Commonwealth Bank of Australia v Maksacheff

Supreme Court of NSW|2016-10-28|Before: Schmidt J, Bellew J, Mr J, Adamson J

Judgment

Mr Maksacheff and his wife are the registered proprietors of a property at Panuara, which has been sold by the Bank as mortgagee in possession. Their re-entry into the property, contrary to a writ of restitution earlier issued in favour of the Bank by the Court, recently prevented the sale of the property being completed.
These proceedings were commenced in 2015. In July default judgment was given in favour of the Bank, with orders for possession of the property and payment of a debt of some $607,523.10 due under a mortgage then being entered. Soon afterwards a writ of possession was also issued in its favour. In August 2015 the Sheriff of New South Wales issued a Notice to Vacate and scheduled an eviction for 9 October 2015, which did not proceed, in circumstances which it is not necessary to recount.
The eviction was finally executed on 30 October 2015, when the Bank took possession. Mr Maksacheff and his family soon afterwards re-entered the property. It was in December that Adamson J granted the Bank leave to issue a writ of restitution, at a hearing at which Mr and Mrs Maksacheff did not appear (see Commonwealth Bank of Australia v Maksacheff [2015] NSWSC 1860).
Possession of the property was retaken by the Bank in January 2016. Mr and Mrs Maksacheff have, however, recently retaken possession of the property again.

The evidence

Even though at the hearing there was little dispute as to the procedural history of the matter, and no issue that Mr Maksacheff and his wife had retaken possession of the property, it was over Mr Maksacheff's objections that I received the affidavits on which the Bank relied to prove that history; its service of various documents; and the fact of their having re-entered the property.
Mr Maksacheff's objections rested on his view that the affidavits were not "legitimate", because they did not comply with "High Court Rules" which he identified, which he claimed required that the affidavit contain the deponent's "abode". That was not a basis on which his objections could be upheld.
The requirements for affidavits filed in this Court are those specified in the Uniform Civil Procedure Rules. The approved form does not require deponents to disclose their "abode". Even if it did, with leave of the Court, an affidavit may be used despite any irregularity in form (see Rule 35.1 and s 80 of the Interpretation Act 1987 (NSW)). No prejudice could flow to Mr and Mrs Maksacheff from the deficiency about which complaint was made and so, if it was necessary, such leave would be given.
It is common ground that there has never been a hearing on the merits of the Bank's claim for possession of the property. Since default judgment was given, Mr Maksacheff has challenged the Bank's right to that possession by two other applications which he has pursued. The first brought by motion in these proceedings only in July 2016 and the second, in separate proceedings, in which he pursued damages against the Bank.
Neither Mr nor Mrs Maksacheff appeared at the hearing before Adamson J in December 2015, which proceeded ex parte in circumstances her Honour described in her reasons. There her Honour noted that the mobile number provided to the Court by Mr Maksacheff was not answered, at the time the matter came on for hearing. In the circumstances before her Honour, she was not disposed to defer determination of the Bank's restitution application until Mr Maksacheff made himself available.
There was no appeal from that decision, with the result that the Bank again took possession of the property, which it eventually sold to a third party.
Beforehand, in July 2016, Mr Maksacheff applied by motion for a stay of execution of the sale; a stay of the auction due the following day; a stay of further proceedings until he was present, as well as other orders. That application failed.
At the hearing on 22 July, Mr Maksacheff was accompanied by a Mr Andrews, who Bellew J permitted to speak on his behalf. His Honour dismissed that motion, despite the case then advanced as to payment Mr Maksacheff claimed had been tendered to the Bank by way of a promissory note and relief which Mr Maksacheff was then pursuing, in other proceedings he had brought.
There was then evidence led by the Bank that it expected that on sale of the property, there would be a shortfall in the debt it was owed under the mortgage. Bellew J's conclusions rested on Mr Maksacheff's unexplained delay and the views which his Honour reached on the affidavit material, firstly that there was no serious question to be raised by the materials on which Mr Maksacheff relied and secondly, that the balance of convenience fell against the making of the orders sought (see Commonwealth Bank of Australia v Maksacheff (Supreme Court (NSW), Bellew J, 22 July 2016, unrep)).
The property was passed in at auction on 23 July 2016 and was later listed for sale by private treaty.
Mr and Mrs Maksacheff also pursued the other proceedings they had brought against the Bank and five named defendants in April 2016, seeking liquidated damages of $2.8 million. They were dismissed by Campbell J on 10 August (see Maksacheff v Commonwealth Bank of Australia (No 2) [2016] NSWSC 1109). There his Honour dealt with a promissory note in the sum of $700,000 for discharge of the mortgage, which Mr Maksacheff had delivered to the Bank, together with a demand in which previous "dishonours" and late payments were acknowledged, but which advised that if their offer was rejected, then that rejection would be considered "as sufficient consideration to satisfy or discharge all liabilities" owed to the Bank.
The Bank did not accept what was offered and so, Mr Maksacheff contended, his indebtedness under the mortgage had been discharged.
Campbell J concluded at [16] that the Bank had met the heavy onus of demonstrating that Mr and Mrs Maksacheff's claim could not possibly succeed, for reasons there explained. In the result Mr and Mrs Maksacheff were not permitted to pursue their claims to a hearing on the merits, for reasons which his Honour also explained.
That judgment has also not been appealed.
Contracts for sale of the property were exchanged on 13 September 2016. Completion was due to take place on 25 October. After Mr and Mrs Maksacheff re-entered the property, however, the Bank was unable to complete the sale, given the contractual requirement that it give vacant possession. That led to the filing of its 25 October motion.

Leave to issue the writ of restitution must be granted and Mr and Mrs Maksacheff's motion dismissed

Under Rule 36.15 a judgment may, on sufficient cause being shown, be set aside by order of the Court, if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. The Court also has power to set aside a default judgment under Rule 36.16.
They are not powers which justice permits be exercised in this case, given the procedural history of the matter I have discussed; Mr and Mrs Maksacheff's re-entry of the property after their eviction; their further re-entry after the issue of the writ of restitution; and the sale of the property to a third party, notwithstanding their belated complaints about the omission of material facts and that the default judgment was not signed, as they claim it ought to have been, under the Rules.
That Mr and Mrs Maksacheff hope that a foreshadowed Parliamentary enquiry into the Banking industry might result in a moratorium, which will be of benefit to them, is also not a basis on which the relief which they seek may justly be granted.
Unless set aside, like all litigants, Mr and Mrs Maksacheff are bound by the Court's judgments and orders in proceedings to which they are parties.
The steps they earlier pursued to achieve that result all failed, with the consequence that the Bank was entitled to exercise its rights to sell the property as it did in September, as a mortgagee in possession, having had a writ of restitution issued in its favour. The purpose of such a writ of restitution procedure was discussed by Johnson J in Perpetual v Kelso [2008] NSWSC 906 at [19] to [26]: "[19] ... The writ of restitution is a recognised procedure where, after entry by the Sheriff under a writ of possession, a defendant forcibly resumes possession of the subject land and the plaintiff seeks to have possession restored. It is a writ in aid of another writ of execution: r 39.1(1)(g), Forms 61, 62, Uniform Civil Procedure Rules: Ritchie's Uniform Civil Procedure NSW, LexisNexis at [39.1.35]; Pitcher v Roe (1841) 9 Dowl 971; Alliance Building Society v Austen [1951] 2 All ER 1068. [20] The use of a writ of restitution has been acknowledged in later cases. In Abram v National Australia Bank Ltd (Court of Appeal, 1 May 1997, BC9701553) Powell JA, at pp 54-55, observed that re-entry by a defendant, after the execution of a writ of possession by the Sheriff, constitutes a trespass with the plaintiffs' remedy being an application for an order in the nature of a writ of restitution. Powell JA cited, in this respect, Pitcher v Roe and Alliance Building Society v Austen. [21] In Maher v Commonwealth Bank of Australia (No 2) (2004) 211 ALR 656 at 658 [6], Finkelstein J observed that there are cases where a defendant has retaken possession within a short period after possession has been taken where the Court would, upon application, issue a writ of restitution. His Honour cited Pitcher v Roe; Alliance Building Society v Austen and R v Elliott [1955] VLR 126. [22] There is a clear foundation for the course of action taken by the Plaintiff in this case, namely to seek a writ of restitution. [23] I should observe that, if this was a case where the writ of possession had not already been executed, and the Defendants were seeking to set aside a default judgment, a number of hurdles would lie in their path. As Simpson J observed in Balanced Securities Ltd v Oberlechner [2007] NSWSC 80 at [19], there are three components which an applicant needs to establish in an application to set aside default judgment. Firstly, an explanation for the failure to defend at the appropriate time. Secondly, a good (arguable) defence on the merits, and thirdly, that it is in the interests of justice to allow the proposed defence to be litigated. Her Honour continued at [20] to observe that, although it is not necessary that a defendant establish that the proposed defence will or must succeed, it is necessary to determine the question having in mind the competing interests of the parties - on the one hand the plaintiff who has properly, legitimately and regularly obtained judgment, and on the other hand, a defendant who has been deprived of an opportunity to advance what might be a legitimate defence. [24] On the material which has been advanced in support of the present application, in my view the Defendants would have grave difficulty on an application to set aside default judgment before a writ of possession had been executed. In circumstances where the writ has already been executed, their position is hopeless. [25] A power of sale under s 58 Real Property Act 1900 is to be exercised for the purpose of the plaintiff recovering moneys which are due and owing to it as a mortgagee (see s 58(3)). Even where a plaintiff takes possession of the property for the purpose of exercising its power of sale, a defendant may obtain an injunction restraining a mortgagee from exercising the power of sale if the amount of the mortgage debt (if this is not in dispute) is paid, or (if the amount is disputed) the amount claimed by the mortgagee is paid into Court: Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164-167 and 168-169; GE Personal Finance Pty Ltd v Smith [2006] NSWSC 889 at [17]. [26] If the Defendants wish to challenge the propriety of any conduct of the Plaintiff in respect of the enforcement of its security, it remains open to them to do so in other proceedings: see Carr v Finance Corporation of Australia Ltd (1982) 150 CLR 139 at 152; Adelaide Bank Ltd v BMG Poseidon Corp Pty Ltd [2008] NSWSC 68 at [25]."
In this case Mr and Mrs Maksacheff had an opportunity before Bellew J to give an explanation for their earlier failure to defend the Bank's application for possession; to explain how it was that they had a good, arguable, defence to the Bank's case on the merits, and how the interests of justice required that they be allowed to litigate that defence. The Bank by then had taken possession and accordingly, they also either had to pay the Bank what was then owing under the mortgage, or to pay that sum into Court. They took none of these steps.
Even when the application which they had brought against the Bank was heard by Campbell J, proceedings in which they acknowledged the mortgage defaults which had brought the Bank to Court in these proceedings, what was owed under the mortgage was not paid.
Nor was it paid when the Bank sought the issue of another writ of restitution or when Mr and Mrs Maksacheff's further application was made by their most recent motion. Nor has it been tendered since the hearing of the Bank's motion.
That Mr and Mrs Maksacheff disagree with the conclusions reached by Adamson J, Bellew J and Campbell J and now seek to advance claims which they ought to have advanced by way of further motion and/or appeal, before the property was sold, as it has been, if they wished to retain possession of the property, is not a basis on which the relief which they now belatedly seek, can justly be granted.
As the result of the events which I have earlier described, the position established on the evidence is that the Bank is now contractually bound to complete the sale and to give the purchaser vacant possession of the property, in circumstances where it is not expected that the proceeds of the sale will satisfy the mortgage debt.
There is no suggestion that the purchaser is not a bona fide third party. Submissions from Mr Maksacheff that the purchaser would now prefer to be released from the contract, advances the matter no further, no evidence about the purchaser's attitude having been led.
The writ of restitution served upon Mr and Mrs Maksacheff before their second eviction in January 2016, was endorsed with advice that they were liable to imprisonment or sequestration, if they did not give the Bank possession of the property, or if they later re-entered. Still they re-entered.
In all of these circumstances, justice does not permit the making of the orders which Mr and Mrs Maksacheff now seek. Rather, it requires that the orders which the Bank seeks be made, namely leave to issue a further writ of restitution, together with orders precluding Mr and Mrs Maksacheff's further entry into the property.

Orders

The usual costs order under the Rules is that costs, as agreed or assessed, follow the event. In this case that is an order that Mr and Mrs Maksacheff pay the Bank's costs of the motions. Unless the parties approach to be heard within 14 days, that will be the Court's order.
For these reasons, I order that: 1. Mr and Mrs Maksacheff's motion be dismissed. 2. Until further order, the first defendant, Daniel Maksacheff and the second defendant, Agnieszka Maksacheff by themselves, their employees, agents, relatives and/or associates, be prohibited and restrained from remaining, entering or attempting to enter the property contained in folio identifier X/XXXXXXX being the land situated at and known as XX XXXXXX Road, Panuara New South Wales. 3. Further, or in the alternative, a further writ of restitution be issued, to restore to the plaintiff possession of the land comprised in the property contained in folio identifier X/XXXXXXX being the land situated at and known as XX XXXXXX Road, Panuara New South Wales, forthwith.

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Uniform Civil Procedure Rules 2015(NSW)

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