Davis v Healey

This motion

1. There are three documents relevant to the hearing of this notice of motion. They are firstly, the mortgage dated 22 September 2016 (Ex 1); secondly, a deed of acknowledgement of debt and loan dated December 2016 ("the deed"); and finally, the short minutes of order filed in this Court on 16 May 2018 (Ex A). I shall refer to these three documents in more detail later in this judgment.
2. It is the defendant's central contention that the deed superseded the mortgage, and therefore as the deed is the only document that is still operative, the consent orders should be set aside.

The existence of the deed

1. The defendant makes much of the existence of the deed and disappearance of his copy of the deed.
2. At paragraph [6] of the defendant's affidavit filed 17 October 2018, he deposes, "Drawn into the contract was an agreement that Rachael Healey and I, Ralph Healey, were to pay $500 each per month. This was later changed to $600 per month by Rachael Healey and $400 per month by Ralph Healey. This loan and repayment contract was drawn up by Merrick Spicer of Merrick Spicer & Associates." The reference to the loan and repayment contract is, as I understand it, a reference to the deed.
3. Mr Spicer in his affidavit sworn 23 October 2018 responded to paragraph [6] of the defendant's affidavit (quoted above) as follows: "4. The only document I have ever prepared in relation to the payment of $1,000 per month was the mortgage document itself. The parties to that document were the Plaintiff as mortgagee and the Defendant and mortgagor only. 5 I have never prepared an agreement whereby the amount of $1,000 per month was to be paid equally by the Defendant and his wife. Further, I have never prepared an agreement whereby the amount of $1,000 was to be paid, as the Defendant contends, as to $600 by his wife and $400 by himself. 6 The final sentence of paragraph 6 to the effect 'All requests to have a copy of this contract remain unanswered' is not correct. There is no such 'contract' or other document and accordingly, no copy can be provided."
4. The plaintiff confirms her solicitor's evidence that there was no contract drawn up where the defendant and Rachael Healey were to pay $500 each for the monthly mortgage commitment of $1,000. The plaintiff says that she has no knowledge of such a contract or an agreement ever being made, whether orally or in writing. The plaintiff denies that the arrangement was later changed so her daughter was to pay $600 and the defendant $400 per month. (Aff 23/10/2018). However, there is a document that does refer to a payment of $1,000. That document is the deed, but the plaintiff's position is that it never came into operation.
5. I will also refer to the defendant's further submission on this topic later in this judgment.

The plaintiff's version of events as to the mortgage

1. The plaintiff has set out her version of events in her affidavit dated 26 April 2019 as how the mortgage came into existence.
2. The plaintiff is currently aged 75 and has a daughter, Rachael. In December 2011, Rachael married the defendant. The defendant is currently aged 70. Rachael has a son born in 2003 that the defendant treats as his own. For ease of understanding and intending no disrespect, I shall refer to Rachael Healey as Rachael.
3. In late 2016, Rachael and the defendant separated, but remained living at the Woodford property. The defendant approached the plaintiff and her husband and asked if they would become trustees of the Woodford property to protect it in case the defendant was declared bankrupt. The principal sum outstanding was about $124,000.
4. In the year prior to Rachael and the defendant physically separating, the plaintiff and Rachael had a conversation in relation to Rachael and the defendant's financial circumstances in which Rachael said to the plaintiff words to the following effect (Aff [8]): "Mum, we're going to lose the house. Can you lend us the money to pay out the mortgage?"
5. The plaintiff responded in words to the effect of (Aff [9]): "I can probably do it. I'll have to check."
6. A few days later they had another discussion when Rachel and the defendant came to her house.
7. On that occasion, the plaintiff recalls a conversation was to the following effect (Aff [10]): "The plaintiff: I've had a think about it and I'm prepared to pay out your existing mortgage provided I then take a mortgage over the property for the amount of money that I provide. I will want interest and I will need at least $1,000 paid back every month. I intend to charge a rate of interest that will see this amount be paid as interest only. The defendant: That will be fine. I am able to afford that. I am presently paying approximately $1,600 a month. I'll be able to repay $1,000 a month easily."
8. The plaintiff then approached her solicitors, Merrick Spicer & Associates, and requested that they "write" to the existing mortgagee and obtain a payout and thereafter prepare a mortgage between Ralph Healey and the plaintiff to secure her advance to him (Aff [11]).
9. Prior to the refinance occurring, the plaintiff had discussed with the defendant exactly how much money was going to be required and where it was going to be spent. She recalls having a conversation with him to the following effect [12]: "I'm prepared to lend you $140,000 on the basis that you repay me the $1,000 a month which will be interest and that the loan itself is repaid within 5 years."
10. The defendant responded in words to the effect (Aff [12]): "That will be fine. As I said before I can afford $1,000 a month."
11. The plaintiff said to the defendant words to the effect: "I need to repay your existing mortgage which is approximately $125,000 and I need to repay Chris for the money he lent you a year or two ago of $10,000. The money that is left over, approximately $5,000, I will use to pay the costs of setting the mortgage up and to reimburse myself for the last year school fees that I have paid on your behalf for XXXX."
12. The plaintiff says the defendant said, "That sounds fine." She told the defendant, "You realise that after lending you this money I will not be able to help you any more financially". The defendant replied, "I understand".
13. Thereafter, the refinance took place. The advance of $140,000 was dispersed as follows (Aff [13]): 1. $124,290 to First Mortgage Investments; 2. $1,181 to fees in relation to the refinance of the mortgage; 3. $10,000 to Christopher Davis for payment of funds to have the caveat withdrawn; and 4. $4,529 to be retained by the plaintiff.
14. The amount retained by the plaintiff at the time of the refinance was to reimburse her for school fees that she had paid on behalf of her grandson which amounted to approximately $4,000 per annum. She had at that point paid a number of years' school fees for her grandson, and so was only partially reimbursed by that amount (Aff [14]).

The mortgage dated 22 September 2016

1. The plaintiff as mortgagee and the defendant as mortgagor entered into the mortgage on 22 September 2016.
2. The terms of the mortgage (Ex 1) are as follows: "The Mortgagor hereby acknowledges receipt of the principal sum of $140,000, and (A) Irrevocably appoints the Mortgagee the attorney of the Mortgagor immediately on or at any time after any breach or default by the Mortgagor to exercise in the name of the Mortgagor all rights, powers and remedies of the Mortgagee expressed or implied herein and to receive any moneys payable to the Mortgagor in respect of the mortgaged land whether in respect of the insurance compensation or otherwise and to do all things required to be done by the Mortgagor and to execute all documents and to do all things necessary in regard to such matters. (B) Covenants with the Mortgagee as follows: Firstly The Mortgagor will pay to the Mortgagee the principal sum, or so much thereof as shall remain unpaid, on 16 September Secondly The Mortgagor will pay interest on the principal sum or on so much thereof as for the time being shall remain unpaid, and upon any judgment or order in which this or the preceding covenant may become merged at the rate of 10.6% per annum as follows, namely by equal monthly payments on the 18th day of each month in each and every year during the term until the principal sum shall be fully paid and satisfied, the first of such payments computed from 16 September 2016, to be made on 16th September 2016 next. Provided always, and it is hereby agreed and declared, that if the Mortgagor shall on every day on which interest is hereinbefore made payable under this security, or within seven days after each such days respectively, pay to the Mortgagee interest on the principal sum or on so much thereof as shall for the time being remain unpaid at the rate of 8.6% per annum, and shall also duly observe and perform each and every covenant on the Mortgagor's part herein contained or implied then the Mortgagee shall accept interest on the said principal sum or on so much thereof as shall for the time being remain unpaid at the rate of 8.6% per annum in lieu of per annum for every month for which such interest shall be paid to the Mortgagee within such seven days aforesaid. Thirdly The Mortgagor will observe the provisions set forth in the Memorandum filed in the Land Titles Office as Number XXXX, which provisions are deemed to be incorporated herein." (My emphasis)
3. The mortgage was signed by the plaintiff and the defendant and their signatures were witnessed. The mortgage was registered at the Land and Property Information and numbered XXXX. The memorandum also forms part of Ex 1, but its contents are not relevant here.
4. Overall, the terms of the mortgage were that the plaintiff would lend the defendant $140,000 repayable within 5 years at an effective interest rate of 8.6% which would be secured by a first mortgage over the Woodford property.

The deed

1. I shall reproduce this document here: "THIS DEED OF ACKNOWLEDGE AND DEBT AND LOAN dated the day of December 2016 BETWEEN CONSTANCE DAVIS of XXX in the State of New South Wales (Lender) AND RACHAEL MAY HEALEY AND RALPH STEWART DAVID HEALEY of XXX in the said State (Borrowers) WHEREAS: A The Lender is the mother of one of the Borrowers, Rachael May Healey and the mother-in-law of the second Borrower, Ralph Stewart David Healey. B The parties have reached agreement in relation to a debt due by the Borrowers to the Lender in the sum of $60,000 the details of the agreement are as detailed below. NOW THIS DEED WITNESSES: 1 This Deed shall bind the parties, their heirs, executors and assigns. 2. The borrowers are jointly and severally liable. 3 The Borrowers acknowledge receipt of a loan from the Lender in the sum of $60,000 and further acknowledge a debt due to the lender in the sum of $60,000. 4 The Lender shall accept in discharge of the debt and repayment of the loan the sum of $1,000 paid on the 18th day of each month for the next 60 months commencing 18 December 2016 and ending 18 November 2021. 5 Provided always payments are made on or before the due date no interest shall run on the loan. 6 Where payments are made late, interest shall then apply on the amount then outstanding under the loan at the rate of 8% per annum calculated from the date of this Deed until such time as the default is rectified." (My emphasis)
2. In the deed, the plaintiff is described as the lender. The defendant and the plaintiff's daughter are jointly described as borrowers. The borrowers are jointly and severally liable. The debt is $60,000 repayable by instalments of $1,000 per month and interest is payable on default.
3. It should be noted that this deed does not refer to the mortgage, nor does it stipulate that it varies the terms of the mortgage. It states that the defendant and Rachael are jointly and severally liable for the debt, including the instalments. There is no mention of any obligation that the defendant would pay 40% and that Rachael pay would 60% of each interest instalment. It should also be noted that the specific day in December 2016 when the operation of the deed commences has been left blank.
4. The defendant submitted that the deed was signed, sealed and delivered by the plaintiff and both borrowers, and that their signatures were witnessed. As previously stated, according to the defendant, the mortgage has been superseded by this deed which is still operative. In support of this proposition he submitted that the monthly repayment in relation to the mortgage was $1,003.33, whereas the monthly repayment under the deed was $1,000 per month.
5. At the hearing the following exchange took place (T29.28-47): "HER HONOUR: What are you saying, there is a difference of $3 something? DEFENDANT: $3.33 cents, yes. These are small details. It is not a big amount but it is a significant amount because $1,003 was for the mortgage only and the mortgage, the repayments changed in tandem with this Deed of Acknowledgment of Debt and Loan and the repayments were accepted for close on nine months of $1000. There was no need or no mention of anything in the mortgage to change the repayments to $1000. This came only later when this Deed of Acknowledgment of Debt and Loan in December kicked in, it arrived in tandem with that. So it was acceptable to everyone else, to everyone concerned, that things had changed and that this deed had in fact superseded the mortgage. I don't think that there can be any doubt about that. And that being the case, if this Deed of Acknowledgment of Debt and Loan of December 2016 was accepted under the repayment structure that that deed signified, then it clearly leads to the conclusion that the mortgage had been superseded, was no longer in existence. It was the mortgage that was linked to the trust, not this, your Honour, that's what I am saying. And I think that the proof is in the $3.33, not a lot, not a lot, but it is outside of the contract that was arranged."
6. The plaintiff, also in her affidavit dated 26 April 2019, gave evidence as to the circumstances by which this deed came into existence. She says that the defendant attempted through his then solicitor to effect a property settlement with orders to be made by the Family Court, whereby his interest in the house would be held by the plaintiff and her husband as trustees for their grandson. As part of that proposal, a set of consent orders was prepared by the solicitor for the defendant and submitted to the plaintiff's solicitor along with a transfer of the defendant's interest in the property to the plaintiff and her husband. As part of that arrangement, the mortgage debt was to be reduced from $140,000 to $60,000. The plaintiff was prepared to make this reduction, as she could see a benefit for her daughter and her grandson in the proposal in that they would be allowed to live in the home to the exclusion of the defendant for as long as they wished (Aff [20]).
7. Both parties agree that the proposed trust orders were never made by the Family Court and that arrangement referred to above was never formalised or finalised.
8. The Woodford property still remains in the name of the defendant and Rachael remains separated from the defendant. Rachael and the defendant are not yet divorced (Aff [21]).

The consent orders made 19 November 2018 by this Court

1. On 19 November 2018, the Registrar made the following orders by consent: "BY CONSENT 1. Order that the Judgment entered by the Court on 6 July 2018 be set aside. 2. Order that the Writ of Possession granted by the Court on 18 September 2018 be set aside. 3. Otherwise the Statement of Claim filed on 6 March 2018 be dismissed. NOTATIONS 1. The Court notes the agreement of the parties to each meet their respective costs. 2. The Court notes the agreement of the parties that the terms mortgage entered into on 22 September 2016 are agreed to include a principal of $140,000 and interest paid on an interest-only basis at the effective interest rate of 8.6% with a term of 5 years to expire 16 September 2021. 3. The Court notes the agreement of the parties that the arrears with respect to the mortgage have today been brought up-to-date."
2. These consent orders were signed by both the solicitor for the plaintiff and the solicitor for the defendant on behalf of the parties.

The defendant's submissions

1. The defendant submitted that in 2016, the plaintiff offered to pay out the mortgage owed on the Woodford property. The mortgage was with First Mortgage Investment. In September of 2016, the defendant signed "unsighted" an agreement at the offices of Merrick Spicer and Associates. He was not navigated through the process nor was he made aware of the figure involved. He had no idea why the sum of $140,000 was written in, but argued that the explanation by the plaintiff was dubious at best. The payout figure to First Mortgage Investments was only around $124,000.
2. The defendant says that he made regular payments of $1003.33 and never knowingly agreed to an additional amount to be added to the $124,000 payout.
3. In December of 2016, by agreement the deed was established and prepared by Merrick Spicer and Associates on behalf of the plaintiff. Both Rachael and the defendant were jointly and severally liable, and the sum of repayment was changed to $1000 per month. The defendant says that he and Rachael initially split the repayments equally at $500 each to comply with the joint responsibility.
4. In or around February of 2017, the defendant says that an amended agreement was signed by all parties to have the repayments altered whereby Rachael would pay $600 and the defendant $400. During visits between Rachael and their son, the defendant alleges that Rachael stole all of his documents including financial agreements, his passport, birth certificate and citizenship certificates. He says that he has never been able to recover any of these stolen documents.
5. On 5 November 2018, following the dismissal of the motion for a stay, the defendant sought advice from his then solicitor, Mr Stephen Dodd.
6. During the course of negotiations between Mr Dodd and the plaintiff's solicitor, Mr Spicer, Mr Dodd sent Mr Spicer a copy of the deed relied upon by the defendant. The defendant makes much of this. According to the defendant, on 13 November 2018, he sat in the office of Mr Dodd in an attempt to pay out Rachael Healey's arrears and have the orders for the writ of possession set aside. Mr Dodd was keen to have the signatures on this deed authenticated and phoned Robert Tinsey, scanning a copy of the document along for inspection. Mr Tinsey was able to confirm that one signature was indeed his and that the document had not been prepared by him. Mr Dodd then called Mr Spicer informing him that he, Mr Spicer, had uncovered a copy of the deed of acknowledgement of debt and loan. Mr Dodd then asked if Mr Merrick would care to have the document scanned across for inspection. The defendant says that there was a pregnant pause, after which Mr Merrick said, "No you need not do that, I have it on screen right now". The defendant says that Mr Spicer had previously denied the existence of this document. This conversation was also in direct contradiction of the statement made by Mr Merrick at paragraph [8] of his affidavit dated 24 April 2019, where Mr Merrick claimed that the deed was sent to him by Mr Dodd. Mr Spicer prepared this document and sent it to the defendant's then solicitor Mr Tinsey.
7. The defendant submitted that Mr Merrick has gone to some lengths to deny all knowledge of the existence of the deed, and now seems to be implying that the defendant forged it. Mr Merrick claims that he does not recognise one of the signatures. The defendant says that the signature must be that of Mr Tinsey, who acted for him and witnessed the signatures of Rachael Healey and the defendant. He says that Mr Spicer and Mr Tinsey had engaged in around four months of regular communication prior to that.
8. The defendant says that his plan is now, as it always had been, to sign the property over to Rachael and his son so that their son may have the security of a permanent home when they are gone.

The plaintiff's submissions

1. The plaintiff submitted that this deed was never delivered and never became operative because Family Court approval was never obtained. The Woodford property was never vested in the plaintiff.
2. By reason of a mistaken view as to the defendant's obligations under the mortgage, namely that Rachael was to pay 60% of the interest payable on the mortgage, the defendant fell into default, possession proceedings were commenced, default judgment was obtained on 6 July 2018 and a writ issued on 18 September 2018.
3. The debt of $60,000 cannot, as a matter of construction, relate to or be part of the same debt as the debt referred to in the mortgage.
4. The consent orders were made when the defendant was represented by Mr Stephen. Prior to the consent orders being made the defendant clearly had the deed in his possession and was aware of its contents.
5. It is apparent from the consent orders that the defendant adopted the position that the deed did not have the effect of varying the mortgage, because he acknowledged the principal sum and the interest rate as set out in the mortgage.
6. There is no evidence from Mr Dodd that would cast any doubt upon his authority to enter into the consent orders on behalf of the defendant.
7. There is no evidence from the defendant setting out the legal basis that he now seeks to resile from the agreement embodied in the consent orders.
8. Additionally, even if the deed is operative, which the plaintiff denies, it is made obsolete by the subsequent consent orders. This is because the deed: 1. does not refer to the mortgage; 2. does not seek to vary the terms of the mortgage; 3. states clearly that the defendant and Rachael are jointly and severally liable for the debt, including the installment, and there is no mention of any obligation that the defendant would pay 40% and Rachael 60% of the interest installment; and 4. refers to the debt of $60,000 which cannot, as a matter of construction, relate to or be part of the same debt as the debt referred to in the mortgage.

The law

1. This Court was referred to Angus v Salier [2015] NSWSC 1446, where Hallan J stated at [57]-[58]: "57. The court should regard settlement of court proceedings as both a public, and a private, good, which the court should encourage and facilitate if, having regard to the interests of all the parties, it is right and just so to do. In this case, I am satisfied that it is right and just to do so, particularly in circumstances where the administration of an estate is being delayed because of legal proceedings. … 58. Where an agreement is reached with the actual as well as the apparent authority of counsel, the question of whether the agreement is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable, or entitle the party to equitable relief against it. Illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like, provide examples of such grounds."

Conclusion

1. The defendant asserts that the mortgage was subsequently superseded by the deed. The payment due under the deed is $60,000, rather than $140,000 as due under the mortgage. The defendant is the registered mortgagor of the Woodford property. Rachael is not a mortgagor and has no legal interest in the property. I am satisfied on the balance of probabilities that this deed formed part of the trust agreement whereby the defendant would transfer his interest in the property to the plaintiff and her husband, and as part of that agreement, the mortgage debt was to be reduced from $140,000 to $60,000.
2. It is common ground that the trust arrangement, of which the deed formed a part, was not approved by the Family Court and therefore did not come to fruition and was never finalised.
3. The defendant refers to an amended agreement entered into around February 2017, which he asserts was signed by all parties. That agreement was to have the repayments altered, such that Rachael was to pay $600 and the defendant $400. The defendant claims that Rachael stole this and other documents belonging to him. However, without any other evidence, I am not satisfied that this agreement did in fact exist. He also complained about the providence of the deed, but he now has a copy of it and the deed was put into evidence at this hearing.
4. The consent orders represent a compromise. The first part is that the judgment for possession and the writ of possession are set aside; otherwise the statement of claim is dismissed. This part of the consent orders is favourable to the defendant. But in return, the defendant agreed in effect to adhere to the terms of the mortgage. When these orders were consented to both parties were legally represented. There was no evidence from Mr Dodd to corroborate the defendant's evidence.
5. None of the defendant's complaints amount to any illegality, misrepresentation, non-disclosure of a material fact, duress, mistake, undue influence, or abuse of confidence. Nor do they depend on a ground which would render the consent orders void or voidable or entitle the defendant to equitable relief. In these circumstances, it is right and just not to set aside the consent orders. The result is that the defendant's amended notice of motion filed 4 April 2019 is dismissed.

Costs

1. Costs are discretionary. Costs usually follow the event. The defendant is to pay the plaintiff's costs on an ordinary basis.

The Court orders that: (1) The defendant's amended notice of motion filed 4 April 2019 is dismissed. (2) The defendant is to pay the plaintiff's costs on an ordinary basis.

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: 03 July 2019