National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority

REASONS FOR DECISION

1. By a notice a motion filed 8 March 2018, Kevin Michael O'Brien sought to be added as a defendant in proceedings brought by the National Australia Bank Ltd ("NAB") for debt and possession against Josephine Joan Charlton in her own capacity and as trustee for the Phoenix Trust (case no. 2015/27843) ("the motion").
2. The debt and possession proceedings brought by NAB were commenced by a statement of claim on 16 January 2015 and were later amended on 4 May 2016. NAB claimed a debt owed by Ms Charlton which was made up of an overdraft, a first business options loan, and a second business options loan.
3. A statement of cross-claim was filed by Ms Charlton and Mr O'Brien on 9 July 2015. Proceedings were also commenced by Ms Charlton and Mr O'Brien as a trustee of Phoenix Trust (a description he used to describe himself on the motion) on 21 April 2016 against the General Manager of the NSW Rural Assistance Authority and NAB. Those were judicial review proceedings.
4. The debt and possession, cross-claim and judicial review proceedings have a lengthy history which was described in a judgment of the Court in National Australia Bank Limited v Charlton; Charlton v The General Manger, NSW Rural Assistance Authority [2018] NSWSC 157 at [21]-[50]. It is sufficient for the purposes of dealing with the motion to observe that the motion was brought 6 days prior to the dates fixed for the trial of the debt and possession proceedings and the judicial review proceedings. The motion was heard on the latter half of the first day of the trial and the beginning of the second day of the trial after the Court had delivered judgment on another motion filed by Ms Charlton seeking a stay of the proceedings for which judgment has been delivered: National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 2) [2018] NSWSC 969.
5. Evidence was admitted for the purpose of the motion (Exhibits A-H - noting that rulings were made as to the portions of those documents received in evidence).
6. Having regard to the hearing of the motion in the midst of the time allocated to the trial the Court took the view that it would make orders in relation to the motion and deliver reasons at a later time. Thus, on 15 March 2018, the Court dismissed the motion and reserved the question of costs. This judgment constitutes the reasons for that decision.

THE MOTION

1. The orders sought in the motion also set out the basis for the application. It is therefore convenient to extract the motion for the orders sought in full as follows: 1. Applicant seeks to be added as a Defendant in matter 2015/27843 Titled - National Australia Bank Limited v Josephine Joan Charlton (also known as Josephine Joan O'Brien in her own capacity and as Trustee of Phoenix Trust), in accordance with UCPR 16.4(2) as the requirements of UCPR 6.8 were not met in relation to the applicant therefore according to UCPR 36.8 judgment for possession of land should not be given, due to the absence of a Defendant which resulted from the originating process - the Statement of Claim not being served on the applicant who was an occupier of the land in the matter 2015/27843 and in possession as Trustee of Phoenix Trust who holds the property as capital of the Phoenix Trust. 2. Appilcant seeks hearing dates 14, 15, 16 March 2018 be vacated due to the Applicants [sic] right to defend as Trustee of Phoenix Trust.

Rules 16.4(2) and 36.8

1. Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") rr 16.4(2) and 36.8 are not engaged because those rules only apply to applications for default judgment on a claim for possession of land. As will be evident from the foregoing description of the proceedings, the application by the NAB does not meet this criteria.

Rule 6.8

1. NAB correctly submitted that it complied with its obligations under r 6.8.
2. Rule 6.8 provides as follows: 6.8 Originating process for recovery of land to be served on occupier (1) If, when proceedings for possession of land are commenced, a person (the occupier) not joined as a defendant is in occupation of the whole or any part of the land, the plaintiff: (a) must state in the originating process that the plaintiff does not seek to disturb the occupier's occupation of the land, or (b) must serve the originating process on the occupier together with a notice to the effect that: (i) the occupier may apply to the court for an order that the occupier be added as a defendant, and (ii) if the occupier does not so apply within 10 days after service, the occupier may be evicted under a judgment entered in the occupier's absence. (2) For the purposes of subrule (1), documents may be served on the occupier personally or by leaving the documents on the land concerned addressed to the occupier by name or addressed simply "to the occupier". (3) If originating process is amended by the addition of a claim for possession of land, the time at which proceedings for possession of that land are commenced is taken, for the purposes of subrule (1), to be the time at which the amendment is made.
3. There was a factual dispute in the proceedings as to whether Mr O'Brien was in possession of whole or part of the land at the time that proceedings for possession of the land were commenced by NAB. Mr O'Brien filed two affidavits in the proceedings sworn on 5 and 13 March 2018 respectively. Those affidavits do not squarely deal with the question of his occupancy. However, in his submissions, he forcefully contended that he was an occupant of the land at the requisite time.
4. On the other hand the evidence relied upon by the NAB by an affidavit of service from Mr Tim Zinga may give rise to an inference that Mr O'Brien was not an occupant of the land at the time that a notice to occupier and the statement of claim were served upon two occupants of the land over which possession was sought.
5. However, it is unnecessary to resolve that factual controversy because the affidavit of Mr Zinga makes clear that NAB had effected service of the originating process and a notice in accordance with the rule (see in particular UCPR r 6.8(2)) by leaving the relevant documents "on the land" addressed to the occupier (in the case in question, the documents were served on Justin and Kate O'Brien).
6. In any event, UCPR r 6.8 is a procedural rule requiring the plaintiff to serve the originating process on the occupier of land, together with a notice to the effect that the occupier may apply to the court for an order that the occupier be added as a defendant, and, if the occupier does not so apply within 10 days after service, the occupier may be evicted under a judgment entered in the occupier's absence: sub-r (1)(b)(ii). Noncompliance with the rule does not entitle an occupier to be joined as a party and, further, in this case, Mr O'Brien, if he be an occupier, did not make the application within 10 days after service.
7. If the Court were to consider the exercise of a discretion to join Mr O'Brien as a party, there are substantial reasons to refuse an exercise of discretion in his favour. The reasons for that conclusion may be briefly stated as follows: 1. The application was made far too late - not only was the application made on the eve of the hearing of the respective applications for debt and possession and judicial review, but Mr O'Brien had been on notice of NAB's claim for debt and possession since at least 3 August 2015 (when he issued his cross-claim against NAB). No application was made to be joined as a defendant to NAB's claim from the date of that cross-claim, notwithstanding the subsequent commencement of judicial review proceedings. 2. As I will discuss below, the effect of an order on Mr O'Brien as a non-party in the present context may be characterised as only indirect or consequential. This is a significant consideration in the determination of whether or not Mr O'Brien ought to be joined: News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 525 (per Lockhart, von Doussa and Sackville JJ).

Rule 6.24

1. Rule 6.24 is in the following terms: 6.24 Court may join party if joinder proper or necessary (1) If the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party. (2) Without limiting subrule (1), in proceedings for the possession of land, the court may order that a person (not being a party to the proceedings) who is in possession of the whole or any part of the land (whether in person or by a tenant) be added as a defendant.
2. Mr O'Brien did not invoke r 6.24 in the motion. However, I propose to consider whether he may be joined under this provision having regard to his unrepresented status, the nature of the submissions made in support of the motion by him, and the provisions s 63 of the Supreme Court Act 1970 (NSW).
3. NAB contended that Mr O'Brien was not entitled to be joined under r 6.24 on the basis that he was not a necessary and proper party. It was contended that was so because NAB's claim did not directly affect his rights and liabilities: John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 ("John Alexander's Clubs") at [131]. I consider that submission is correct.
4. Mr O'Brien's rights and liabilities are indirect or inconsequential for the following reasons: 1. Assuming that Mr O'Brien was an occupier of the property, he has not articulated the basis upon which such a right may arise. No reliance was placed upon a lease or a license or some other contractual right. There was no claim as to an equitable interest. There was no evidence which would sustain, on some broader basis, rights arising from occupation of that character. 2. There appeared to be common ground that Mr O'Brien was a trustee of the Phoenix Trust at the time that the various loans were taken out and secured by the mortgage. Nonetheless, the debt and possession proceedings do not directly affect Mr O'Brien's rights and liabilities as discussed below. 3. In terms of the debt proceedings, Ms Charlton is a party to the relevant loan agreements and is liable to be sued on them. There is an issue as to whether her resignation as a trustee affects her liability under the loan agreements. It may be assumed for the purposes of this judgment that Ms Charlton and Mr O'Brien's contentions, in that respect, were correct. However, that does not impact upon the conclusion for relevant purposes that Ms Charlton, and not Mr O'Brien, is the party to those agreements. 4. As to the possession proceedings, Mr O'Brien does not have a present legal interest in the property. Ms Charlton is the registered proprietor of the property. The conclusiveness of the Register confers on the registered proprietor of an interest in Torrens Title land (there being no dispute that the property is such land) and "indefeasible title" to that interest. Thus, the title cannot be set aside on the ground of a defect existing in the title before the interest was registered: see ss 42(1), 43 and 96 of the Real Property Act 1900 (NSW); Bahr v Nicolay (No 2) (1998) 164 CLR 604 at 613. Even if it is assumed that Mr O'Brien is the sole trustee of the trust following Ms Charlton's resignation, the property has not been conveyed to him and he does not appear as the registered proprietor of the property. 5. Further, on the evidence admitted before the Court for the motion, Mr O'Brien does not have a beneficial interest in the property because he is not a beneficiary under the trust. 6. NAB submitted that, at its highest, Mr O'Brien would only seem to have a contingent claim that, as the sole remaining trustee (if the same be assumed), he is entitled to a vesting order from this Court in respect of the legal interests in the property: ss 9(3), 71(1) and 78(3) of the Trustee Act 1925 (NSW). Mr O'Brien has not made any such claim despite, on his case, becoming the sole trustee in 2011. I accept the submission for NAB that, even if such vesting order were made, it would necessarily be made subject to NAB's mortgage, so he would not stand in any different position to Ms Charlton (see Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407 at 418 (per Mason CJ, Dawson and McHugh JJ). 7. It may be accepted, for the purposes of determining the motion, that, at the relevant time, Mr O'Brien was the caveator with respect to the property. However, that position gave him no actual rights. A holding of the caveat does not enlarge or add to existing proprietary rights of the caveator upon which the caveat is founded, but is a means of protecting those rights if he has any: Butler v Fairclough (1917) 23 CLR 78 at 84. The primary purpose is to protect the caveator's interest from being defeated by a registered dealing without the caveator first having a chance to approach this Court for an order protecting the interest: Kerabee Park Pty Ltd v Daley; Kerabee Park Pty Ltd v Karinya Investments Pty Ltd [1978] 2 NSWLR 222 at 228. If a possession order was made in consequence of NAB's application, it would open to NAB to issue a lapsing notice requiring Mr O'Brien to come before this Court and demonstrate his interest in the property.
5. During the course of argument on the motion, counsel for NAB properly brought the Court's attention to the judgment of the High Court referred to above: John Alexander's Clubs at [131]. I extract below [131]-[132] ([131] being referred to earlier in these reasons): [131] Walker Corporation submitted that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined. That submission is correct. The Court of Appeal's orders directly affected Walker Corporation. The majority of the Court of Appeal (Macfarlan JA, Giles JA concurring) erred when it held to the contrary. [132] In News Ltd v Australian Rugby Football League Ltd the Full Federal Court (Lockhart, von Doussa and Sackville JJ) said: Where the orders sought establish or recognise a proprietary or security interest in land, chattels or a monetary fund, all persons who have or claim an interest in the subject matter are necessary parties. This is because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest. [Footnotes omitted.]
6. A question arises from John Alexander's Clubs as to whether, in a case of orders being sought against a non-party which directly affect the rights or liabilities of the non-party, that party must be joined to proceedings. However, it is unnecessary to address that matter in the present case because, as I have discussed, such rights or liabilities as Mr O'Brien presently has as a non-party to the debt and possession proceedings are not directly affected by the application by NAB in those proceedings.

CONCLUSION

1. The notice of motion filed 8 March 2018 should be dismissed. In the ordinary course, an order for costs would be made in favour of NAB. However, I have taken the course of reserving costs and hearing any argument on the question from NAB and Mr O'Brien in due course.

ORDERS

1. The notice a motion filed 8 March 2018 by Mr O'Brien is dismissed and costs are reserved. 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: 27 June 2018