Boutros v Nationwide Capital Pty Ltd

The proceedings below 7A brief description of the proceedings in which the orders were made by McDougall J is necessary. 8The first respondent/plaintiff, Nationwide, lent to the first defendant, Boutros Constructions Pty Limited (Constructions), the sum of $965,000 pursuant to a deed of loan and a deed of charge. The loan was for a period of four months from 12 November 2010. Interest was payable monthly in advance at the higher rate of 8 per cent per month, reducible to 4 per cent per month on prompt payment. The loan was guaranteed by the second defendant, Chalita Boutros (Boutros), and the third defendant, the applicant, who is the daughter of Boutros. The applicant agreed to give a mortgage over any real estate she might own. She is the registered proprietor of the Croydon Park property. 9The loan was due to be repaid on 12 March 2011. This did not occur. 10The Croydon Park property is subject to a first registered mortgage to Westpac Banking Corporation (Westpac), the fourth defendant. The other defendants in the proceedings below were the fifth defendant, Credit Corp Service Pty Limited, a judgment creditor pursuant to writ of execution issued against the applicant which is entered against the title to the property and the sixth defendant, Now Studio Pty Limited, which had lodged a caveat against the title of the property claiming an interest under a deed of acknowledgment of debt dated 9 June 2010. 11In the proceedings below, Nationwide sought money judgments against Constructions, Boutros and the applicant, and also an order for judicial sale in respect of the property, with provision for consultation with Westpac as to the sale price. 12On 30 November 2012, Windeyer AJ entered judgment for Nationwide against each of Constructions, Boutros and the applicant in the sum of $2,402,221; declared that the applicant has charged the property in favour of Nationwide, pursuant to the Deed of Guarantee of 12 November 2010, as security for moneys payable under such guarantee and that Nationwide is entitled to enforce such charge. His Honour made orders for the judicial sale of the property ([2012] NSWSC 1472). 13A cross-claim, apparently for damages, brought by Constructions and the applicant against Nationwide was dismissed. 14Orders 3 to 6 made on 30 November 2012 relating to the judicial sale of the property, were in the following terms: "(3) Order that the said property be sold subject to the supervision of the Court. (4) Order that the plaintiff conduct the sale by public auction or, if not sold at auction, by private sale, and pay the proceeds of sale in the following order: (a) First, for all the proper costs and expenses relating to the sale of the property; (b) Secondly, as at any remaining proceeds of sale after payment in accordance with order 4(a), the whole of the amount due to the Fourth Defendant pursuant to registered mortgage AE834653; (c) Thirdly, as to any remaining proceeds, such sum shall be paid into Court to await determination by the Court as to entitlement as between the plaintiff, the fifth defendant and the sixth defendant. (5) The plaintiff shall, with respect to the sale of the property, act in the following fashion: (a) Prior to offering the property for sale, the plaintiff shall consult with, the fourth defendant, with respect to the sale of the property and ascertain from the fourth defendant a minimum sale price necessary to pay out the fourth defendant's mortgage ("the minimum price"), which shall include a reasonable allowance for further interests and costs under that mortgage up to the anticipated date of completion of the sale; (b) Unless the Court otherwise orders, the Plaintiff shall not offer the property for sale at less than the minimum price; (c) In the event that the fourth defendant does not provide the plaintiff the minimum price within fourteen days of request, or the minimum price is a figure that the plaintiff reasonably believes is unlikely to be realised or exceeded on the sale of the property, the plaintiff shall not proceed to sell the property, but shall instead cause the matter to be re-listed before the Court and shall notify the fourth defendant of the listing, for the purpose of the Court making directions as to the minimum reserve price for any action and minimum sale price for any sale by private treaty. (6) Order that the plaintiff act at all times in relation to the selling of the property in accordance with the duties owed by a mortgagee in exercising a mortgagee's power of sale." 15Orders for possession of the property were not made on 30 November 2012. As noted by Windeyer AJ (at [56]), such orders were not sought in the pleadings, although they might follow from the order for judicial sale, provided the first mortgagee has not taken possession. His Honour noted that there was no evidence of whether Westpac as the first mortgagee had taken possession, and as no order for possession was sought by Nationwide his Honour did not take the matter further. 16As noted above, the applicant filed and served a notice of intention to appeal in respect of the decision of Windeyer AJ, but no notice of appeal was subsequently filed within 3 months of the material date of 30 November 2012, or subsequently. 17On 5 June 2013, Nationwide filed a notice of motion in the proceedings below seeking orders for vacant possession of the property as against the applicant. 18On 9 July 2013, McDougall J ordered that the applicant provide Nationwide with vacant possession of the property within 21 days and gave leave for the issue of a writ of possession in respect of the property, but ordered that the execution of such writ be stayed until further order ([2012] NSWSC 976). 19His Honour was satisfied (at [7]) that Nationwide had demanded that the applicant give up possession of the property, that the applicant had refused to do so, and that Nationwide had been making attempts, for some months, to sell the property by public auction. He was also satisfied that Nationwide and Westpac had reached agreement as to the minimum price referred to in the orders of Windeyer AJ. 20The bases on which the applicant opposed the orders sought by Nationwide were referred to by McDougall J at [8] as follows: (1)The orders were not sought in the originating process nor at the hearing (his Honour interpolated "this is clear"). (2)The orders made were final orders. (3)The relief now sought is substantive relief. (4)In the events that have happened, it is not open to the Court to reconsider the matter, and grant the (so-called) final relief sought. 21His Honour accepted (at [9]) that the orders of Windeyer AJ, so far as they went were final, notwithstanding that Windeyer AJ had noted the possibility (at [56]) that a possession order was no more than an incident of working out the process of judicial sale. 22His Honour referred (at [10]-[14]) to the applicant's argument based on the principle of finality, that the Court could not grant further relief which was in the nature of final relief after final orders had been made by Windeyer AJ on 30 November 2012. He noted the cases relied upon by the applicant being Phillips v Walsh (1990) 20 NSWLR 206 at 209-210 per McClelland J and Australian Hardboards Limited v Hudson Investment Group [2007] NSWCA 104; (2007) 70 NSWLR 201 at [56] per Campbell JA (Tobias JA agreeing), concerning what can be done under a reservation of liberty to apply. His Honour observed (at [14]) that there was no express reservation of liberty to apply in relation to the order for judicial sale, but found that as the order was made on terms that the property be sold "subject to the supervision of the Court", this was equivalent to an implied reservation of liberty to apply. His Honour then stated that: "The Court could hardly supervise the sale unless the parties were able to come to the Court to ask it to supervise that supervisory jurisdiction." 23His Honour next dealt with the applicant's argument that Nationwide as an equitable mortgagee had no entitlement to an order for possession. His Honour noted (at [16]) the distinction between an order for ejectment at common law, and an order in the nature of specific performance of a promise by an equitable mortgagor to an equitable mortgagee to provide possession on default. 24Significantly, his Honour observed (at [21]) that Nationwide did not seek an order for possession on either of these bases, but rather as an incident of the order for judicial sale. 25His Honour held (at [23]) that where an order for sale had been made, as between Nationwide as equitable mortgagee and the applicant as equitable mortgagor, Nationwide was entitled to sell free of the equitable mortgagor's possession of the subject property. His Honour found (at [24]) that the Court's order for sale would be frustrated if Nationwide could not sell the property free of the applicant's possession of the property, and that the supervision of the Court may be invoked to ensure that this happens. 26In light of the above findings, his Honour (at [25]) disposed of the applicant's finality objection on the basis that the possession order sought by Nationwide was part of the working out of the order already made, pursuant to the equivalent of liberty to apply.

Principles for a grant of stay 27The powers of this Court to order that the decision below or the proceedings under the decision be stayed arises under r 51.44 Uniform Civil Procedural Rules 2005. 28The principles to be applied when exercising the Court's power to grant a stay pending an appeal are well known: see Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694. See also Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 at 741 [17]-[20]. 29A successful party is prima facie entitled to the fruits of his or her judgment. As explained by Campbell JA in Vaughan v Dawson [2008] NSWCA 169 at [16], what that "prima facie entitlement" means, in practical effect, however, is that the onus is on the applicant for a stay to make out a case that it is suitable for the Court to award a stay. Further, it is for the applicant to demonstrate a proper basis for a stay that will be fair as between the respective interests of the parties: see Alexander v Cambridge Credit Corporation Ltd at 694; Adeels Palace Pty Ltd v Moubarak [2009] NSWCA 130. 30The Court will weigh considerations such as the balance of convenience and the competing rights of the parties. Where it is apparent that unless a stay is granted an appeal will be rendered nugatory, this will be a substantial factor in favour of the grant of a stay. 31It is appropriate to consider whether the appeal raises a serious question to be tried and if so, where the balance of convenience lies: see Campbell JA in Vaughan v Dawson at [13]; Kalifair at 741 [18].

Is there a serious question to be tried? 32For there to be a serious question to be tried in relation to an appeal, there needs to be a prospect demonstrated to the Court that the appeal may succeed: see Vaughan v Dawson at [18]. In the present case, there is no concession by the first or second respondents that the prospective appeal is an arguable one. (The second respondent, Westpac, adopted the submissions of the first respondent, Nationwide.) Thus it is necessary to look at whether arguable grounds of appeal are demonstrated. 33The draft notice of appeal identifies two grounds of appeal: (1)His Honour erred in making orders for possession of the appellant's property and for the issue of a writ of possession when the first respondent had no, or had not proven, any legal or equitable right to such orders. (2)His Honour erred in holding that orders for possession of the appellant's property and for the issue of a writ of possession could be made as orders working out an order for judicial sale despite the first respondent having no, or not proving, any legal equitable right to such orders. 34As to the first ground, the applicant's written submissions in support of her application for leave to appeal, contend that McDougall J was wrong for two reasons: (1)Nationwide did not have an action for possession pursuant to s 20 of the Civil Procedure Act 2005, as it had no right, as an equitable mortgagee, to possession of the Croydon Park property; and (2)Nationwide did not prove that it had in its equitable mortgage a covenant requiring the applicant to give vacant possession which was capable of being specifically performed. 35It will be immediately observed however that the relief granted by McDougall J was not based on either an order for possession of the type now provided by s 20 of the Civil Procedure Act, that is, an order for ejectment at common law: see Mills v Lewis (1983) 3 BPR 9421. Nor was it based on an order in the nature of specific performance of a covenant in an unregistered mortgage to give possession upon default: see King Investment Solutions v Hussain [2005] NSWSC 1076; (2005) 13 BPR 98296 at [129]. Rather, McDougall J granted relief on the basis that it was ancillary to the earlier judicial sale orders. 36As to the second ground, the applicant submitted that the relief granted by McDougall J was outside the parameters of a working out order, as observed by McClelland J in Phillips v Walsh (1990) 20 NSWLR 206 at 210, and that Nationwide did not otherwise prove a legal or equitable right to obtain such an order. 37Nationwide submitted that having been appointed as agent of the Court under the judicial sale orders, it was within the implied reservation of liberty to apply for Nationwide to seek an ancillary order that the applicant provide possession of the property as an adjunct to the order for judicial sale.

Consideration 38A number of observations are appropriate in relation to the orders for judicial sale made by Windeyer AJ on 30 November 2012. 39First, the applicant has not sought to challenge those orders by way of an appeal. 40Secondly, by appointing Nationwide to conduct the sale, Nationwide is acting as the Court's agent for sale: see Guardian Mortgages Pty Ltd v Miller [2004] NSWSC 1236; 12 BPR 98145 at [122]. 41Thirdly, those orders expressly provide for the sale of the property to be "subject to the supervision of the Court". As McDougall J correctly observed (at [14]), the Court impliedly reserved liberty to apply. Accordingly, Nationwide could seek ancillary orders to facilitate the sale of the property as part of the Court's supervision of that task. 42The applicant's submissions proceed upon the mistake of equating the right to possession of an equitable mortgagee with the right to a sale under the supervision of the Court. Judicial sale is a remedy for realising the security, whereas taking possession is a remedy for preserving the security and keeping the mortgage alive, albeit the mortgagee may subsequently seek to realise the security. 43The observation of Windeyer AJ (at [56]), that it was possible that an order for possession (as between Nationwide and the applicant) "might follow from the order for judicial sale" was a reference to the Court's power to make a necessary order ancillary to the primary order for judicial sale. Such an order may be "necessary" to enable a purchaser to obtain vacant possession on completion. His Honour was not referring to the rights of an equitable mortgagee to obtain possession as against the equitable mortgagor for the purpose of preserving the security and keeping the mortgage alive, for example, by receiving rents and profits or entering into a lease of the mortgaged property. 44The distinction which Windeyer AJ clearly had in mind and which McDougall J subsequently acted upon, is recognised in the authorities: see Harden Shire Council v Richardson [2012] NSWSC 622 at [167] per Johnson J; Prior v Simeon [2010] WASC 382 and Prior v Simeon (No 2) [2011] WASC 61 at [3] and [20] per Corboy J. See also Re Gordon (1889) 61 LT (NS) 299 at 300-301 per Field J; and Wade, "An Equitable Mortgagee's Right to Possession" (1955) 71 Law Quarterly Review 204 at 205-206. 45Prior v Simeon involved an order for judicial sale to give effect to an equitable lien held by a registered proprietor as security for a right to be indemnified by way of recoupment for payments made by the registered proprietor as trustee of the land. In Prior v Simeon (No 2) at [20]-[21], Corboy J noted that the order originally made in that case requiring the defendants, who were beneficiaries of the trust, to deliver vacant possession of the land to the trustee 14 days prior to the completion of the sale by the trustee under the Court's orders, was an ancillary order to facilitate the order for judicial sale. By contrast, the subsequent variation of the Court's orders made in Prior v Simeon (No 2) to provide for the (immediate) delivery up of possession of the land by the beneficiaries to the trustee, was made on the basis that the trustee was entitled to an order for possession of the land in aid of its accrued right of indemnity, and not merely pursuant to a direction of the Court made ancillary to an order for judicial sale. 46The trustee in Prior v Simeon (No 2) had sought the order for possession so that he could enter into a short-term lease of the land pending its sale, to derive the benefit of rental income to meet expenses of the trust and pending, a hoped for, improvement in the property market. The variation order which permitted the trustee to obtain possession, was for the purpose of preserving the security held by the trustee, not for realising the security by immediate sale. Hence, it was necessary for the trustee to demonstrate a right to possession in that case. 47In my view, the applicant has not demonstrated that it is reasonably arguable that McDougall J erred in ordering that the applicant give up vacant possession of the property to Nationwide. This was a necessary order ancillary to the primary order for judicial sale. The basis of this relief did not depend upon Nationwide establishing that it had a legal right to possession or an equitable right to obtain specific performance of a covenant that the applicant give possession of the property upon default. 48Once the ancillary nature of the relief granted by McDougall J is appreciated, it follows that the relief sought by Nationwide in the notice of motion was not foreclosed by the principles referred to by McClelland J in Phillips v Walsh. 49The absence of an express reservation of liberty to apply did not preclude the granting of the relief sought by Nationwide for possession of the property: see Phillips v Walsh at 210. In any event, there was an implied reservation of liberty to apply for the reason stated at [42] above. 50The implied liberty to apply in the present case is directed to the supervision of the Court's order for judicial sale, where further or supplementary orders or directions may be needed to enable it to achieve its purpose. See Australian Hardboards Limited v Hudson Investment Group at [54] per Campbell JA. 51Further, there is no difficulty about exercising a liberty to apply for the purpose of dealing with facts that have arisen only since the original order was made: see in Australian Hardboards Limited v Hudson Investment Group at [58] per Campbell JA. In the present case, the applicant has, in effect, refused to cooperate with the implementation of the orders for judicial sale. Nationwide required vacant possession of the property to facilitate the sale process so that interested purchasers could inspect the property and to enable a purchaser to obtain vacant possession on completion. 52In my view, there is no foundation in the applicant's complaint that the relief granted by McDougall J was foreclosed by the principles referred to in Phillips v Walsh.

Balance of convenience 53The applicant did not rely on any affidavit evidence in support of the question of balance of convenience or balance of hardship. The applicant's submissions were limited to the circumstance that the applicant was in possession of the property. By implication, she would be prejudiced if required to vacate the property before any appeal was determined, assuming a grant of leave. 54Against this, Nationwide submitted that the grant of a stay would frustrate the Court's orders for judicial sale, which are not the subject of challenge by the applicant. 55The applicant did not expressly submit that, if a stay were refused, it would stifle the appeal. Insofar as the applicant has not sought to challenge the orders for judicial sale, the absence of such a submission is unsurprising. Effectuation of the transfer of the property pursuant to the orders for judicial sale, is not an outcome challenged by the applicant. 56On the other hand, insofar as it may be inferred that in the absence of a stay, Nationwide will seek the leave of the Supreme Court to enforce the writ of possession and if such leave is granted, Nationwide will seek to execute the writ to obtain vacant possession of the property, then the consequence would be that any appeal, assuming a grant of leave, would be rendered nugatory. 57However, it needs to be kept in mind that the applicant's challenge to the orders below is limited to a claim that she is entitled to remain in possession of the property upon completion of a sale by Nationwide pursuant to the Court's orders. The basis and terms upon which the applicant would be entitled to remain in possession, as against a purchaser from Nationwide under the judicial sale orders, was not explained by the applicant. Consistently with the applicant's position that she was entitled to remain in possession of the property unaffected by the orders for judicial sale, including the ancillary orders requiring her to give vacant possession of the property to Nationwide, the applicant did not offer to pay, as a condition of a stay, any amount by way of an occupation fee to either Nationwide, or to Westpac as the first mortgagee, to militate against the prejudice which would arise because interest continues to accrue on the first mortgagee's debt and on the judgment debt obtained by Nationwide against the applicant. 58There is no evidence before the Court as to the value of the property. However, the applicant did not submit that the value of the property exceeded the amounts secured in favour of the first mortgagee, Westpac, and Nationwide, let alone taking into account the amounts claimed by the fifth and sixth defendants to be secured against the property. Interest continues to accrue on the amounts secured in favour of Westpac and Nationwide. The grant of a stay would therefore cause the potential proceeds of sale, after payment of the costs and expenses of the sale and the first mortgagee's debt, to decrease and would be the source of loss to Nationwide if it subsequently establishes its claim to priority over any balance of the proceeds of sale in the proceedings below. 59The position is that the applicant has embarked on an application for leave to appeal that has no evident prospects of success in circumstances where a stay would only increase Nationwide's likely loss. In my view, the balance of convenience favours Nationwide.

Conclusion 60I am not satisfied that the applicant has demonstrated an arguable case for appeal, or indeed leave to appeal, and this is a sufficient basis for rejecting the application for a stay. 61Further, and although it is unnecessary for my decision having regard to the conclusion in [60] above, the balance of convenience favours Nationwide in circumstances where the applicant has not challenged, by way of an appeal, the orders for judicial sale made on 30 November 2012, and the continued delay in the sale of the property under the Court's orders would be a source of loss to Nationwide.

Orders 62The orders I make are as follows: (1)The applicant's notice of motion filed 18 July 2013 be dismissed. (2)The applicant pay the first and second respondents' costs of the motion.

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: 01 August 2013