On 5 March 2020, I made orders for the stay of a judgment given in these proceedings and for the recording of writs over certain property to be cancelled. The parties were content for my reasons for making those orders to be given later. These are those reasons.
On 11 October 2019, I granted summary judgment in favour of the plaintiff, Decon Australia Pty Limited (Decon), against the defendants, TFM Epping Land Pty Limited and Katoomba Residence Investment Pty Limited (TFM and KRI), in the amount of $6,355,352.46: Decon Australia Pty Limited v TFM Epping Land Pty Ltd [2019] NSWSC 1379 at [218].
The judgment was based on a payment claim served by Decon under the Building and Construction Industry Security of Payment Act 1999 (NSW) for construction works which Decon claimed to have carried out pursuant to a building contract with TFM and KRI for Decon to design and construct a development in Epping comprising three residential towers and approximately 99 lots (the Development).
On 13 January 2020, TFM and KRI filed a summons seeking leave to appeal from the judgment. The application for leave to appeal is listed for concurrent hearing with any appeal on 21 April 2020.
Prior to the summons seeking leave to appeal being filed, writs for the levy of TFM and KRI's property were issued in favour of Decon. On or about 13 February 2020, Decon obtained registration of the writs on the title of seven unsold lots in the Development, namely lots 1, 11, 32, 43, 45, 54 and 78, by way of dealings AP881886G, AP881823H and AP881906D.
On 21 February 2020, TFM and KRI filed an application seeking a stay of the judgment pending determination of their application for leave to appeal and an order, pursuant to s 135(2) of the Civil Procedure Act 2005 (NSW), that the Registrar-General of New South Wales cancel all recordings of writs issued in favour of Decon over the property of TFM and KRI. That application was listed for hearing before me on 5 March 2020.
At the hearing of the stay application, there was no dispute that the Court should order a stay of the judgment. The issues between the parties related to the terms on which the stay should be ordered and whether the Court should also make an order for the cancellation of the writs issued in favour of Decon.
In considering the issues in dispute, the Court had before it competing proposals as to the terms on which the parties contended that the stay should be granted.
In support of their contention that the Court should order a stay and cancel the writs, TFM and KRI proffered an undertaking to the Court not to deal with any of their assets except to pay ordinary course of business expenses and to sell, for market value, any real estate held by them. That real estate includes the 53 unsold lots in the Development. They also proffered an undertaking not to deal in any way at all with their interests in seven lots in the Development, namely lots 2, 10, 23, 46, 59, 61 and 72, being lots which do not have writs or registered mortgages recorded on title.
TFM and KRI argued that their proposal adequately balanced the interests of the parties as well as the interests of third party prospective purchasers of unsold lots in the Development. They contended that there was a risk of prejudice to TFM and KRI if the writs remained and their appeal was successful and that the proffered undertakings should protect Decon's interests as they would preserve the status of their assets pending the appeal.
At the hearing, Decon accepted that it was appropriate for the Court to make an order staying the judgment but contended that the writs issued in its favour should not be cancelled. Decon submitted that the continued registration of the writs provided it with additional protections and that there would be nominal prejudice to TFM and KRI if they were to remain on title until determination of the appeal.
In support of its position, Decon offered to consent to the sale of one of the lots in respect of which a writ had been registered (Lot 1) and to stipulate the sum of "Nil" as the minimum amount to be paid to the Sheriff in accordance with s 113(3)(a) of the Civil Procedure Act. Decon agreed not to take any further steps to execute on the writs registered in respect of the other six lots and proposed that s 113 of the Civil Procedure Act should otherwise apply in the event of any proposed sale or mortgage of those six lots.
The principles to be applied in exercising the Court's discretion whether or not to grant a stay pending an appeal do not require special or exceptional circumstances to be made out. If a stay is to be granted, the Court should consider whether the terms of the stay are fair having weighed considerations such as the balance of convenience, the competing rights of the parties, the effect of granting a stay or not on third parties, and the risk of prejudice or damage if the stay is not granted on the terms sought and whether they will be redressed by a successful appeal: Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 at 694 and 695; Kalifair Pty Ltd v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737 at [18]; Bridge Property Investments Pty Ltd v Garland Lot 3 Pty Ltd [2014] NSWCA 82 at [54].
As a successful party, Decon is entitled to the benefit of its $6.4 million judgment. It is entitled to be protected, as far as practicable, from the risk that if the appeal fails, assets which earlier might have been available to it to satisfy the judgment will no longer be available for that purpose: Kalifair Pty Ltd v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737 at [28].
Having regard to those principles and the evidence before the Court, on balance, I was persuaded by TFM and KRI's submissions that the terms of their proposal were fair and that orders should be made in this case for a stay and for the cancellation of the writs issued in favour of Decon. This was primarily because I was satisfied that, pending determination of the appeal, Decon's interests should be protected by TFM and KRI's proposal, there was evidence of some risk of prejudice to TFM and KRI and there was little purpose to be served by the continuation of the writs having regard to the terms of the undertakings proffered by TFM and KRI.
As to Decon's interests, the evidence before the Court indicated that each of the seven lots on which writs have been registered in favour of Decon has a prior registered mortgage on title.
In relation to Lot 1, the evidence also indicated that it was in the process of being sold, the writ had impeded settlement of the sale and Decon would not recover any money in terms of satisfaction of the judgment as the registered mortgagee was entitled to the whole of the sale proceeds. In that context, during the course of the hearing, Decon accepted that the writ in respect of Lot 1 should be removed to enable the sale to progress.
The evidence before the Court also indicated that the payout figures on the loans secured by the registered mortgages on five of the other lots which had writs recorded on title, namely lots 11, 32, 43, 54 and 78, are greater than the likely sale price of those lots.
Lots 11, 43 and 54 secure two loans to ALS256 Pty Ltd and ALS283 Pty Ltd of more than $22 million. Lots 32 and 78 secure a loan to United Investment Holding Pty Ltd, which was novated to Shanghai Yilian Investment Management Co Ltd, with a principal amount owing of approximately $1.952 million. Accordingly, like Lot 1, Decon is unlikely to recover any sum on execution of the writs registered on those five lots in the future.
At the hearing, Decon accepted that the writs on the lots which were the subject of registered mortgages that covered 100% of their value would not provide it with protection for the purposes of recovery of the judgment. However, Decon submitted that the continuation of the writs provided Decon with some comfort as the process facilitated by s 113 of the Civil Procedure Act would enable Decon to be informed about any sale transaction in respect of those lots.
To deal with Decon's concern, TFM and KRI proffered an additional undertaking to the Court to promptly notify Decon about the exchange of any contract for the sale of the lots in the Development and the sale price. While not in the same terms as s 113 of the Civil Procedure Act, the disclosure regime provided by way of the additional undertaking will give Decon visibility in respect of the sale of any lots in respect of which writs have been registered in its favour, as well as the other lots in the Development.
As to Lot 45, the evidence indicated that the total amount of the loan outstanding to the registered mortgagee, Binah Group Pty Limited, is $384,767.04, an amount which the parties accepted was less than any likely sale price.
Lot 45 is, therefore, the only asset subject to a writ which might be available to Decon for execution for the purposes of recovering on the judgment in the future. In those circumstances, there was some force to Decon's submission that continuation of the writ might provide Decon with some protection pending the appeal as the record of the writ would preclude registration of another dealing over that lot for a period of six months, such as a caveat lodged by a lender with an existing unregistered equitable interest: Real Property Act 1900 (NSW), s 105A(2).
That said, and as TFM and KRI submitted, s 74H(5)(f) of the Real Property Act does not prohibit the registration of a writ on title where a caveat has been lodged, unless the caveat otherwise specifies.
While the recording of a writ on title binds the land from the time it is delivered to the Sheriff, it does not create any interest in the land on the part of Decon as a judgment creditor: Civil Procedure Act 2005 (NSW), s 112; Real Property Act 1900 (NSW), s 105(1); Brendan Edgeworth, Butt's Land Law (7th ed, 2017, Lawbook Co) at 12.1620. Execution of a money judgment by way of writ levied on property simply permits the property to be sold, subject to existing interests in the land, rather than itself creating a proprietary interest in the land: Boyd v Thorn (2017) 96 NSWLR 390 at [79].
Further, the undertakings proffered by TFM and KRI should protect Decon's interests insofar as they relate to the possibility of recovery based on Lot 45. The undertakings prevent the creation of new interests in respect of Lot 45 to the benefit of any third party, such as a third party mortgagee. They also restrain TFM and KRI from dealing with Lot 45 otherwise than by sale for market value and paying expenses in the ordinary course of business, such as to discharge the first registered mortgage. If Lot 45 is to be sold prior to the appeal being determined, Decon will be provided with notice of the sale and sale price and any net sale proceeds would be subject to the asset preservation regime provided for in the proffered undertakings.
The proffered undertakings also provide further protection for Decon as they prevent TFM and KRI from dealing in any way with seven other unsold lots in the Development which have no existing registered mortgages on title. While caveats have been lodged in respect of those lots, they include caveats lodged by Decon.
There was also evidence of possible prejudice to TFM and KRI from the writs remaining on the title which might give rise to loss that may not be recoverable if they succeed on appeal.
The evidence from Yvonne Liu, the Head of Finance at TFM and KRI, was that the continuation of the writs pending the appeal will cause significant financial hardship as TFM and KRI would not be able to sell the lots to repay mortgages for which the lots were security. Ms Liu's evidence was that settlement of the sale of Lot 1 for $605,000, which was scheduled to take place on 7 February 2020, did not occur due to the writ on title. She also gave evidence that three other lots in respect of which writs had been recorded on title, namely Lots 32, 54 and 78, were subject to contracts of sale or had a contact for sale issued. Ms Liu also gave evidence that one of the registered mortgagees on title had threatened to appoint receivers due to the writs registered over their secured property.
Decon submitted, and I accept, that the risk of prejudice to TFM and KRI from continued registration of the writs may not be high in the context where they only affect a small number of the 53 unsold lots in the Development. But, as TFM and KRI submitted, the effect of a writ is to impose a blot on title which, the evidence showed, can hinder progress of the sale of the lots. There was also the risk of the appointment of a receiver from the existence of the writs on title to some of the lots.
Decon also submitted that it was relevant to the Court's consideration that TFM and KRI's prospects of success on appeal are low. This submission was made in the context where the first and third grounds of appeal relied on by TFM and KRI are contentions that were not raised or determined at first instance. It also submitted that the second ground of appeal, that the Building and Construction Industry Security of Payment Act 1999 (NSW) did not apply to Decon's payment claim as it was for a restitutionary quantum meruit, was also without merit.
The parties were agreed that a stay should be ordered. They did not elaborate on the issues raised by the appeal during oral argument. Accordingly, I considered it more appropriate to adopt the approach of not speculating about TFM and KRI's prospects of success on appeal and proceeded on the basis that they may have an arguable case: Lewence Construction Pty Ltd v Southern Han Breakfast Point Pty Ltd [2015] NSWCA 150 at [11] and [12].
The undertakings proffered by TFM and KRI provide a de facto Mareva order over their assets pending determination of the appeal. They should address the risks to Decon from ordering a stay and cancellation of the writs as they prevent TFM and KRI from entering into any adverse dealings between now and the determination of any appeal which could impact Decon's ability to satisfy the judgment at a later time. The proffered undertakings also provide for a disclosure regime in respect of the sale and sale price of any lots in the Development.
Any prejudice to Decon from the stay and cancellation of the writs is likely to be low given TFM and KRI's liabilities exceed their assets and all of the lots over which writs have been registered are subject to first registered mortgages. There was also evidence that continuation of the writs might prejudice TFM and KRI, including their ability to sell the lots. The sale of lots is something that should continue to occur so long as Decon's position in respect of any net proceeds from those sales is protected. In my opinion, the proffered undertakings should do so.
The primary purpose of recording a writ is to permit execution of a judgment to be levied on the property by a sale by the Sheriff: Biseja Pty Ltd v NSI Group Pty Ltd [2007] NSWSC 283 at [7].
In this case, a stay is being ordered and the proffered undertakings address the various protections which Decon claimed to arise from registration of the writs. In these circumstances, there was no utility in the writs remaining recorded on title and I was satisfied it was appropriate to make the order for their cancellation: Biseja Pty Ltd v NSI Group Pty Ltd [2007] NSWSC 283 at [7].
For these reasons, I made the following orders:
[2]
Part A: Orders
Upon TFM Epping Land Pty Ltd and Katoomba Residence Investment Ltd, by its counsel, giving to the Court the undertakings set out below, the Court orders:
1. The orders and judgment of the Court dated 11 October 2019 be stayed until the determination of the application for leave to appeal and any appeal or until further order of the Court.
2. Pursuant to s 135(2) of the Civil Procedure Act, the Registrar-General of New South Wales cancel all recordings of writ number 2019/205661 issued by this Court in proceedings 2019/205661 on 24 October 2019, including, without limiting the generality of the foregoing, the recordings made pursuant to dealings: AP881819, AP881886, AP881906; AP881823 and AP881788.
[3]
Part B: Undertakings
1. Each of TFM Epping Land Pty Ltd and Katoomba Residence Investment Ltd undertakes, by its counsel, to the Court that it will not by itself, its servants or agents, remove or cause or permit to be removed from the State of New South Wales or sell, charge, mortgage or otherwise deal with or dispose of, or cause or permit to be sold, charged, mortgaged or otherwise dealt with or disposed of, all or any of its assets (whether held beneficially or otherwise) within the State of New South Wales.
2. The undertaking referred to in paragraph 1 shall not prevent each of TFM Epping Land Pty Ltd and Katoomba Residence Investment Ltd from:
1. paying expenses incurred in the ordinary course of business, including legal expenses incurred in prosecuting their application for leave to appeal;
2. selling, for market value, any real estate held by either TFM Epping Land Pty Ltd or Katoomba Residence Investment Ltd.
1. Despite paragraph 2, the undertaking in paragraph 1 will prevent each of TFM Epping Land Pty Ltd and Katoomba Residence Investment Ltd from selling, charging, mortgaging or otherwise dealing with or disposing of their interest in the following lots:
1. Lot 2 SP98272 (Unit G02);
2. Lot 10 SP98272 (Unit 102);
3. Lot 23 SP98272 (Unit 207);
4. Lot 46 SP98272 (Unit G14);
5. Lot 59 SP98272 (Unit 212);
6. Lot 61 SP98272 (Unit 214); and
7. Lot 72 SP98272 (Unit 316).
1. Within 48 hours of the exchange of any contract for the sale of land at 2 - 8 Hazelwood Place, Epping, TFM Epping Land Pty Ltd and Katoomba Residence Investment Ltd must notify the legal representatives of Decon Australia Pty Ltd of the fact of the exchange and of the sale price.
[4]
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: 30 March 2020