J P Morgan Trust Australia Limited v Anthony Robert Bridge

Judgment 1HIS HONOUR: By its notice of motion filed on 14 May 2013, J P Morgan seeks leave to apply for the issue of a writ of restitution. The reason for the application is to be found in the following facts and circumstances. 2J P Morgan commenced these proceedings by statement of claim filed on 13 September 2012. Mr Bridge and his partner were named as the defendants. J P Morgan lent Mr Bridge and his partner the sum of $225,150 pursuant to an agreement made in or about February 2007 secured by a mortgage over their property at San Remo on the Central Coast. The interest rate provided by the agreement was 10.4 percent per annum. The loan was to be repaid as interest only for the first three years at the rate of $1,828.50 per month. It is not in dispute that they defaulted under the agreement by failing to make repayments when due. 3No defence was filed to the statement of claim. On 13 February 2013 J P Morgan obtained judgment by default for possession of the property and a money judgment for $335,363.69. A writ for possession issued out of this Court on 13 March 2013. On 30 April 2013 the sheriff executed the writ and J P Morgan took possession of the property. Mr Bridge has since re-entered the property and remains in possession. 4Mr Bridge opposes the issue of a writ of restitution. He raised a series of matters that he said I should consider in support of the position that he was adopting. 5First, Mr Bridge said that the loan was predatory and was vulnerable to being set aside. When the loan was negotiated and advanced, Mr Bridge was working as a carpenter and joiner. The loan application referred to that fact but included no details of his income or assets. Ms Harkin was described as performing home duties. She was not otherwise in paid employment outside the home. Mr Bridge contended that the loan was advanced by J P Morgan without any concern on its part about whether or not he had the capacity or the ability to meet repayments due under the agreement on a monthly basis. 6Mr Bridge said that at the time the loan was sought, he and his partner were paying approximately $300 per week in rent. They expected that the loan repayments would be approximately the same amount. It took J P Morgan a few months to put in place a direct debit system for the repayments that he was required to make. This was probably due to the fact that Mr Bridge did not supply a BSB number to J P Morgan. By the time that was sorted out, Mr Bridge realised that the monthly repayments were closer to $2,000, which he could not afford. 7Mr Bridge complained to the banking and financial services ombudsmen. No satisfactory solution was achieved. 8Mr Bridge also sought legal advice. The outcome of that advice is not apparent. 9Whatever the issue or issues may have been, Mr Bridge and his partner would appear, historically at least, to have maintained payments to the lender's satisfaction until some time in or about the middle of 2010. This appears from the fact that when the statement of claim was filed it included an allegation that J P Morgan was owed a little over $50,000 in accordance with a notice of default dated 19 July 2012. 10Mr Bridge said that he sought legal advice from a local solicitor but could not afford his fees. Attempts to obtain pro bono assistance have also so far proved unsuccessful. That included an approach to the Law Society of New South Wales. 11Mr Bridge acknowledged before me that whatever the outcome of his attack upon the validity of the loan or the mortgage, he remained indebted for and liable to repay at least the originally advanced principal sum. Mr Bridge said that he recognised and accepted that a sale of the property would be inevitable before that repayment could be made. It goes without saying that Mr Bridge was neither able nor did he offer to bring into Court any undisputed amount pending determination of the issues that he wished to agitate. 12It was contended by J P Morgan that Mr Bridge's case was unarguable both upon the facts of this case in particular and in light of authority dealing with writs of restitution. It is convenient to consider the second issue first. 13In Perpetual Limited v Kelso [2008] NSWSC 906 Johnson J was required to consider an application by mortgagors for a stay on a writ of possession or writ of restitution. His Honour said this at [15]: "[15] A further argument advanced by the Defendants is that they seek to be allowed in to defend the proceedings upon arguments identified in the affidavit, where it is said that the loan contract is, in various respects, unfair and unjust. In my view, the fact that the writ of possession has been executed and the Plaintiff has taken possession of the subject land means that, as a matter of law, it is too late for the Defendants to be seeking to be let back in to defend the proceedings." 14His Honour continued to review the facts of the case before him and to consider certain authorities dealing with writs of restitution. He concluded that there was in the case before him a clear foundation for the action taken by the plaintiff in that case to seek a writ of restitution. His Honour then continued at [23] - [26] in these relevant terms: "[23] I should observe that, if this was a case where the writ of possession had not already been executed, and the Defendants were seeking to set aside a default judgment, a number of hurdles would lie in their path... [24] On the material which has been advanced in support of the present application, in my view the Defendants would have grave difficulty on an application to set aside default judgment before a writ of possession had been executed. In circumstances where the writ has already been executed, their position is hopeless. [25] A power of sale under s 58 Real Property Act 1900 is to be exercised for the purpose of the plaintiff recovering moneys which are due and owing to it as a mortgagee (see s 58(3)). Even where a plaintiff takes possession of the property for the purpose of exercising its power of sale, a 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; GE Personal Finance Pty Ltd v Smith [2006] NSWSC 889 at [17]. [26] If the Defendants wish to challenge the propriety of any conduct of the Plaintiff in respect of the enforcement of its security, it remains open to them to do so in other proceedings: see Carr v Finance Corporation of Australia Ltd (1982) 150 CLR 139 at 152; Adelaide Bank Limited v BMG Poseidon Corp Pty Ltd [2008] NSWSC 68 at [25]." 15It is contended on behalf of J P Morgan that his Honour's statements support the proposition that the execution of a writ of possession forecloses as a matter of law in all cases upon the exercise of any rights that anyone in the position of Mr Bridge may otherwise, or earlier, have had to challenge or to seek to set aside the judgment upon which the writ was based or to take any other step thereafter, such as to oppose the issue of a writ of restitution, that is itself also based upon the same judgment. J P Morgan relies in particular upon his Honour's references to it being too late "as a matter of law" for a defendant in such circumstances to be let back in to defend proceedings and that it is accordingly and conclusively accurate to characterise the position of such a defendant as "hopeless". 16I was referred to the decision of the Federal Court of Australia in Maher v Commonwealth Bank of Australia (No 2) [2004] FCA 1398; (2004) 211 ALR 656 in which Finkelstein J dealt with the issue at [5] - [6] in the following relevant terms: "[5] If anyone, including a stranger, interfered with the execution of the writ, he committed a contempt of court: Styles Case [1609] Eng R 31; (1609) 2 Br & G 216; Lacon v De Groat (1893) 10 TLR 24. If, after execution, the plaintiff was immediately put out of possession by the defendant, particularly before the writ of possession had been returned, he might have another writ, an alias, on the basis that there had not been a true execution: Dogger v Roe (1688) Comb 150; Kingsdale v Mann (1703) 6 Mod Rep 27; Doe d. Thompson v Mirehouse (1883) 2 Dowl 200. Indeed the writ could be continually renewed until there was an effectual execution, that is, until the plaintiff obtained full and quiet possession: Molineux v Fulgam (1622) Palm 289; Devereux v Underhill [1685] Eng R 3652; (1667) 2 Keb 245. On the other hand, if the writ were executed an alias, could not be issued otherwise the plaintiff might "retain the right of suing out a new habere facias possessionem, as a remedy for any trespass which the same [defendant] might commit within twenty years next after the date of the judgment": Doe, on Demise of Patet v Roe [1807] Eng R 409; (1807) 1 Taunt 55. Contrast the position in Ireland, as to which see Stacpoble v Walsh (1880) 6 LR Ir 444. [6] There were some cases, limited to the situation where the defendant had retaken possession within a short period, where the court would, upon application, issue a writ of restitution: Doe d Pitcher v Roe (1841) 9 Dowl 971; Alliance Building Society v Austen [1951] 2 All ER 1068; The Queen v Elliott [1955] VR 126. However, where the plaintiff was forcibly taken out of possession by a stranger after a writ of possession had been fully executed, he could not obtain a writ of assistance but was required to bring a new action or bring proceedings for contempt: Fortune v Johnson (1651) Styles 318; Doe d Thompson v Mirehouse (1883) 2 Dowl 200..." 17I raised with the parties the question of whether or not the answer to the problem was usefully informed by a consideration of the doctrine of merger. Some reference to that was made in Wolfe v Permanent Custodians Ltd [2012] VSC 275, at [86] - [93]. It is instructive to record at least some of what was said in that case, as follows: "Effect of judgment - extinguishment of rights pursuant to mortgage [92] Any rights or possible causes of action under the Mortgage, [Memorandum of Common Provisions] or security guarantee were effectively 'extinguished' upon default judgment. Mr Wolfe and Ms Breasley have foregone the opportunity of putting forward a defence seeking to set aside judgment. It would have been at this stage that Mr Wolfe as a defendant should have sought to defend the matter or have made application to set aside the judgment. There can be no independent cause of action so long as the judgment stood. Any issues related to the notice provisions of the Mortgage, the Transfer of Land Act and the [Memorandum of Common Provisions], all needed to be raised at the time prior to default judgment as all rights and liabilities pursuant to the Mortgage were subsumed into the higher remedy-default judgment, warrant and the judgment debt. [93] The judgment now has the requisite character of 'finality' due to it being an order of the Court and thus stands as having an independent existence to that of the Mortgage and any rights contained therein. Thus, the original loan, guaranteeing the rights and liabilities under it has no relevance. Mr Wolfe and Permanent's liabilities and obligations are now to be found pursuant to the court orders and subsequent to this, the December Agreement." 18It will be apparent that these passages are not entirely on point, as they redirect consideration to the lost right to complain about matters arising out of the underlying transaction and the foregone right any longer to enforce any such right following upon default judgment. They are predicated upon the well known three stage process discussed conveniently by Simpson J in Balanced Securities v Oberlechner [2007] NSWSC 80 at [19] - [20] and elsewhere. The passages do not deal directly with the more fundamental and difficult question of whether or not the issue of the writ of possession as such, or the successful implementation of enforcement action in reliance upon it, manifests or signals a qualitative alteration to the rights of both parties so that the judgment is in effect immutable and beyond scrutiny, even if an explanation for not defending, an arguable defence on the merits and the interests of justice appear theoretically to be available. 19There is English authority at least for the proposition that, even though a retaking of possession following closely upon the successful execution of a writ of possession does, or may, amount to contempt, the preferred course is for the Court to issue a writ of restitution. In Alliance Building Society v Austen [1951] 2 All ER 1068, Roxburgh J at 1070 said, in the context of the applicable local rules and practice, "that the writ of restitution should be regarded as the normal procedure." The mortgagor was nonetheless in that case imprisoned for contempt, having promised the Court not to retake possession of the property in question, and having broken that promise notwithstanding. 20It seems to me that the answer is to be found residing in the associated concepts of certainty and finality of judgments and orders of the courts. There is always power in the Court in a suitable case to grant the stay of execution of a judgment, even at the point where the writ for enforcement of the judgment or order has issued and where steps have been put in train in anticipation of it finally being executed. Once the writ has been executed, however, and practical effect has been given to the order of the Court, the force of the writ has been spent and the rights of the parties correspondingly subsist only in their respective legal and physical positions as the party in possession of the property on the one hand and the party who has been legally ejected on the other, together with all of, but only, the usual rights and obligations that come with those positions. 21Mr Bridge is in that position now. He is a legal stranger to the land, even though he has committed a trespass and moved himself back. He is still the registered proprietor of the property and has retaken possession but he has no right to do so. The validity of the judgment that supported the issue of the writ of possession that saw him out of the property cannot now be contested. Mr Bridge's rights are to be found residing in his ability to expect J P Morgan to conduct the sale of the property in a proper manner and to account to him in accordance with its obligations as a mortgagee. In general terms, if Mr Bridge has any complaints concerning the enforcement of J P Morgan's security, it is and remains open to him to pursue them in other proceedings. 22That leaves the final matter of what is now obviously the hypothetical question of whether or not Mr Bridge had at any time some viable right to challenge the validity or enforceability of the loan agreement with J P Morgan or the security that he and his partner granted over the property that they purchased with the money lent to them. Mr Bridge and his partner are unrepresented before me. Mr Bridge clearly had no legal training, even though he did his best in the understandably difficult and stressful conditions for a layperson in a formal setting. I have already observed that his loan was at an interest rate of 10.4 percent per annum interest only for three years. He was suddenly and unexpectedly confronted with loan repayments that stretched his resources and ultimately overpowered them. 23What was or may have been the situation that prevailed at the time he and Ms Harkin entered into this transaction has not been fully explained or established. Describing something as a "low doc" loan, or impugning it as predatory lending only poses the question: it does not answer it. I am not privy to Mr Bridge's dealings with the offices of the ombudsmen to whom he reported his concerns. Nor am I aware of the scope or content of any legal advice that he received. No material before me has yet approached demonstration of some action or failure on the part of J P Morgan that would attract the attention, let alone the intervention, of this Court. Whether such material exists remains to be seen. 24Mr Bridge has not persuaded me at any level that he could have brought himself within the Oberlechner factors referred to earlier. 25In my opinion J P Morgan is entitled to the relief that it seeks. Accordingly, I make the following orders: