John Sands (Australia) Limited v Joske [2004] VSC 251

5. The Master dismissed the plaintiff's application for judgment and ordered that the proceeding against the second defendant be dismissed on 22 April 2004. The plaintiff has appealed from the Master's decision to the Court. The appeal proceeded by a re-hearing de novo of the application under Order 77.05(7) of the Rules.

8. I note that, although the notice of appeal referred to leave being sought for lodging the appeal out of time, no such leave was required when time was calculated in accordance with Order 3.01 of the Rules.

12. The plaintiff relied upon affidavits sworn by:

(a) Allan Maxwell Tanner, on 28 January 2004 and 18 February 2004, deposing to the service of the writ and statement of claim upon the first and second defendants on 13 and 11 January 2004, respectively;

(b) Emily Letitia Merrett:

(i) on 13 February 2004, as to a search of the register which revealed no notice of appearance filed on behalf of either defendant; and

(ii) on 17 May 2004, as to the amount of counsel's fees;

(c) Dean Eastwood Jones, on 12 May 2004, as to the amount of the plaintiff's legal costs.

The application

18. The judgment sought by the plaintiff must be warranted by the facts alleged and the claim for relief made in the statement of claim: General Motors Acceptance Corp of Australia v Davis[1].

22. The plaintiff pleaded that the first defendant had entered into an agreement with it described as an "Agreement to Guarantee and Indemnify" dated on or about 17 August 1999 ("the Guarantee"). It was alleged that by the Guarantee the first defendant guaranteed payment to the plaintiff "of all moneys and performance of all obligations including any past, present and future indebtedness or obligations by Taxigon Pty Ltd". The first defendant was said to have agreed to indemnify the plaintiff "against all loss or damage arising from any past, present or future dealing with Taxigon or [the first defendant]".

25. The statement of claim went on to plead that by the Guarantee the first defendant:

"Charged in the Plaintiff's favour all of [the first defendant's] estate and interest in any land and in any other assets whether tangible or intangible in which she had any legal or beneficial interest or in which she later acquired any such interest, payment of all monies owed by Taxigon or [the first defendant] and agreed upon request to execute a registrable instrument transferring to the Plaintiff [the first defendant's] estate and interest by way of security ['the Charge']."

29. The statement of claim alleged that the defendants were the registered proprietors of certain land in North Caulfield, Victoria. It did not allege whether they were registered as joint proprietors or tenants in common. However, it did allege that the plaintiff had claimed an interest in the land pursuant to the Charge by a caveat dated 18 February 2003 lodged at the Office of the Registrar of Titles.

32. The statement of claim alleged that the plaintiff had entered judgment against the first defendant in a County Court proceeding claiming the sum of $68,837.29 pursuant to the Guarantee. Judgment had been entered against the first defendant for the sum of $70,675.25 said to be "inclusive of costs and interest" on 18 March 2003. The plaintiff alleged that the first defendant had paid the sum of $45,000 in reduction of the judgment debt on 23 May 2003.

35. It was then alleged that as at "15 December" the sum of $27,477.04 was "due and owing under the judgment debt". No year was referred to in the pleading however the particulars subjoined to paragraph 9 of the statement of claim which contained the allegation showed the sum of $27,477.04 as an amount calculated to 15 December 2003. I shall assume for present purposes that it was alleged that that sum was due and owing under the judgment debt, as at that date.

38. The statement of claim then alleged that the sum of $27,477.04 was secured by the Charge.

41. Without pleading the making of the request referred to in the pleading in relation to the creation of the Charge under the Guarantee, the statement of claim went on to allege that the plaintiff was "entitled to a registrable instrument of mortgage" executed by the first defendant in respect of her estate and interest in the land.

45. Counsel for the plaintiff provided minutes of proposed orders. In so far as they departed from the orders sought in the prayer for relief in the statement of claim served on the defendants and sought to substantially increase the claim, I would not make the orders because the defendants should have been entitled to rely upon the prayer for relief in the document served upon them as setting out the plaintiff's claims against them. See: Jamaica Railway v Colonial Bank[2]; Williams_, Civil Procedure in Victoria_ [1 21.01.60].

48. I will however proceed to consider whether the plaintiff is entitled to the relief sought in the statement of claim.

52. A number of orders were sought in the prayer for relief in the statement of claim.

Declaration of plaintiff's right to registration as legal mortgagee

56. First, the plaintiff claimed a declaration that it was entitled to be registered as a legal mortgagee of the land "under and by virtue of" the Guarantee.

59. In my view, that claim is not supported by the facts alleged in the statement of claim. First of all, there is no pleaded agreement to execute a mortgage. All that is pleaded is an obligation to execute a transfer of the first defendant's interest "by way of security". Further, in any event, there is no pleading that any requisite request was made. In addition, there is no pleading of facts that would support any entitlement in the plaintiff to any interest in the land, other than in relation to the first defendant's interest.

Specific performance of the alleged agreement to execute a transfer

63. The statement of claim went on to seek specific performance of the alleged agreement by the first defendant to execute a registrable transfer of her interest in the land to the plaintiff.

66. Although it would appear from the proposed minutes of order provided to the Court and the submissions of counsel for the plaintiff that this claim was not pressed, I note my view that it would have failed at the outset, in the absence of any pleading of a request triggering any alleged entitlement.

70. The prayer for relief went on to seek a number of orders explained by counsel for the plaintiff as usual orders in relation to a claim for foreclosure. She submitted that on the facts alleged in the statement of claim, the plaintiff would be entitled to the remedy of foreclosure as an equitable mortgagee or chargee.

73. In my view, the facts alleged in the statement of claim do not support the plaintiff's alleged right to such relief. As I have indicated, they do not establish the existence of a specifically enforceable contract for the creation of a legal mortgage which might confer the status of equitable mortgagee upon the plaintiff with regard to the first defendant's interest, much less that of the second defendant.

76. Further, the remedy of foreclosure is not available to an equitable chargee who is not a mortgagee: see Sykes and Walker The Law of Securities (5th Ed) 195 and 199; Tyler, Young and Croft, Fisher and Lightwood's Law of Mortgage (Australian Edition) [21.10]; United Travel Agencies Pty Ltd v Cain[3].

The alleged right to an account as to the amount due under the Guarantee and the costs of the proceeding

80. Even if the plaintiff were to be taken to have sought an account of the amount due under the Guarantee and an order for its payment independently of its claim for foreclosure, the claims would not succeed.

83. The judgment recovered in the County Court in an action on the Guarantee would have merged the debt under the Guarantee. The judgment is the source of the first defendant's obligation to pay the amount of $27,477.04 alleged to have been outstanding as at 15 December 2003 and any further interest calculated in accordance with the Penalty Interest Rates Act 1983.

86. However the plaintiff seems to be seeking an account of the amount outstanding under the judgment debt, rather than under the Guarantee, because it asks that "for the purposes of such account the sum of $27,477.04 should be treated as due on 15 December 2003".

89. The plaintiff also claims an account in relation to the costs of this proceeding. The facts alleged would not warrant such an order. Any costs awarded on the application should rather be assessed on taxation, in default of agreement, or fixed by the Court.

93. Alternatively, the plaintiff sought an order under s 91 of the Property Law Act 1958 for judicial sale of the land. The Court's power to make such an order is conditioned upon a request from a mortgagee "or any person interested either in the mortgage money or in the right of redemption" in any action, relevantly, for foreclosure or sale: s 91(2). The definition of "mortgage" in s 18(1) of the Act would appear wide enough to encompass an equitable charge and thus an equitable chargee is arguably entitled to an order under s 91(1) in an appropriate proceeding: see Fisher and Lightwood's Law of Mortgage (Australian edition) at [21.14].

96. A chargee on default has the right to apply to the court for an order for judicial sale: United Travel Agencies Pty Ltd v Cain[4].

99. Nevertheless, on the basis of the facts alleged in the statement of claim, the Charge could be regarded as encumbering only the first defendant's interest in the land. A judgment creditor or a secured creditor of even a joint tenant can execute only against that joint tenant's aliquot share: Guthrie v ANZ Banking Group Ltd[5]; Wright v Gibbons[6]. There is no pleaded factual basis upon which the Charge would apply to the interest of the second defendant in the land.

102. Even if the plaintiff were otherwise entitled to an exercise of the Court's discretion under s 91(2) as to the ordering of a sale, it would only be in respect of the first defendant's interest in the land. No such relief was sought.

105. I note that I was referred to a number of authorities by counsel for the plaintiff. I have considered those authorities, but was not persuaded by them to reach any conclusions contrary to those expressed.

108. The appeal should be dismissed in relation to the Master's order dismissing the application.

The order for the dismissal of the proceeding against the second defendant

112. In the absence of any relevant application, I will allow the plaintiff's appeal in relation to the Master's order dismissing the claim against the second defendant.

[1] [1971] VicRp 90; [1971] VR 734

[2] [1905] Ch 677 at 691 per Romer LJ

[3] (1990) 20 NSWLR 566

[4] (1990) 20 NSWLR 566 at 568-572 per Young J

[5] (1991) 23 NSWLR 687 at 680 per Meagher JA

[6] [1949] HCA 3; (1948-9) 78 CLR 313 at 331 per Dixon J