Donald Alexander Gilmour (G-I-L-M-O-U-R) seeks an order staying the execution of a writ of possession relating to a property at 8 Illarangi Street, Carlingford. The writ is due to be executed tomorrow, 29 July 2015.
The application was foreshadowed yesterday and it seems that certain without prejudice negotiations took place with the plaintiff's solicitors over the preceding days but when those negotiations failed to bear fruit, the applicant came before me as Duty Judge today.
While the without prejudice negotiations provide some explanation for the delay, the applicant for the stay has otherwise demonstrated a tardiness in conducting the affairs which gave rise to the present proceedings.
The result is an extremely sad situation. The applicant has placed before me, without objection, an affidavit of his solicitor, along with annexures, and his own affidavit exhibited to which is a folder of material setting out relevant parts of the history of the matter. The plaintiff has provided an affidavit of its solicitor, along with annexures showing the history of the debt, which ultimately led to the judgment for possession. The applicant is a retiree, a man of 77 years of age. When he retired at the age of 75, he was the registered proprietor of the land and home which is the subject of the writ of possession.
He also received on retirement a redundancy package in the amount of around $300,000.
As his counsel puts it "unfortunately" he came into contact with a person by the name of Esber and decided to invest in Mr Esber's business which is or was known as Phoenicia Trading Pty Limited.
Phoenicia Trading Pty Limited is the first defendant in the proceedings commenced sometime later by the plaintiff.
The applicant it seems invested the whole of his redundancy package, that is $300,000 in Phoenicia.
Sometime later he was persuaded or convinced to use his home as collateral for a loan so that further investments could be made in Phoenicia. It was in that context that a loan was obtained through or with the plaintiffs in the middle of October 2014. That loan was in the amount of $650,000. A portion of the funds of the loan were used to pay out and discharge an existing mortgage over the real estate. That may be a significant factor, if the applicant ever sought to challenge the obtaining of judgment for possession, but I need not dwell upon that aspect of the case.
The balance of the loan, as I understand it, was invested in Phoenicia.
It is not necessary to refer in detail to the terms of the loan but it appears that the interest rates under the agreement were quite high. Nevertheless, the applicant agreed to enter into the loan agreement and it seems he did so with the benefit of independent legal advice. The loan agreement provided for the interest rate to increase in the event of default in loan repayments.
Default in fact occurred so that the higher interest rate, I think it was 10 per cent per month, applied to the principal.
So it was that a debt of $650,000 as at 17 October 2014 became by 22 February 2015 a debt of over $911,000.
At about that time, the applicant entered into a deed of forbearance. By that document the plaintiff agreed not to enforce its legal rights based on the original loan agreement and subsequent default and the applicant agreed to a number of things, including repayment of the debt and abandoning any right he may have to defend proceedings based around the original loan agreement or based on any judgment obtained under that loan agreement, including the enforcement of a writ of possession if one was ultimately obtained. Again, it seems that the applicant had legal advice when he entered into the deed of forbearance. Attached to the deed of forbearance was a consent judgment signed by the parties, including the current applicant. The consent judgment was by agreement held in escrow until a default event. Inevitably a default event occurred and the plaintiff exercised its right under the deed of forbearance and moved on the consent judgment. This occurred in April 2015, by which time the debt had accumulated to an amount of $1,036,937.70.
Judgment was entered in accordance with the consent judgment and the plaintiff thereafter sought by notice of motion a writ for possession of the land. That appeared to have occurred on 17 June 2015 and judgment for possession was issued on 19 June 2015. It is to the execution of that writ or that judgment that the current stay application relates.
The relevant principles that arise in such an application were summarised by Johnson J in GE Personal Finance Pty Limited v Smith [2006] NSWSC 889.
His Honour explained that an application to stay, such as the present, arises in a variety of circumstances and most typically are one of three kinds. First, where a defendant indicates that the proceedings are to be defended; second, where a defendant indicates that the loan is to be refinanced; and third, where a defendant seeks to sell the property themselves.
Mr Newton, who appears for the applicant on the hearing of the stay, was not prepared to eschew altogether the possibility that the proceedings may be defended. Indeed, he commenced his submissions by indicating that the circumstances in which the loan was advanced and the nature of the loan and the interest rates were such that there may be some possibility of a defence based around the legislative and common law concepts of unconscionability.
However, he acknowledges that the clear evidence that his client had independent legal advice and the clarity of the terms of the deed of forbearance suggest that any purported defence would be confronted with obstacles which would be extremely difficult to overcome. Added to that is the fact that the funds under the mortgage were used to discharge an existing mortgage.
However, when the arguments closed, Mr Newton had not in terms abandoned the possibility that a defence might be forthcoming or that an attempt to set aside the consent judgment might be made.
In GE Personal Finance v Smith, Johnson J made it clear that where a defendant seeks to be let in to defend proceedings, it would ordinarily be expected, particularly when they are represented by lawyers, that a draft notice of defence and draft application to set aside the judgment would be filed with the application for stay.
There is no suggestion that the applicant seeks to refinance the loan. Indeed, the deed of forbearance appeared to be based around the proposition that he would do just that. There seems to be no evidence that any attempt was made or steps taken to refinance or, if there were such steps, there was no evidence or suggestion that this was a realistic possibility.
This is a case which falls in the third category of stay applications referred to by Johnson J in GE Personal Finance v Smith. The defendant seeks time to sell the property himself. As Johnson J pointed out at paragraph 20:
"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."
His Honour went on however to note that an applicant for a stay may find it difficult to convince the Court to grant a stay if the arrangements for the sale were left until the very last minute, once the writ of possession was about to be executed.
Johnson J also referred to circumstances where a stay might be granted on hardship grounds. That is not really this case, although the fact that the applicant has been; living in the home for 50 years has been referred to on a number of occasions, but more, as I apprehend it, as a matter going to the practicality and the advantages of the applicant organising the sale of the home himself, rather than the plaintiff taking possession of the real estate tomorrow and then proceeding to sell it over time.
I would indicate that whilst I have a great deal of sympathy for the applicant's position, it does not strike me as a case where a stay would be granted on compassionate grounds alone.
As Johnson J pointed out at [27] of GE Finance v Smith, a relevant factor in the exercise of discretion is the level of indebtedness set against the value of the property. Where the value of the property far exceeds the level of indebtedness, the exposure of the plaintiff is less and the stay will more readily be granted.
In the present case the level of indebtedness as of today's date is said to be $1,053,301.43. That amount is increasing quickly as a result of the generous interest rate to which the plaintiff is entitled.
As to the value of the property, there are various figures. A valuation of 1.1 million dollars is annexed to the applicant's affidavit. The valuation appears to be dated 30 March 2015.
That amount accords with the estimates provided by the solicitor for the plaintiff. In fact the solicitor for the plaintiff estimates the value of the property to be 1.1 to 1.2 million dollars.
Further, a letter from a real estate agent practising in the area of the relevant home, that is Carlingford, which is annexed to the affidavit of the plaintiff's solicitor, indicates that the market is moving in an upward direction and she refers to sales of what I take to be roughly similar properties ranging from around 1.2 million, 1.3 million and even 1.4 million dollars. She notes the proximity of the home to transport, schools and shopping centres and the demographic desirability of the area. It seems to be an attractive property located in a rising market.
Making an estimate of the value of the property is difficult, and given the generosity of the interest rate to which the plaintiff is entitled, it has to be said that the plaintiff is somewhat exposed, but it does appear to me that at this stage, if the applicant moves quickly with the sale, the property will discharge his debt to the plaintiff.
In this regard the applicant has already taken some steps, albeit belated steps, to arrange the sale of the property and I have before me evidence in support of that proposition.
The property is to be sold and an auction has been arranged on 12 September 2015.
The robust submissions made by Ms Tovey on behalf of the plaintiff point out that once the interest accumulates between now and September, and taking into account auction costs, advertising and other incidental costs, along with agent's fees, it is unlikely that the applicant will gain any benefit from proceeding with the sale himself, rather than acceding to the plaintiff taking possession of the property tomorrow.
The final matter to which I should make reference concerns a technical but potentially important glitch in the documentation. The applicant's name is Gilmour spelt G-I-L-M-O-U-R. He is by that name and that spelling, the registered proprietor of the property. However, as a result of human error, the statement of claim commencing with the proceedings, were brought in the name of Gilmore G-I-L-M-O-R-E. The judgment or order of 19 June 2015 is also in the name of Gilmore G-I-L-M-O-R-E.
At no earlier stage of this unfortunate chronology has the applicant, or as he was, the second defendant, sought to make anything of this erroneous spelling of his name. The precise legal implications of the matter was not subject to any particularly cogent or well informed submissions. I mean no real criticism of counsel in saying that. It is simply that time is short and the matter may be somewhat novel, although I very much doubt it is unique. However, it is a matter that may potentially have some capacity to delay any action on behalf the plaintiff for the sale of the property. It is not a matter of great moment in my consideration of the application but I do note it and take it into account.
The matter is finally balanced. In the end I am satisfied that the interests of justice are such that I should exercise my discretion to grant a stay. I am satisfied that the kinds of conditions proposed to be attached to the stay are such as to protect the plaintiff's position in all of the circumstances.
Accordingly I make the following orders:
1. The execution of the writ of possession in respect of the property at 8 Illarangi Street, Carlingford, ("the property), is stayed on the following conditions:-
1. the second defendant, or to be clear Donald Alexander Gilmour G-I-L-M-O-U-R is to list the property which is comprised in certificate of title 34/29030 for sale by auction with the auction to take place on or before 12 September 2015;
2. that the second defendant, that is Donald Alexander Gilmour G-I-L-M-O-U-R is to instruct his solicitor to consult with the plaintiff's solicitor as to the reserve price for the sale of the property. In the absence of agreement with the plaintiff as to a reserve price, to set a reserve price of 1.1 million dollars.
3. The costs of and incidental to the notice of motion are to be paid by the second defendant to be clear Donald Alexander Gilmour G-I-L-M-O-U-R.
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Decision last updated: 04 August 2015