Nationwide Capital v Boutros Constructions

Judgment (ex tempore - revised 9 july 2013) 1HIS HONOUR: The plaintiff advanced the sum of $965,000 to the first defendant. The second and third defendants guaranteed the obligations of the first defendant to the plaintiff. The third defendant agreed to give, in support of her guarantee, a mortgage over any real estate she might own. She is the registered proprietor of a property at Croydon Park. 2On 30 November 2012, after a contested hearing, Windeyer AJ gave judgment in favour of the plaintiff: [2012] NSWSC 1472. His Honour directed entry of judgment for the plaintiff against the first, second and third defendants in a sum exceeding $2.4 million. He declared that the third defendant had charged the Croydon Park property in favour of the plaintiff to secure payment of that sum, and that the plaintiff was entitled to enforce its charge. He ordered that the property be sold subject to the supervision of the Court. 3His Honour made further orders, as to the process of sale. Those orders contemplated, among other things, that after payment out of the first mortgagee (the fourth defendant, Westpac Banking Corporation), and payment out of the amount claimed by the plaintiff, any balance should be held in court to await determination as to entitlement between the third defendant and other interested parties. 4His Honour also made orders intended to ensure that a minimum price would be set which would allow for clearance of the Westpac mortgage. He reserved liberty to relist the matter in the event that the plaintiff and Westpac could not agree on that. Finally, (for present purposes) his Honour stood over certain costs questions. 5What his Honour did not do (and what the plaintiff had not sought) was make an order for possession against the third defendant in favour of the plaintiff. His Honour specifically referred to that at [56] of his reasons: [56] So far as the sale of the Beaufort Street property is concerned, the plaintiff is entitled to an order in the nature of that sought. No claim was made in the pleadings for an order for possession. While this might follow from the order sought for judicial sale, it could not be made if the first mortgagee has taken possession. There is no evidence of this and as no order was sought, I will not take this further. 6The plaintiff moves today for an order that the third defendant give it vacant possession of the Croydon Park property, within 21 days. It seeks, further, the issue of a writ of possession, on the basis that the writ not be enforced prior to the expiry of the 21 day period. 7The plaintiff's evidence satisfies me that it has demanded that the third defendant give up possession of the land, that the third defendant has refused to do so, and that the plaintiff has been making attempts, for some months, to sell the property by public auction. It is clear that the plaintiff and Westpac have reached agreement as to the minimum price referred to in the orders of Windeyer AJ, although obviously enough, that minimum price will vary (no doubt, increase) with the effluxion of time. 8The third defendant's opposition to the orders sought is based upon the following: (1) the orders were not sought in the originating process nor at the hearing (this is clear); (2) the orders made were final orders; (3) the relief now sought is substantive relief; and (4) in the events that have happened, it is not open to the Court to reconsider the matter, and grant the (so-called) final relief sought. 9The plaintiff submits that, as Windeyer AJ had noted as a possibility at [56] of his Honour's reasons, the order sought is no more than an incident of working out the process of judicial sale. It submits further that the orders were not final in the sense that they were intended of themselves to dispose of each and every issue in the proceedings. As I have shown already, there were a number of respects in which further decision by the Court would be required if the relevant parties could not agree. Nonetheless it seems to me, so far as the orders went, they were final. 10Each party referred me to authorities. For the third defendant, Mr Allen of counsel relied on the decision of McLelland J in Phillips v Walsh (1990) 20 NSWLR 206. In that case, his Honour was concerned with enforcement of an application for compromise. In the course of dealing with that, his Honour looked at the principle of finality: His Honour said at 209-210 that in general, where proceedings have been disposed of by a final order which has been entered, they are at an end and cannot be revived. If I may say so with respect, that is clearly correct, as a matter of general principle. 11Of course, as his Honour noted at 209-210, there were exceptions to that general principle. Thus, as his Honour said at 209-210, "application may be made for the purpose of dealing with a matter involved in, or arising in the course of, working out [the Court's] order; for example, by making more specific provision for its implementation...." 12However, as his Honour noted at 210, that "exception or qualification does not... extend to an application made for the purpose of giving substantive relief not sought in the statement of claim or which is substantially different to that given by the final order." 13Mr Allen relied, further, on the decision of Campbell JA (with whom Tobias JA agreed and with whom, I think, Young CJ in Eq agreed in part) in Australian Hardboards Limited v Hudson Investment Group Limited (2007) 70 NSWLR 201. Campbell JA considered, among other things, what could be done under a reservation of liberty to apply. His Honour said at [56] that this depended on what was necessary to work out the orders that had been made. As his Honour said, "[i]f an order is one the working out of which of its nature involves complex questions or questions, that were not specifically raised at the time that the order was made, those questions can be raised and decided in the original suit pursuant to liberty to apply." 14In this case, there was no express reservation of liberty to apply in relation to the order for judicial sale. Nonetheless in my view, when the order that was made was that the property be sold "subject to the supervision of the Court", this is equivalent to an implied reservation of liberty to apply. The Court could hardly supervise the sale unless the parties were able to come to the Court to ask it to supervise that supervisory jurisdiction. 15Finally, Mr Allen relied on the decision of Campbell J in King Investments Solutions Pty Limited v Hussain [2005] NSWSC 1076. That was a case dealing with an mortgage. His Honour noted at [127] that an equitable mortgagee had no entitlement to an order for possession. However, as his Honour said, if the mortgage entitled the equitable mortgagee to equitable possession on default, then on default, the equitable mortgagee would be entitled to relief in the nature of specific performance of that promise. 16That is different to an order for ejectment. As Campbell J pointed out at [129] in the case of an equitable mortgage, the order that is made is directed to the mortgagors. They are ordered "in personam" to give up possession to the mortgagee. The order could not affect others having an interest in the land: for example, a registered first mortgagee. His Honour noted at [129] that an order for possession of land is justified only when an order for ejectment only could have been made at Common Law. 17Nonetheless, in my view, what Campbell J said a little later in King Investment Solutions has relevance to the present point. His Honour noted at [133] that the ability of the equitable mortgagee to get possession of the land impacted on the Court's discretion to make an order for sale of the land. His Honour referred to the judgment of Lord Cairns LC in Heath v Crealock (1874) 10 Ch App 22 at 32. His Lordship there said that: ...A Court of Equity is not in the habit of ordering a sale unless it can go on and complete the sale in every necessary way, giving possession and insuring that the title-deeds shall be handed over. 18That aspect of the reasons of Campbell J in King Investment Solutions was referred to by Hallen AsJ (as his Honour then was) in Mango Media Pty Limited v Smith [2012] NSWSC 686, a decision relied on by Mr Young of Senior Counsel, for the plaintiff. 19Hallen AsJ referred also to what Johnson J had said in Harden Shire Council v Richardson [2012] NSWSC 622 at [167]. Johnson J there noted, in my respectful view correctly, that, "vacant possession is a normal incident of sale, the availability of which is generally necessary for completion of the sale." 20Johnson J relied on King Investment Solutions at [133]. Further, Johnson J said, the vendor would normally give vacant possession concurrent with transfer of title; and where the sale was one by a mortgagee, the mortgagee must recover possession of the property preliminary to sale, in order to sell with vacant possession. 21On the analysis of Campbell J in King Investment Solutions at [127], the most the plaintiff could have sought in this case was an order for specific performance of any covenant for vacant possession on default. On saying that, I do not find that there was such a covenant, because the mortgage is not before me. But what the plaintiff did seek, and what it got, was an order for judicial sale: sale under the supervision of the Court. For the reasons given by Johnson J in Richardson, it seems to me that it is a normal incident of such a sale that, at least as between the equitable mortgagor and the equitable mortgagee, the equitable mortgagee selling with the aid of the Court should give the purchaser possession free of the rights of the equitable mortgagor; and thus, beforehand, is entitled to recover possession from the equitable mortgagor. 22In my view, when Windeyer AJ noted as a possibility that an order for possession (as between plaintiff and third defendant) "might follow from the order sought for judicial sale", his Honour's observation was correct. 23Thus, in circumstances where an order for sale has been made, as between the plaintiff equitable mortgagee and the third defendant equitable mortgagor, it seems to me that the plaintiff is entitled to sell free of the equitable mortgagor's possession of the subject property. 24In circumstances where the equitable mortgagor will not give possession of the property, the supervision of the Court may be invoked to ensure that this happens. If the property cannot be sold free of the equitable mortgagor's possession of the property, then the sale that the Court has ordered will be frustrated. 25In my view, therefore, the relief sought by the notice of motion is not foreclosed by the principles referred to by McLelland J in Phillips, and on the contrary is open, on the basis that it is part of the working out of the order already made, pursuant to the equivalent of liberty to apply. 26It remains the case, of course, that the order is one made against the third defendant personally. Thus, it remains the case that if someone else is lawfully (as between them and the plaintiff) in occupation of the property, the order will be ineffective. On the evidence, the only competing claimant for possession is Westpac, and Westpac's position appears to be that as long as the property is sold pursuant to the regime laid down by Windeyer AJ at a minimum price to which it has agreed, then it will not seek to exercise its right of possession. 27In those circumstances, it seems to me to be appropriate to make the orders sought, that the third defendant give vacant possession, and the order for issue of a writ of possession. 28However, both because I would hope that the third defendant would obey the Court's order, and because it may be that there are others who have a claim to possession whose interests might be affected by execution of the writ, I think that the better course is to give leave for the writ to be issued but to stay execution until the further order of the Court. 29Accordingly, not having heard any submission as to the appropriate time within which vacant possession is to be given (and noting this motion is being heard more than a month after it was filed), I make the following orders: (1) Order in accordance with paragraph 1 of the notice of motion filed on 5 June 2013. (2) Order in accordance with paragraph 2. (3) Order that execution of the writ be stayed until the further order of the Court. (4) Reserve liberty to apply. 30I will hear the parties on costs. [Counsel addressed.] 31As to costs, Mr Allen submits we are here today because the plaintiff did not ask for orders in the originating process or on hearing. That is true in a sense. But we are also here today because possession, having been demanded (on my findings, as a matter of entitlement) the third defendant did not yield it. The event, in respect of the notice of motion, has been that the plaintiff has had substantive success. I see no reason why costs should not follow that event. 32Accordingly, I order the third defendant to pay the plaintiff's costs of the motion.