GE Personal Finance Pty Limited v Smith

CASES CITED : Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 Parist Holdings Pty Limited v Perpetual Nominees Limited [2006] NSWSC 599

PARTIES : GE Personal Finance Pty Limited (Plaintiff) Johnny James Smith (Defendant)

SOLICITORS : Mr M Groben, Gadens (Plaintiff) Mr J Smith (in person)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST

10538/06 GE Personal Finance Pty Limited v Johnny James Smith

1 JOHNSON J: On 3 February 2006, the Plaintiff, GE Personal Finance Pty Limited, commenced proceedings against the Defendant, Johnny James Smith, seeking, inter alia, an order for possession of land at 15 Warwick Avenue, Kempsey, being the land comprised in Folio Identifier 57/262340. The Plaintiff's claim alleged default on the part of the Defendant under a mortgage entered into on 22 February 2005, and sought judgment in the sum of $177,668.76 (being the amount said to be owing as at 16 January 2006). 2 On 9 February 2006, the Statement of Claim was served on the Defendant. No Defence was filed thereafter by the Defendant. 3 On 3 April 2006, application was made by the Plaintiff for Default Judgment. By that time, the amount claimed against the Defendant had increased to $182,558.24. The affidavit in support stated that the Defendant's default was based upon his failure to make payments under the mortgage on 21 June, 21 July, 21 August and 21 September 2005 in a total sum of $5,534.22. 4 There is evidence before the Court that, since the mortgage was entered into on 22 February 2005, the Defendant has made four payments only, being the sums of $1,410.00 on 24 March 2005, $750 on 27 July 2005, $750.00 on 10 August 2005 and $750.00 on 27 January 2006. No payment has been made by the Defendant since the commencement of these proceedings on 3 February 2006. 5 Default Judgment was given on 6 April 2006. On 11 May 2006, a Writ of Possession issued.

Application for a Stay of Execution of Writ of Possession 6 There is a history of stay applications by the Defendant. Today, the Defendant approached the Duty Registrar for a further stay of execution of the Writ of Possession. There is presently in force a stay granted by Assistant Registrar Howe on 30 June 2006 which expires at midnight tonight. Given the prior history of stays, the Duty Registrar declined to consider the Defendant's application for a stay which had been made in accordance with paragraph 20 of Practice Note SC CL 6 (Supreme Court Common Law Division - Possession List). Although paragraph 22 of the Practice Note provides for the Duty Registrar to refer the proceedings to the Duty Associate Judge for consideration where the Duty Registrar declines to grant a stay, the application was referred to the Duty Judge, Buddin J, who, by arrangement, listed the matter before me in my capacity as Possession List Judge. 7 Upon the Defendant appearing this morning to make an ex parte application, Buddin J directed that the solicitor for the Plaintiff be notified of the application and that the application stand in the list to provide an opportunity for the Plaintiff to attend the hearing of the application. In my view, this ought be the invariable practice where applications of this type are made, even when the application is made close to the time of execution of the Writ of Possession by the Sheriff and when the application is made outside ordinary court sitting hours. Such an approach will also permit an opportunity to examine the file to provide an understanding of the history of the litigation. 8 Mr Groben, solicitor for the Plaintiff, has appeared before me and opposed the stay application.

Some Factors Relevant to Stay of Execution of a Writ of Possession 9 The Court has a discretion whether to stay the execution of a Writ of Possession issued in proceedings of this type. It is a power which is sought to be exercised frequently and in a variety of circumstances. There can be no prescription of the circumstances in which this important discretionary power ought be exercised. 10 Nevertheless, there are a number of factors which are clearly relevant to the question whether the discretion ought be exercised in the circumstances of the particular case. 11 Firstly, it should be kept in mind that, by the time a stay application is made, the proceedings have usually advanced through various stages without the Defendant participating in the proceedings. In the usual case (of which the present case is an example), the Defendant has not filed a Defence and Default Judgment has been granted (Part 16.4 and Part 36.8 Uniform Civil Procedure Rules) followed by the issue, with the leave of the Court, of a Writ of Possession (Part 39.1(1)(d) Uniform Civil Procedure Rules). Some time is then required for the Plaintiff to make practical arrangements with the Sheriff for execution of the writ. 12 Having been served with originating process alleging default under the mortgage and identifying the relief which the Plaintiff seeks, the Defendant is on general notice as to the consequences which may flow as a result of the proceedings. If the Defendant takes no action until the execution of the Writ of Possession is imminent, a legitimate question arises as to why the Defendant has not taken earlier action, either by way of negotiations with the Plaintiff or application to the Court. A Defendant seeking a stay ought be in a position to explain to the Court his or her action or inaction prior to the making of the application. 13 Secondly, the basis upon which the stay application is made is significant. As paragraph 20 of the Practice Note makes clear, there are three common circumstances advanced on a stay application:

(a) where the Defendant indicates that the proceedings are to be defended, a draft Notice of Grounds of Defence should be provided and the Defendant ought be in a position to make submissions concerning the merits of the proposed grounds;

(b) where the Defendant indicates that the loan is to be refinanced, proof of steps undertaken to refinance will be required on the application;

(c) where the Defendant indicates that the subject property is to be sold, copies of agent sale agreements, a contract for sale of the property, advertisements and other documentary evidence ought be provided. 14 The three categories referred to in the preceding paragraph of this judgment raise different considerations. 15 With respect to the first category, if a Defendant seeks to be let in to defend the proceedings (and, usually, to set aside a default judgment for that purpose), then a stay may be more readily granted to preserve the subject matter of the litigation pending the determination of the proceedings by the Court. 16 As to the second category, where the Defendant seeks to refinance so as to discharge the debt to the Plaintiff under the mortgage, the Defendant is seeking to satisfy the debt payable to the Plaintiff in its entirety so as to render unnecessary the exercise of the power of sale by the Plaintiff. 17 The power of sale under s.58 Real Property Act 1900 is to be exercised for the purpose of the Plaintiff recovering the moneys which are due and owing to it as mortgagee (see s.58(3)). Even where the Plaintiff takes possession of the property for the purpose of exercising its power of sale, the 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, 168-169. In this respect, I have been referred by Mr Groben to a recent decision of Hamilton J in Parist Holdings Pty Limited v Perpetual Nominees Limited [2006] NSWSC 599, where his Honour considered the circumstances in which injunctive relief may be granted to restrain the exercise of power of sale by a mortgagee. 18 Thus, it remains open to a Defendant to discharge the debt owing to the Plaintiff in its entirety before the property is sold and to recover possession of the property. No doubt, it is personally convenient to a Defendant to retain possession of the property continuously rather than lose possession, and then regain it upon discharging the debt to the Plaintiff. It is for this reason that a Defendant who is seeking to discharge the debt to a Plaintiff will seek a stay of execution of the Writ of Possession to allow this to be done. 19 If a Defendant is contending that there is a realistic prospect of obtaining refinance to discharge the debt, it is reasonable to expect that the Defendant will take early steps in this regard and be in a position to provide credible and reliable evidence of available refinancing so as to discharge the total debt. It might be expected that a reasonable Plaintiff would facilitate such a process and not run up further legal costs in such circumstances. 20 The third category involves a stay application where the Defendant wishes to sell the property. It might be thought that the orderly preparation and presentation of the property for sale, with the Plaintiff and Defendant co-operating in this regard, would maximise the prospect of a favourable sale price. This would serve the interests of the Plaintiff and the Defendant. A Defendant may encounter difficulties on a stay application if the decision to sell the property, and to make necessary arrangements for this to be done, is left until the last minute when the Writ of Possession is about to be executed. 21 A stay may be sought on hardship grounds. The Defendant may contend that there will be hardship to him or her and other family members if the writ is executed and they are removed from the property. It must be kept in mind that the Defendant and other occupiers of the property (Part 6.8 Uniform Civil Procedure Rules) will have been served with originating process so that the consequences which may flow from the proceedings would have been notified to them. Of course, it may be that, in the absence of legal advice, the precise consequences may not be clear to a Defendant and other occupiers. It may also be that the Defendant and his or her family may have not confronted the reality of the situation at an earlier time. 22 Ordinarily, if a Defendant is not in a position to demonstrate a reasonable foundation for a stay in one of the three circumstances referred to in paragraph 13 above, then there could be no reasonable expectation of an extended stay on hardship grounds only. If it is inevitable that the Plaintiff will obtain possession of the property for the purpose of exercising the power of sale, then it will be necessary for the Defendant to vacate the property. 23 Of course, particular factors may exist in an individual case which bear upon this class of stay application and which may ground the exercise of discretion by way of a stay for a longer period. However, in circumstances where vacation of the premises by the Defendant is inevitable, there ought be no reasonable expectation of an extended stay being granted on hardship grounds. 24 It is a relevant factor, in the exercise of discretion on a stay application, to have regard to the level of indebtedness under the mortgage and the extent to which the Defendant has made payments and attempted generally to comply with the conditions of the mortgage. It might be thought that issues of this type would be relevant, in the first instance, to the decision of a mortgagee to commence proceedings against a mortgagor. Where proceedings are commenced, a poor record of payment by a Defendant under the mortgage may operate adversely to the Defendant on a stay application. 25 Ordinarily, a Plaintiff is entitled to recover, under the mortgage, enforcement costs and legal costs. It is necessary for Defendants to keep in mind that delay in the proceedings, and the taking of procedural steps which run up Plaintiffs' costs, will operate adversely to the Defendant in a financial sense if possession of the property is taken and the power of sale is exercised. The Plaintiff will be entitled to retain from the proceeds of sale of the property not just the principal and interest outstanding under the mortgage, but additional costs and expenses incurred in the proceedings and in the exercise of the power of sale. This will operate to reduce any remaining balance which may be available for payment to the Defendant. 26 In circumstances of falling property values, there may be a real prospect that the Plaintiff will not recover the outstanding level of indebtedness from the proceeds of sale of the subject property. The Plaintiff may then seek to recover any outstanding balance from the Defendant personally. 27 Accordingly, the likely sale price of the property may also be relevant to the exercise of discretion as to whether a stay should be granted, thereby extending the proceedings and increasing the level of costs incurred. 28 A further relevant consideration is the delay which will arise if it is necessary to postpone action by the Sheriff to execute a Writ of Possession. Where a date and time has been nominated for this action, and a stay is granted shortly before that time, it is the experience of the Court that a period of some two to three weeks is required before further arrangements can be made by a Plaintiff for the Sheriff to take possession of the property. Additional enforcement costs are involved in this regard as well. Accordingly, a last-minute stay will have the effect of allowing a Defendant a significant period of continued possession of the property and increasing the sum which the Plaintiff may recover from the Defendant. 29 It is, of course, necessary to consider all the circumstances of the particular case to determine whether a stay is granted and, if so, upon what terms. The Court may take the view that sworn evidence is required from a Defendant by way of an affidavit or oral evidence where an urgent stay application is made. In an appropriate case, the Plaintiff may wish to test the evidence of a Defendant with respect to the grounds of the stay application and the material advanced in support of it. 30 I have made these observations in this judgment to emphasise that Defendants can have no reasonable expectation that a stay of execution of a Writ of Possession will be granted upon request in every case. The nature of the proceedings, and the stage which the proceedings have reached by the time of such an application, are important factors which the Court must take into account and which a Defendant must overcome on a stay application. A Defendant must satisfy the Court that a sound and proper basis exists for the grant of a stay.

The Present Application 31 I turn to the circumstances of the present case. I have already referred to the early chronology of these proceedings. Following the issue of the Writ of Possession on 11 May 2006, a letter was sent to the Sheriff on 19 May 2006 setting an eviction date of 30 May 2006. 32 On 26 May 2006, an ex parte application for a stay of execution of the Writ of Possession was granted. The application was stood over until 2 June 2006. On 2 June 2006, the Defendant appeared in person before Assistant Registrar Howe and informed the Court that he had applied for mortgage assistance and had made an appointment for a loan application with Bluestone Mortgages and with his local credit union. The Court ordered the Defendant to serve any affidavit with respect to refinancing by 28 June 2006 and the matter was stood over until 30 June 2006 with the stay being continued. 33 On 29 June 2006, the Defendant contacted Mr Groben and informed him that the credit union had refused his application for refinancing, that the local credit union would approve an application for refinancing if he paid the arrears and three months' payments, that the Defendant's father would provide the required money in the following week and that a letter of approval from the local credit union should be available after a meeting set down for the following week. 34 I note that the Defendant was and is employed as an Aboriginal Community Liaison Officer with the New South Wales Police at Kempsey. 35 On 30 June 2006, the matter again came before Assistant Registrar Howe. On that occasion, the Defendant informed the Court that his application to the Police Credit Union had been declined, but that he was confident that an application to refinance through the local credit union would be approved. The Court extended the stay until 30 August 2006 and directed that any further application for a stay be supported by evidence with respect to refinancing and that such an application ought be made before 30 August 2006. 36 On 15 August 2006, Mr Groben wrote to the Defendant informing him that there would be opposition to any further application for a stay and noting that there had been no evidence provided to the Plaintiff's solicitors of any steps taken by the Defendant to refinance. 37 Today, the Defendant approached the Court. He prepared a handwritten Notice of Motion and swore an Affidavit. I note that he annexed to that affidavit the letter from Mr Groben's firm of 15 August 2006. In this way, he placed before the Court, for the purpose of his ex parte application, the fact that his application had a chequered history and that the Plaintiff would oppose any further application for a stay. In doing this, the Defendant acted openly and appropriately, and in a manner which operates in his favour on this application. Also annexed to the affidavit of the Defendant sworn today is a letter from Jeff Haisell, the Branch Manager of Coastline at Kempsey. This letter is dated 29 August 2006 and is addressed to the Plaintiff's solicitors and states: "We refer to the above matter and confirm that an amount of $30,000 is held to cover arrears owing to GE Finance and arrangements for transfer of funds to the GE offices at Port Macquarie will be finalised on Friday 1 September 2006. Mr Smith is also applying through the Credit Union for finance to take over his Home Loan." 38 At the hearing before me, the Defendant has supplemented his affidavit with oral evidence, and he was cross-examined by Mr Groben. Mr Smith is married and lives with his wife in the subject property at Kempsey. According to his evidence, there are two children aged 14 and 9. As I have noted, he is in employment as an Aboriginal Community Liaison Officer with the New South Wales Police. He readily acknowledges his poor payment history under the mortgage, and relates a number of features of his family circumstances that throw light on how this poor record of payment came about. He acknowledges also that he has obtained a stay to date by means of various promises of refinancing and applications to be made to credit unions. He emphasises that a new factor that exists now is the indication, confirmed in the letter of Mr Haisell, that the sum of $30,000.00 will be paid on 1 September 2006 to reduce the level of indebtedness under the mortgage. 39 I note that the evidence before me today indicates that the current amount owing under the mortgage is $194,519.85. I also note that a valuation of the property obtained on 11 August 2006 by the Plaintiff indicates that it has a market value of $170,000.00-$180,000.00. The Defendant has informed me that the payment of $30,000.00, to be made on Friday of this week, is not a loan but is money provided by his mother-in-law. He intends to progress the application through the credit union for refinancing (at a lower interest rate) to take over the home loan. He has had discussions with Mr Haisell's office in this regard. 40 There remains, of course, an element of uncertainty surrounding the Defendant's position. He indicates that steps will be taken by him in the near future. This bears a similarity to submissions advanced by him to the Court in support of earlier stay applications. There is, however, a significant new factor which operates in the Defendant's favour today. That is the firm indication, supported by documentary evidence, that the sum of $30,000.00 will be available and paid to reduce the level of indebtedness to the Plaintiff within days. Mr Groben acknowledges that this is an unusual feature of this case. Nevertheless, he has submitted (reasonably) that, given the history of the matter, no more time ought be allowed to the Defendant. 41 I have had regard to the various factors which are relevant to this application, a number of which I have identified in the general examination of relevant discretionary factors set out earlier in this judgment. In circumstances where a substantial reduction of the mortgage debt is to be made within days from today, I am prepared to grant the Defendant some little time to take the steps which he proposes to discharge his debt to the Plaintiff. 42 I propose to adjourn the matter, in the first instance, for one week until 6 September 2006 and to grant a stay extending until 4.00 pm on that day. If I am informed by a legal representative of the Plaintiff that the sum of $30,000.00 has been paid, I am prepared to adjourn the matter from 6 September 2006 until Friday 22 September 2006 and extend the stay until 4.00 pm that day. Given that the Defendant resides in Kempsey and has travelled here by train (involving a journey to Sydney last evening and a return journey to be undertaken later this afternoon), I do not require the attendance of the Defendant next Wednesday, 6 September 2006. 43 If the sum of $30,000.00 has been paid, I will adjourn the proceedings and extend the stay in the manner which I have indicated without his attendance. If, however, the sum of $30,000.00 is not paid, I have made clear to the Defendant, and I make it clear once again in this judgment, that I will not extend the stay beyond next Wednesday, 6 September 2006. I do expect the Defendant to appear in person, or through a legal representative, on Friday 22 September 2006. On that occasion, there is an expectation that the Defendant will demonstrate that refinancing has been approved so as to discharge the total debt to the Plaintiff. If refinancing is not approved by that time, and if there is to be any further application for a stay, then there will need to be substantial evidence to justify the grant of a further stay. 44 I have concluded that this is a reasonable approach in this case because of a combination of factors, some of which are unusual. It seems to me that a just outcome of the present application will enable the Defendant to reduce, in the first instance, by payment of a significant sum, his level of indebtedness to the Plaintiff and then allow him an opportunity to demonstrate, within a relatively short time, an ability to discharge the balance of his indebtedness to the Plaintiff. If these steps cannot be undertaken, then there can be no reasonable expectation by the Defendant that a further stay will be granted. 45 Accordingly I make the following orders:

(1) The proceedings are adjourned until 10.00 am on 6 September 2006 before me.

(2) The stay of execution of the Writ of Possession is extended until 4.00 pm on 6 September 2006. 46 I note that if payment of the sum of $30,000.00 is made by the Defendant to the Plaintiff before 6 September 2006, I will, without the requirement for attendance by the Defendant on that date, adjourn the proceedings until 10.00 am on Friday 22 September 2006 before me, and extend the stay until 4.00 pm that day. If, however, payment is not made prior to 6 September 2006, in the absence of any further stay application, which would require most extraordinary circumstances, I will not extend the stay beyond 6 September 2006. [Further submissions by Mr Groben and the Defendant] 47 At the conclusion of my judgment, Mr Groben raised a practical and significant issue which required clarification. In so far as I have referred (in paragraph 43 above) to an expectation that, by 22 September 2006, the Defendant ought have documentary evidence of approval of a loan to refinance, it is appropriate that I clarify that matter in the following way. It is my expectation that, by 22 September 2006, the Defendant ought have an unconditional letter of approval indicating that a loan discharging his total indebtedness to the Plaintiff is available, or a conditional letter of approval of such a loan, together with documentary evidence demonstrating the Defendant's ability to comply with any condition placed upon the loan approval.

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