Baker-Crooks v Separovich

The Deed and mortgage

The Deed of 15 January 2016 relevantly provided: WHEREAS; A. The lender has previously lent certain sums of money to the borrower for the purpose of owner occupied housing ("the previous advance"). B. The parties have agreed that the lender shall lend certain sums of money to the borrower for the purpose of repaying the previous advance and that the loan referred to in this deed is for the purpose of owner occupied housing. C. The parties have agreed that the loan referred to in Recital B shall be upon the terms of this deed. … 2. LOAN 2.1 The borrower acknowledges receipt of the sum of $1,100,000.00 lent by the lender to the borrower upon the terms of this deed. 2.2 The lender may subsequently lend such additional amounts as are agreed by the parties, upon the terms of this deed. … 4. LOAN REPAYMENT 4.1. The borrower shall repay the principal sum and any outstanding interest to the lender on or before the earliest of: 4.1.1 The property being sold by the borrower; 4.1.2 The expiration of 3 months written notice from the lender served on the borrower calling for such repayment. 4.2. The borrower shall have the right to repay the whole or any part of the outstanding balance at any time. 5. MORTGAGE The borrower will grant the lender a mortgage over the property as security for the principal sum. 6. OTHER OBLIGATIONS OF THE PARTIES 6.1 The borrower shall, within 28 days of the date of this deed, execute a will giving effect to the following: 6.1.1 Revoking all previous wills of the borrower; 6.1.2 Appointing the lender as executrix of the borrower's will, and any appointment of another executor to act jointly with the borrower may only be made with the lender's written consent prior to the execution of such will; 6.1.3 Giving the property to the lender to hold in trust for the borrower's children and remoter issue. 6.1.4 Convenanting that such will shall not be revoked without the lender's written consent. 6.2 The lender shall, on or about the date of this deed, execute a will, or a codicil to her existing will, containing a term providing that, in the event the principal sum exceeds the share of the lender's estate to which the borrower (or any testamentary trust bearing the name of the borrower) is entitled, this loan shall be forgiven to the extent of such excess.
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. The Mortgagor shall take all steps reasonably required on her part to place the Mortgagee in a position to register the mortgage contemplated in this document by doing all acts necessary including putting it in registrable form, arranging for the certificate of title of the property to be produced by the Mortgagee at Land and Property Information and obtaining consent from other parties holding any estate or interest in the property. … 9. If the Mortgagor defaults on any term of this Mortgage, or has any execution process levied against the Mortgagor, or commits any act of bankruptcy, then the whole of the outstanding loan amount becomes immediately due and payable and interest (at such rate as may from time to time be prescribed pursuant to the Family Law Rules) will run on the outstanding balance as and from the date of the default or the date that any execution process is levied, or any act of bankruptcy is committed.
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.
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.
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.
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: Upon default being made in payment at the respective times and in the manner shown in the mortgage of the principal sum or any part thereof, or of the interest thereon or any part thereof, or upon default being made in the observance or performance of any of the covenants contained herein or in the mortgage or implied therein by the Real Property Act 1900 or the Conveyancing Act 1919 the mortgagee shall (notwithstanding any omission, neglect or waiver of the right to exercise all or any of such powers on any former occasion) be at liberty to exercise all or any of the powers of a mortgagee under the said Acts immediately upon or at any time after default as herein before mentioned, subject however to compliance with any requirements of the said Acts in respect of the exercise of such powers. If at any time default shall be made in the due payment of the interest on any of the days when the same respectively shall become payable or within the time thereafter mentioned in the schedule to the mortgage, or, if the power of sale given to the mortgage under either of the said Acts shall become exercisable, then the principal sum shall immediately become due and the mortgagor will thereafter pay the same on demand.
Clause 11 relevantly provides: All powers, rights and remedies implied in favour of or conferred upon mortgagees by the Conveyancing Act 1919 or the Real Property Act 1900 shall be in enlargement and not in curtailment of the powers, rights and remedies conferred by these presents,… .
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: [54] The Real Property Act 1900 itself confers no status upon an unregistered mortgage. Rather, the attributes of such a mortgage derive from the contract between the mortgagor and mortgagee, and the general law. Relevant provisions of the contract can include whether there is a right to possession of the mortgaged land, whether there is a power of sale out of court upon default, whether there is a covenant to execute a registrable mortgage, and whether there is a covenant to procure the registration of a registrable mortgage. The rights under the general law could be affected by whether the unregistered mortgagee had custody of the certificate of title, and whether there were any prior mortgages. Rights under the general law may also depend upon the extent to which it is possible to obtain specific performance of particular covenants in the mortgage. Provided only that the intention to make the land security for a debt is clear, an unregistered mortgage will confer at least the rights which the general law confers upon a chargee. Whether there are any more extensive rights will depend upon the circumstances of the particular mortgage. In the present case, the intention of the mortgagors to make the land act as security for the debt is clear. … [80] In the present case, the mortgage of the second mortgagee contains a contractual power of sale. In itself, that provides a basis for the Court to have jurisdiction to make an order for sale of the mortgaged property, by way of an action for specific performance. … [126] By contrast [to the position of a registered second mortgagee of Torrens land], a mere equitable chargee of land has no right to possession: Garfitt v Allen (1887) 37 Ch D 48. [127] In New South Wales, an equitable mortgagee of land has no entitlement to an order for possession, of the type provided for by section 79 Supreme Court Act 1970 prior to its repeal on 15 August 2005, and now by section 20 Civil Procedure Act 2005: Mills v Lewis (1985) 3 BPR [97205] at 9431 - 9431.3 per Priestley JA (with whom Hope and Glass agreed). However, if there is a covenant in the mortgage entitling an equitable mortgagee to possession upon default, once there has been a default an equitable mortgagee is entitled to a declaration that it is entitled to possession, and, in an appropriate circumstance, an order in the nature of specific performance requiring the mortgagor to give possession to the mortgagee: ibid. … [129] In the present case, the mortgage of the second mortgagee contained a covenant for possession upon default, and so provided the basis for an order in the nature of specific performance of that covenant. However, an order in the nature of specific performance of such a covenant will be directed to the mortgagors, ordering them in personam to give up possession to the mortgagee. It would not, of itself, lead to the making of an order for possession of land (which, as explained in Mills v Lewis (1985) 3 BPR [97205] is justified only when an order for ejectment would have been justified at common law), nor to the issuing of a Writ of Possession. (emphasis added)
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].
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.
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.
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.
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.
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.
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.
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: [167] I accept that vacant possession is a normal incident of sale, the availability of which is generally necessary for completion of the sale: King Investment Solutions Pty Limited v Hussain [2005] NSWSC 1076 at [133]. The vendor's obligation to give vacant possession to the purchaser should occur concurrently with the payment of the purchase price and the transfer of title: Isaacs v McGuire (1888) 14 VLR 815 at 818. A mortgagee exercising power of sale is obliged to recover physical possession of the property from the mortgagor: Reynolds v Doyle (1919) 19 SR (NSW) 108 at 110; Lang, "NSW Conveyancing Law and Practice", CCH, paragraph [10-130]. Mortgagees normally take possession as a preliminary to sale, so that the property can be sold with vacant possession: Butt, "Land Law", Lawbook Co, 6th edn, 2010, paragraph [18 106]. … [194] The Plaintiff's third submission in support of the claim for possession was based upon s.109 Conveyancing Act 1919 (see [156] above). [195] I am satisfied that the Plaintiff is a mortgagee within s.109(1)(a) by reference to a charge (under s.550 LG Act) and the definition of "mortgage" in s.7 Conveyancing Act 1919. As vacant possession is a normal incident of sale (see [167] above), I accept that a condition of sale that a property be conveyed subject to vacant possession falls within the words in s.109(1)(a) Conveyancing Act 1919. [196] I would uphold the Plaintiff's entitlement to possession of the Jugiong property on this basis as well.
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.
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.
Accordingly, the declaration and orders I make are these: 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. Declare that the Plaintiff is entitled to possession of the Property; 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. Judgment for the Plaintiff for possession of the Property; 5. Leave to the Plaintiff to issue a writ of possession forthwith to enforce the judgment of the Court; 6. Grant liberty to the parties to apply generally on 2 days' notice.

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