[1949] HCA 1
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
[1964] HCA 69
Suncorp-Metway Ltd v Nam Property Holdings Pty Ltd [2010] NSWSC 1078
Webster v Lampard (1993) 177 CLR 598
Source
Original judgment source is linked above.
Catchwords
[1949] HCA 1
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125[1964] HCA 69
Suncorp-Metway Ltd v Nam Property Holdings Pty Ltd [2010] NSWSC 1078
Webster v Lampard (1993) 177 CLR 598
Judgment (9 paragraphs)
[1]
EX TEMPORE Judgment (REVISED)
HIS HONOUR: Before the Court is a Notice of Motion filed 30 November 2021 whereby the plaintiff, G & G Mikhael Pty Ltd, seeks summary judgment in relation to its Statement of Claim and summary dismissal with respect to a Cross-Claim filed by the defendant, Safwan Chalak.
The substantive proceedings arise on the basis of an Amended Statement of Claim filed by the plaintiff on 3 May 2021. That has been responded to by way of an Amended Defence filed on 22 November 2021. The defendant has additionally, on 20 September 2021, filed a Cross-Claim.
The substantive proceedings seek orders for possession of land comprised in 1/SPXXXXX being the land situated at and known as townhouse 1 at X XXXXXX XXXXXXXX Chipping Norton New South Wales ("the property"). The second prayer in the Amended Statement of Claim seeks leave to issue a writ of possession. The third prayer seeks judgment for the plaintiff against the defendant in the amount of $1,712,971. The fourth prayer seeks that the defendant pay the plaintiff's costs pursuant to the provisions of the mortgage as set out subsequently in the Statement of Claim or, alternatively, under s 98 of the Civil Procedure Act 2005 (NSW).
The Motion for summary judgment as filed seeks judgment in terms of prayers 1 through to 4 of the Amended Statement of Claim for the full amount claimed plus interest, or for an alternative amount as determined by the Court and that the Cross-Claim be dismissed pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). Prayer 3 of the Motion seeks, in the alternative to prayers 1 to 3 of the Amended Statement of Claim, that the Defence and Cross-Claim be struck out pursuant to UCPR r 14.28, and prayer 4 seeks an order that the defendant pay the plaintiff's costs of the Notice of Motion and the proceedings.
It is appropriate to note at the outset the principles that apply with respect to an application for summary judgment. A high degree of certainty is required before a party is to be denied the opportunity to have their claim determined in the usual way. The provision pursuant to which summary judgment is sought is UCPR r 13.1(1) which provides as follows:
13.1 Summary judgment (cf SCR Part 13, rule 2; DCR Part 11A, rule 2; LCR Part 10A, rule 2)
(1) If, on application by the plaintiff in relation to the plaintiff's claim for relief or any part of the plaintiff's claim for relief -
(a) there is evidence of the facts on which the claim or part of the claim is based, and
(b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed,
the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires.
(2) Without limiting subrule (1), the court may give judgment for the plaintiff for damages to be assessed.
(3) In this rule, a reference to damages includes a reference to the value of goods.
Before a Court will give summary judgment to a plaintiff pursuant to this rule, it is necessary for this Court to reach a high level of satisfaction that the order should be made. The principles are well known. A very clear case is required before summary judgment is granted and the power to order summary judgment should be sparingly employed: see Bendigo and Adelaide Bank Ltd v Tombs [2010] NSWSC 1427 at [24] citing Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69; Webster v Lampard (1993) 177 CLR 598; [1993] HCA 57 and Cosmos E-C Commerce Pty Ltd v Bidwell & Associates Pty Ltd [2005] NSWCA 81.
Before turning to the particular issues that arise on this Motion, it is convenient to say something as to the background of the matter. The plaintiff on the Motion relied upon an affidavit of George Mikhael of 20 October 2021 exhibited to which was a large volume of material marked GM1. The plaintiff further relied upon two affidavits of Mark Diab, the first of 20 October 2021, the second of 3 November 2021. The plaintiff also relied upon an email sent by the defendant's solicitor, Dr Dion Accoto, to the plaintiff's solicitor, Merlyn Taouk, dated 6 November 2020. That last item was the subject of objection. I admitted it provisionally. In the result it has had no material bearing in the determination of the issues.
The material before the Court sketches the background to the particular dispute. In very short compass, according to the plaintiff's evidence, the defendant approached him in or around early August 2017 with a proposal. The defendant indicated that he had obtained land at X XXXXXX XXXXXXXX Chipping Norton and had obtained development approval to demolish the existing dwelling and build three properties, being respectively a one bedroom townhouse, a two bedroom townhouse, and a double storey four bedroom house. The plan was to develop the site, sell the smaller townhouses, and retain the double storey four bedroom house for his own purposes.
The defendant was in need of finance in order to achieve this plan. According to the plaintiff he indicated that, while he was not in the business of a money lender, he would, nonetheless, think about it. Mr Mikhael indicates that this discussion, and indeed all other relevant discussions, took place in the presence of Mr Diab, who held a position within the plaintiff company as account and operations manager. Mr Mikhael, I should note, is a director of the plaintiff company. Mr Diab, as I understand, is also the son-in-law of Mr Mikhael, although nothing turns on that.
Ultimately the parties, that is the plaintiff through Mr Mikhael, and the defendant, reached an agreement with respect to a loan resulting in a deed of loan executed by Mr Mikhael on behalf of the plaintiff, and by the defendant on 7 September 2017. I pause to note that this loan is not the subject of the proceedings, but provides an essential part of the background.
That loan was secured by way of a caveat over the property, at that stage comprising the totality, including what became all three titles, which operated as, in effect, a second mortgage over the property. The property was the subject of a first mortgage in favour of the National Australia Bank.
According to Mr Mikhael, the terms of the loan were discussed and agreed at a discussion which took place in person on or about 8 August 2017 in the presence of Mr Diab.
Those terms were essentially a loan in the amount of $600,000 at an interest rate of 15%, repayable within ten months. According to the plaintiff, as a result of drawdown requests made by the defendant, amounts were provided to the defendant and recorded against the loan.
According to the plaintiff, by April 2018 the accumulated loan including interest had reached $588,883. In his affidavit Mr Mikhael states that he was concerned about the growing indebtedness of the defendant and informed the defendant to that effect in or about early June 2018. According to the plaintiff, the defendant assured him that he would be able to sell the two smaller properties, which would allow him to repay the loan, but in order to do so he would need to be able to complete construction.
Further discussions occurred in July 2018 whereby, according to Mr Mikhael, his concerns were again raised, in addition to a concern with respect to the priority of the security interests in the property. On the plaintiff's evidence an agreement was reached whereby the plaintiff, through Mr Mikhael, would take over the first mortgage held by National Australia Bank. Whilst this would have the effect of increasing the total indebtedness, the plaintiff would obtain a position as the first mortgagee, which would in essence improve its position with respect to the security for the loan.
According to the plaintiff, the agreement reached was that the plaintiff would pay out the $700,000 owed to the National Australia Bank, that amount would become part of the debt owed by the defendant to the plaintiff, but the interest rate on that amount would be 7% and not 15%. The plaintiff's evidence is that in accordance with that agreement, a second loan agreement and a mortgage document were prepared. It is that mortgage that is at the core of the proceedings brought by way of the Statement of Claim and thereby the core of the issues with respect to this Motion.
It can be seen from what has been said that the history, in one sense, gives rise to a mortgage which in and of itself is a relatively simple proposition, but also gives rise to issues with respect to different components of the loan with correspondingly different interest rates, raising at least a degree of complexity.
Be that as it may, there appears to be no issue that there is in place a mortgage which is exhibited at Tab 10 of the Exhibit GM1, that mortgage having been executed on 27 July 2018. At Schedule 2 to that mortgage, various terms are set out. The secured property, including its address and Torrens title description are set out, the principal with respect to the loan is specified as $2 million, the repayment date six months from the date of the mortgage as specified and there are terms with respect to rates of interest, stipulating 15% per annum for the first $1.3 million advanced, 7% per annum for the following $700,000 advanced and 15% per annum for any further moneys advanced by the mortgagee in its absolute and sole discretion, with interest to be paid monthly in arrears.
It is not necessary for the purposes of these reasons to set out the remainder of the mortgage, as specified in the schedule or to delve any deeper into the terms of the mortgage itself.
The issue before the Court is, at least in the first instance, crystallised to some extent by the Amended Statement of Claim and the matters in the Defence. Having regard to the Amended Statement of Claim and the Amended Defence, the following matters are clear: the defendant is the owner of the property; subject to matters set out at paragraphs 15 to 32 of the Amended Defence, the defendant admits to obtaining a loan from the plaintiff on or about 1 August 2018; the defendant mortgaged his property as security for the loan; and the mortgage has the result that in the event of default under the loan, the plaintiff can take possession of the property and obtain judgment in the amount owed to the plaintiff. Further, in accordance with clause 3.1 of the mortgage, $2,000,000 was advanced, that amount to be repaid within six months of the date of the mortgage, being about 1 February 2019 and that by clauses 3.3, 3.4 and 3.5 of the mortgage, interest was payable in the terms to which I have referred.
In the Amended Statement of Claim, by particular 7, the plaintiff asserts that the defendant is in default of the loan in breach of the clauses to which I have referred setting out the principal advanced, repayment date and interest payable.
The particulars set out the precise amounts claimed by way of principal and interest in relation to firstly, the position as at 1 February 2019 and secondly, the position as at 31 March 2021.
The defendant denies particular 7, however, that denial is said to be subject to paragraphs 15 to 32 of the Amended Defence. Read together, it is tolerably clear that what is in dispute in relation to paragraph 7 is not the default as such but rather the particulars and the basis upon which calculations have been made having regard to matters raised in paragraphs 15 to 32, which I will come to shortly.
In paragraphs 8 through to 11, the Amended Statement of Claim sets out the effect of various clauses in the mortgage. In relation to those matters the defendant also indicates there is no dispute subject to matters raised in paragraphs 15 to 32 of the Amended Defence. By paragraph 12 of the Amended Defence it is accepted that notice pursuant to s 80 of the Consumer Credit (New South Wales) Code is not required.
In paragraph 13, the plaintiff asserts that notice has been given pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW). The defendant in its Defence takes issue with the validity of that notice and the consequent right of the plaintiff to sell the property.
Paragraph 14 of the Amended Statement of Claim indicates that, given the default, the lender now claims judgment for possession of the property, full amount of the loan, stipulating an amount of $1,712,971, being principal and interest as at 31 March 2021 plus legal costs, filing costs and service costs, continuing interest and fees in accordance with the loan and costs with respect to the proceedings.
The Amended Defence in relation to this paragraph states to the extent that paragraph 14 of the Amended Statement of Claim contains any allegation of fact on the part of the plaintiff against the defendant, the defendant denies this paragraph.
The issues as they have crystallised on this Motion are as follows: first, whether there is an enforceable mortgage in place; secondly, whether the defendant is in default; thirdly, the relief available; fourthly, the amount of principal owing; and fifthly, the amount of interest owing. I pause to note that I have expressed each of the above as issues but of course remind myself that they are issues in the context of an application for summary judgment. By that, I mean to say that I am mindful throughout that I am not determining the fact of whether there is, for example, to take the first item, an enforceable mortgage; rather, I am determining it on the basis of whether there is a contestable issue between the parties as to that matter.
[2]
The first issue: is there an enforceable mortgage?
Turning to the first issue, that is the existence of an enforceable mortgage, much of the defendant's response had the effect of admitting the essence of the matters in the Amended Statement of Claim but subject to paragraphs 15 through to 32 of the Amended Defence. As has already been made clear, there is a mortgage in place signed by the parties. However, at paragraph 33 of the Amended Defence, the defendant asserts that in the circumstances referred to in paragraph 30, the plaintiff is not entitled to enforce any rights under the terms of the mortgage.
Paragraph 30 in turn says "the representation and nondisclosure referred to in paragraphs 28 and 29 above were at the time of the execution of the Mortgage false or false or misleading".
Turning then to paragraphs 28 and 29, those paragraphs provide as follows:
"28 The representations made by the Plaintiff in paragraph 15 above as to interest were representations made by the Plaintiff, by its director, George Mikhael, of a present statement of affairs.
29 The non disclosure on the part of the Plaintiff referred to in paragraph 16 above constituted by silence a representation as to a present state of affairs."
Those paragraphs in turn provide the following:
"15 Prior to the execution of the Mortgage by the Defendant, the Plaintiff by its representative, George Mikhael represented orally to the Defendant that for the purpose of the reconstruction of existing facilities between the Plaintiff and the Defendant:
(a) the Plaintiff would in return for the creation of the Mortgage payout the existing first ranking mortgage secured against the whole of the land contained in Certificate of Title Folio Identifier 136/239234 in favour of the National Australia Bank Limited;
(b) the existing second mortgage in favour of the Plaintiff would remain with additional funds for development of that property;
(c) interest would be charged in respect advances secured by the mortgage at 7% per annum;
(d) any existing interest payable either under the facility from the National Australia Bank Limited would accrue interest at the rate of 7% per annum;
(e) the interest rate of 7% per annum would apply to all monies due and owing or to be secured under the terms of the Mortgage.
16 The Mortgage in accordance with its terms executed between the Plaintiff and the Defendant provided for interest to be payable at the rate of:
(a) 15% per annum for the first $1,300,000 advanced;
(b) 7% per annum for the following $700,000.00 advanced; and
(c) 15% per annum for any further monies advanced by the Plaintiff in its absolute and sole discretion."
Having regard to the above, it is in my view plain that to the extent that the defendant says the plaintiff is not entitled to enforce any rights under the terms of the mortgage, it is based on assertions with respect to discussions had surrounding the interest rate to be applied and the amount to which respective rates would be applied.
The defendant at the time he entered into the mortgage agreement with the plaintiff had already been the mortgagor under an agreement with the National Australia Bank. There seems to be no room for doubt that he understood the basic framework of the agreement, that is that he was obtaining a loan and his property was being provided as security for the loan. The manner in which the Defence is pleaded in my view makes clear that, despite the terms of paragraph 33, the matter being raised by way of Defence, relates not so much to the mortgage itself but rather the amount payable on the basis of the interest rate to be applied.
On that basis, it is my view that there is in place a mortgage and further, the mortgage is enforceable subject to resolution of the terms with respect to the payment of interest. In those circumstances it seems to me that there is no reason why the plaintiff, given the absence of any real dispute, should not have judgment in its favour for possession in accordance with the terms of the mortgage together with judgment with respect to such principal as is outstanding and that amount of interest, which is not contestable, assuming it is accepted the defendant is in default and that there are amounts outstanding.
[3]
The second issue: was the defendant in default?
I turn then to the second issue as to whether the defendant is in default. In respect to this issue the plaintiff provided a significant body of material demonstrating correspondence from the plaintiff to the defendant together with some correspondence flowing in the other direction. The effect of that correspondence is that over time moneys were drawn by the defendant against the loan secured by way of mortgage. Some repayments were made as a result of moneys obtained on the sale of the smaller townhouses but a significant sum remains unpaid.
That material, if accepted, would establish default both in terms of the time by which the loan was to be paid and by virtue of the failure to pay, to date, amounts due under the loan.
Again, I accept as stressed by the defendant, that I am at this stage concerned with summary judgment, and that I am not determining the facts of the matter but rather whether there is a contestable issue with respect to the matter.
However, reading the Amended Statement of Claim and the Amended Defence together with the evidence relied upon on this Motion by the plaintiff, it seems to me beyond contest that over the period of the loan, amounts were drawn down by the defendant such that it is beyond contest, in my view, that the defendant is in default under the mortgage.
[4]
The third issue: what relief is available?
I note that an issue was raised in the materials as to the validity of the notice purportedly given to the defendant pursuant to s 57 of the Real Property Act. That, in my view, is not a matter that I need to consider.
The validity of any such notice impacts the power of sale (see Suncorp-Metway Ltd v Nam Property Holdings Pty Ltd [2010] NSWSC 1078 at [41]). It does not stand in the way of orders giving judgment for the plaintiff or a writ of possession. In the event that there is a legitimate claim based upon the notice given for the purpose of s 57 of the Real Property Act, it will be for the defendant to take such steps as he deems appropriate in the event that he seeks to intervene to prevent the sale of the property.
That being the case, the plaintiff is entitled to the relief sought subject to the below.
[5]
The fourth issue: what is the amount of the principal?
I turn then to what I have identified as the fourth issue; that is, the amount of the principal. I accept, as has been put by the defendant, that it is not for the defendant to produce evidence on the application for summary judgment contesting matters in dispute. I also accept that the source of information in relation to the amount of principal outstanding comes from Mr Mikhael, a director of the plaintiff, and Mr Diab, an employee of the plaintiff and close relation of Mr Mikhael.
Resuming upon a brief interruption in the audio visual link, I had indicated prior to the interruption that with respect to issue four, the evidence with respect to the amount of the principal comes from Mr Mikhael, a director of the plaintiff, and his son-in-law. However, when I look at that material, it spans communication going back to the beginning of the arrangements. There are a significant number of emails to the defendant updating him with respect to amounts provided under the facility such that it does not seem to be realistically contestable that these amounts were in fact provided pursuant to the mortgage.
I am fortified in my view with respect to that conclusion by the manner in which the pleadings set out the issues. In this latter respect, I accept that the Amended Defence provides no admission as to the amount of money actually lent by way of principal. Nonetheless, as I have already indicated, it is clear that the primary issue centres around the rate of interest payable on the monies advanced.
In saying that, I acknowledge that there is also an issue in relation to accounting with respect to monies received in relation to the sale of the smaller properties. However, it is clear from the material that the net proceeds of the sale of the first property was an amount of $655,177.90 received on 28 August 2019. That is clear from a letter from the plaintiff's solicitor to Mr Diab, together with a settlement adjustment sheet, indicating a total in the same amount. That figure then corresponds with a figure then appearing in various iterations of a spreadsheet with respect to the loan indicating repayment of that amount.
With respect to the second repayment, on the plaintiff's evidence an amount of $450,000 was repaid on 19 October 2021. That figure, on the plaintiff's evidence, was arrived at as a result of the sale of the property for $500,000 together with an agreement that of that amount $450,000 would be put towards the outstanding debt, allowing the defendant the balance of the amount to put towards his own purposes.
While the defendant seeks an accounting in relation to the monies received upon completion of the sales, it seems to me that there is no real room for dispute as to the actual receipt of those monies and the fact that they were put towards reducing the outstanding debt.
Put simply, while that is all based upon evidence put forward by the plaintiff, it is evidence on affidavit and, more particularly, all evidence capable of being corroborated or, alternatively, disproved by reference to banking records. Looking at the body of the material and the emails over a lengthy time, it is fanciful to think that there has been some falsification with respect to the amounts advanced and the amounts repaid.
Again, I reach that view mindful of the issues raised in the Amended Defence. The result of that is that I accept that there is currently owing, based upon the material relied on by the plaintiff, a total of $1,033,064.
[6]
The fifth issue: how much interest is owed?
The next issue for determination is the amount of interest owed. As I have indicated, this appears to be an area of genuine contest.
On the plaintiff's case, the sum originally advanced for the purposes of construction was advanced at a rate of 15%. The plaintiff maintains that part of the loan continued to accrue interest at the rate of 15% and that only that part of the loan resulting from the payment to National Australia Bank attracted the lower rate of 7%.
The defendant disputes this and maintains that the proper amount of interest for the whole amount is 7%. By way of the Cross-Claim the defendant seeks an order that the mortgage be varied to make provision for interest to be calculated at the rate of 7%.
There are issues beyond the actual rate of interest and they go to whether the interest is simple or compounding and, if compounding, whether interest is compounding daily or monthly.
In relation to this aspect of the matter, while there is a dispute, and on the materials before me a contestable issue, that contestable issue is not at large but rather confined to whether, on the best case for the defendant, the interest rate is 7% simple interest or something else. Given that, it seems to me that the plaintiff is entitled to the payment of interest at that rate at the least. To the extent that the plaintiff is entitled to more, that will need to be the subject of a final determination.
[7]
The Cross-Claim
In relation to the defendant's Cross-Claim, the defendant seeks an order that the plaintiff provide an accounting in respect of monies advanced and properly accruing in terms of the mortgage, taking into account monies received as a consequence of sale of properties secured. The plaintiff seeks that this be struck out.
I have some sympathy for the plaintiff's position. The plaintiff, by its solicitor, wrote to the defendant requesting confirmation of the information and material said to be missing and indicating that it would be provided upon request. Despite the invitation by the plaintiff to assist the defendant, the defendant responded indicating the directions that were made, that the defendant did not understand the basis of the request in the email, and asking the plaintiff to identify the basis upon which the defendant was obliged to answer the question, concluding the email with:
"It is a matter for us to decide whether we will make a request for any other information, not for you to invite us to do so."
That is a surprising response from a solicitor tasked with assisting a party in the course of litigation. It closed off an opportunity to potentially resolve at least some aspects of the proceedings.
Be that as it may, there remains in the Court a discretion to provide an accounting and that discretion is generally to be exercised after a full hearing. I would only decline the defendant a hearing on the issue if I was satisfied the matter was not contestable and I am not so satisfied.
Insofar as the Cross-Claim seeks an order that the mortgage be varied so as to make provision for interest to be calculated at 7%, that is clearly an issue that is bound up with the issues joined in the Statement of Claim and the Amended Defence, and I decline to strike out that aspect of the Motion.
[8]
Conclusion
The result of the above is that I find in favour of the plaintiff on the Motion with respect to prayers 1 and 2 and, in part, 3. Given that, the plaintiff is also entitled to costs.
I make the following orders:
1. I give judgment for the plaintiff for possession of the land comprised in folio identifier 1/SPXXXXX being the land located at and known as Townhouse 1, X XXXXXX XXXXXXXX, Chipping Norton, New South Wales, thereafter "the land".
2. I grant the plaintiff leave to issue a writ of possession with respect to the land.
3. The writ of possession referred to in Order 2 is stayed for a period of eight weeks.
4. I give judgment for the plaintiff against the defendant in an amount equal to the principal outstanding on the loan together with interest on that amount calculated as simple interest at the rate of 7% to date and thereafter interest to be calculated in accordance with the rules.
5. The defendant has to pay the plaintiff's costs as agreed or assessed.
6. I direct the parties provide to my Associate by close of business tomorrow the terms of the order for judgment in order to give effect to the above reasons.
[9]
Amendments
04 March 2022 - Formatting issue on coversheet
04 March 2022 - Coversheet amended
09 March 2022 - Added (REVISED) to judgment heading
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: 09 March 2022
Parties
Applicant/Plaintiff:
G & G Mikhael Pty Ltd
Respondent/Defendant:
Chalak
Legislation Cited (4)
Consumer Credit (New South Wales) Code Real Property Act 1900(NSW)