claim for possession. In my view, the objectives set out in s 56 of the Civil Procedure Act require that I grant the relief sought in prayer 4. In circumstances where the delay has been that long and there is no legal defence, there is no justification for denying the plaintiff its legal rights. 24At this point I note two matters. First, Ms Allen, who put everything that could be said on behalf of the defendant, pointed to what she submitted was the unjustness that would be occasioned by the making of a further order for possession, particularly having regard to what she submitted was the plaintiff's failure to accept a reasonable offer of a payout figure made by the defendant. The difficulty with that is that it is no legal answer to the plaintiff's entitlement to possession, which, leaving aside all other matters, flows from the failure to repay the principal two years ago. 25The second matter raised by Ms Allen concerned the issues that I have referred to above in relation to interest and costs that the plaintiff seeks to recover from the defendant and which she disputes. Ms Allen submitted that the issue of the quantification of the amount to which the plaintiff is entitled to be paid out is inextricably linked to its right to possession. I do not agree. In fact, they are quite separate. As I have said, the right to possession flows from the simple default on the part of the defendant in failing to repay the principal: a default she does not deny. A default judgment for a monetary amount was not granted. 26I am proposing to grant the plaintiff judgment on so much of its claim as seeks possession. There will still be remaining in the proceedings a substantial dispute as to how much is necessary to pay out the mortgage, that being the dispute raised by the claim of the plaintiff for a monetary amount. Although the parties, and perhaps the Court, have been acting on the basis that the proceedings simply come to an end when an order for possession is made, in this case that is not correct because there are still outstanding issues raised by the pleadings. 27Finally, I note that I will shortly hear the parties on the appropriate costs order. I also note that the defendant points out the provision in the memorandum of mortgage which on its face could have the effect that, irrespective of the order made by the Court as to costs, all of the plaintiff's costs, no matter how they conduct themselves in the proceedings, are loaded onto the mortgage. That is not a matter in respect of which I can make any order on an interlocutory application. It is a matter that might be raised in a defence insofar as a monetary judgment is sought, and it will be open to the defendant to plead that matter if she sees fit. 28On the question of costs, the plaintiff contends that it has succeeded in that it has obtained a judgment for possession. That has considerable force. However, it would not be in this position if there had not been a mistake both in the original statement of claim and in the default judgment. Before me, it was in the position of seeking an indulgence. 29Further, there was nothing unreasonable in the defendant's behaviour at least so far as it brought its own motion. It has had some measure of success in that at least one practical outcome of there being a further writ issued is that there will be a period in which she will have an opportunity to negotiate either a payout figure or a payout regime with the plaintiff. Bearing that in mind and the events which precipitated the motions, in my view the appropriate order is that each party pay their own costs. I will so order. 30Accordingly, I make the following orders:

1. That the default judgment entered against the defendant dated 12 February 2012 be set aside.
2. That the writ of possession issued on 14 March 2012 be set aside.
3. The plaintiff have leave to file an amended statement of claim in the form of MFI 1.
4. Judgment for the plaintiff for possession of the property located at xxx xxxxxxxxx xxxx, Leeville NSW 2470, being the land contained in folio identifiers 1/113916, 30/755618, 31/755618, 51/755618, 56/755618, 9/755625, 10/755625, 11/755625, 12/755625 and 86/755625.
5. The plaintiff have leave to issue a writ of possession in respect of the property identified in order 4.
6. The writ be stayed for a period of 21 days.
7. The defendant file and serve any defence to the amended statement of claim within 35 days.
8. The matter be listed for further directions before the Registrar at 9am on 5 September 2012.
9. Each party pay their own costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 July 2012