Nguyen v Sage Consultant Group Pty Ltd; Dang v Nguyens

Judgment

1. On 24 June 2021, I delivered the principal judgment in these two proceedings: Nguyen v Sage Consultant Group Pty Ltd; Dang v Nguyen [2021] NSWSC 753.
2. This is an interim procedural judgment to respond to the parties' submissions as to the orders that should be made to give effect to the reasons in the principal judgment, and also to deal with any further proceedings that may be necessary to achieve finality of the disputes between the parties.
3. I will use the same terms as in the principal judgment.
4. The essential problem with which the principal judgment grappled was that, because in NSW the issue by the Court of a writ for the levy of property to enable a successful plaintiff to enforce a judgment granted to that plaintiff does not give the plaintiff an estate or interest in any land of the defendant, the plaintiff, upon registration of the writ in the Register, does not have standing under s 74MA of the Real Property Act 1900 (NSW) to apply for an order requiring a caveator to withdraw a caveat lodged against the title to the land. It is necessary to look to the principal judgment to understand in precise terms how the problem arose in these proceedings. In summary, the Sheriff was unable to execute the first writ issued to the Nguyens before it expired, and the Caveat was lodged by Ms Dang before the renewed writ could be registered. The Caveat prohibited the registration of the renewed writ and the registration after the sale of the Smithfield property of any transfer that was not subject to the equitable estate in the land claimed by Ms Dang.
5. As, for reasons explained in some detail in the principal judgment, the procedures which the Sheriff is required to apply in the execution of writs may prevent the sale of the subject land where a caveat has been lodged, the judgment creditor may be denied the benefit of the issue of a writ.
6. The amount of the judgment made by the Court in favour of the Nguyens in the 2017 proceedings against the fourth defendant, Mr Hoang, was $239,906. The Nguyens will now also be entitled to an amount of interest under s 101 of the Civil Procedure Act 2005 (NSW).
7. The Nguyens succeeded in the 2019 proceedings in establishing that they were entitled to an order that Ms Dang withdraw the Caveat. That was not on the basis that the Court has power under the Real Property Act to make such an order. The Court found that it did not have that power. However, following an earlier order made by a Judge of the Court that Ms Dang file a summons to establish the validity of her claim to a proprietary interest in the land, Ms Dang did so, but ultimately failed. The Court held that Ms Dang did not have the proprietary interest that she claimed. The Court then further held that, if it is established in contested proceedings on the merits that a caveator is not entitled to the interest in the land claimed in the caveat, the jurisdiction of the Court extends to the making of an order for the withdrawal of the caveat. That is an order that could not have been made by any application by the Nguyens under the Real Property Act.
8. However, the Court also held that Ms Dang was apparently entitled to be subrogated to the mortgage over the Smithfield property, because she had made repayments towards the mortgage on behalf of Mr Hoang; such right of subrogation only becoming effective once the whole of the mortgage debt had been repaid.
9. The difficulty that the Nguyens now face is that, as a result of information provided to the Court by Ms Dang after the delivery of the principal judgment, it is now known that the balance owed to the registered mortgagee as at 13 July 2021 was $879,752.03. Ms Dang has also provided a valuation of the Smithfield property by a certified practising valuer that assessed the market value of that property at $1,085,000.
10. If, in fact, the Smithfield property has a value of $1,085,000 and the mortgagee is owed $879,752.03, then the remaining 'equity' in the Smithfield property is approximately $205,247.97. That figure will be subject to the effect of any increase in the amount secured by the mortgagee up to the sale of the Smithfield property and the costs of sale, including the costs of the Sheriff.
11. As mentioned above, the Court found that Ms Dang appears to be entitled to be subrogated to the mortgage in an amount that may be $90,700. Ms Dang asserted in submissions provided to the Court after the publication of the principal judgment that she has made additional mortgage payments in the total amount of $26,099.51. Assuming that Ms Dang can establish her right to subrogation against Mr Hoang, the total would be $116,799.51.
12. Although, ordinarily, after the Sheriff has conducted a sale of land the subject of a writ for the levy of property, the Sheriff would pay as much as possible of the judgment debt to the judgment creditor, that outcome is complicated in the present case by the possibility that Ms Dang has a right of subrogation to the mortgage.
13. If that right exists, it will arise at the instant when the mortgagee is repaid. As the mortgage will be kept alive by the right of subrogation for the benefit of Ms Dang, she will take priority for the debt protected by the right of subrogation over the right of the Nguyens as judgment creditors under their writ.
14. The issue is further complicated, because a later caveat was lodged against the title to the Smithfield property by a former solicitor of Mr Hoang, which claims a charge over the Smithfield property to secure Mr Hoang's obligation to pay an amount of legal costs to the solicitors.
15. The practical difficulties that the Nguyens face are further compounded by the rules and practices that govern the exercise of the Sheriff's duties in the execution of writs for the levy of property. These matters are explained in some detail in the principal judgment. Most relevantly, as the Sheriff has no means of determining whether an interest claimed in a caveat is invalid, it is the Sheriff's practice to require the judgment creditor to come to an arrangement with the caveator before the sale of the property in execution of the writ, to ensure that the caveat will be withdrawn to enable the transfer of the land to any purchaser. If this is not done, the purchase price of the land will be depressed and it may be impossible for the Sheriff to achieve a proper sale price.
16. In the present case, the outcome of the 2019 proceedings has been that the Nguyens have established an entitlement to an order that Ms Dang's Caveat be withdrawn, but they still have to deal with the solicitors' caveat.
17. The second principal problem is that the Sheriff may decide not to attempt to execute a writ for the levy of property if it appears to be futile to do so. That futility will be apparent if, after the sale of the property, the discharge of any securities that take priority to the rights of the judgment creditor, and the payment of the costs of sale, there is no or insufficient proceeds to pay all or a substantial part of the judgment debt to the judgment creditor.
18. As I observed in the principal judgment at [419], the Court recognised that the Sheriff had duties and an independent discretion as to how she executed a writ for the levy of property, and the Court would not make any order that inappropriately transgressed on the right of the Sheriff to execute her duties as she saw fit.
19. As is explained in the principal judgment, it is the usual practice of the Sheriff to require that a valuation of land be provided by the judgment creditor, in order to assist the Sheriff to determine whether, in all of the circumstances, it was warranted that the land be sold in execution of the writ. In this case, it is entirely a matter for the Sheriff as to whether or not she accepts the valuation that has been provided to the Court by Ms Dang.
20. It is now obvious that there is a substantial possibility that the pursuit by the Nguyens of their claims in the 2019 proceedings may be futile. That is, unfortunately, a risk that judgment creditors take when they seek to enforce judgments of the Court in their favour by the execution of writs for the levy of property. In NSW, judgment creditors are unsecured, although the process of the issue of a writ for the levy of property gives them a mechanism for obtaining payment of the judgment debt by the sale of the property of the judgment debtor. That right is encumbered by the difficulties that have been discussed in the principal judgment.
21. It will be necessary for the Nguyens to understand that, although the Court can make declarations and orders to the effect that Ms Dang does not have the proprietary interest in the Smithfield property that she claimed, and that the Caveat be withdrawn, and although the Court can make an order facilitating the execution of the renewed writ by the Sheriff, whether or not that execution takes place entirely depends upon what the Sheriff decides to do in the execution of her duty.
22. In respect of the observations made by the Court in the principal judgment concerning the appearance that Ms Dang had a right of subrogation to the mortgage, after repayment of the mortgage debt in respect of mortgage repayments made by Ms Dang, Ms Dang has asked the Court to make orders now giving effect to that right of subrogation.
23. Although the Court considered that it was proper to make findings on that subject on the basis of the evidence that was before the Court, it was not relief sought by Ms Dang in her summons or statement of claim in the 2019 proceedings. The interest that Ms Dang sought to establish was an entirely different, albeit more extensive, interest than a right of subrogation to the mortgage. Mr Hoang did not take part in the hearing, apparently because he was incarcerated. So far as the Court knows, Mr Hoang has not been given notice of Ms Dang's subrogation claim. Mr Hoang is entitled to notice of that claim and the opportunity to contest it, before the Court makes any orders as sought by Ms Dang. The fact that Mr Hoang is Ms Dang's son makes no difference.
24. The Court cannot make any orders against Mr Hoang on the subrogation issue until Ms Dang amends her statement of claim to seek appropriate relief, the amended statement of claim has been served on Mr Hoang, and Mr Hoang has been given an opportunity to inform the Court whether he wishes to defend the claim. I do not at this stage decide whether the Nguyens have standing to contest any claim for subrogation by Ms Dang against Mr Hoang. The parties have not made submissions on that subject.
25. In principle, the Nguyens are entitled to an order that Ms Dang pay their costs of the 2019 proceedings, on the basis that costs should follow the event. The basis upon which those costs should be assessed is yet to be established.
26. The determination of that basis would have to be made having regard to the fact that, although the outcome may be to establish that Ms Dang will be entitled to be subrogated to the mortgage when the mortgage debt has been repaid, that was a conclusion reached by the Court in the course of its reasons, and was not a claim for which Ms Dang gave notice to the Nguyens in her summons or statement of claim. Ms Dang may still not succeed in obtaining orders from the Court to give effect to her apparent right of subrogation, as that will depend upon the response of Mr Hoang to the claim, and possibly also the Nguyens.
27. I now turn to the issue of the costs of the notices of motion in the 2017 proceedings. The Nguyens filed notices or amended notices of motion on 24 January 2019, 4 June 2019 and 26 May 2020. The amended notice of motion filed on 24 January 2019 amended the notice of motion filed on 22 November 2018. By the amended notice of motion, the Nguyens sought an order for the withdrawal of the Caveat under s 74MA(2) of the Real Property Act.
28. Ms Dang filed a notice of motion on 15 February 2019 seeking an order that the Nguyens' amended notice of motion be summarily dismissed.
29. On 4 June 2019, the Nguyens filed a further notice of motion by which they sought an order directing the Sheriff to execute the first writ for the levy of property, as well as a direction to the Sheriff to make an application to the Court that the Caveat be withdrawn.
30. The 26 May 2020 notice of motion filed by the Nguyens sought an order that the second writ be renewed for a further 12 months. As noted at [116] of the principal judgment, the Principal Registrar of the Court made an order that the application be refused until the issues relating to the operation of the Caveat were resolved in the 2019 proceedings.
31. The draft short minutes of order prepared by the Nguyens in the 2017 proceedings provided for all four notices of motion to be dismissed, with an additional order that Ms Dang pay the Nguyens costs of the motions on the indemnity basis from 24 June 2018. It was noted in the principal judgment at [41] that the Caveat was lodged on 26 June 2018.
32. The draft short minutes of order provided to the Court by Ms Dang in the 2017 proceedings provided for the grant by the Court of the orders sought by her in her notice of motion filed on 15 February 2019, to the effect that the Nguyens' amended notice of motion filed on 24 January 2019 be summarily dismissed.
33. Ms Dang also sought an order that the Nguyens' notice of motion filed on 4 June 2019 be dismissed.
34. Ms Dang's draft short minutes of order do not appear to deal with the Nguyens' notice of motion filed on 26 May 2020. That may be because, as a practical matter, now that the Nguyens have succeeded in the 2019 proceedings in establishing that the Caveat must be withdrawn, the Nguyens will be entitled to a further order for the renewal of the writ.
35. It is difficult to understand the basis upon which the Nguyens claim that Ms Dang should be ordered to pay their costs of all four motions on the indemnity basis.
36. The amended notice of motion filed by the Nguyens on 24 January 2019 was entirely misconceived, as it proceeded on the basis that the Nguyens had standing to seek an order for the withdrawal of the Caveat under s 74MA(2) of the Real Property Act. It is perfectly plain that they had no such standing, as the issue and registration of the writ did not give them an estate or interest in the Smithfield property.
37. It is true that the amended notice of motion filed on 24 January 2019 must be dismissed, but on the basis that the Nguyens pay Ms Dang's costs of the amended notice of motion, as well as the costs of Ms Dang's own 15 February 2019 notice of motion whereby she sought an order for the summary dismissal of the Nguyens' amended notice of motion.
38. Given the entirely misconceived basis of the amended notice of motion, in principle, the Nguyens should be ordered to pay Ms Dang's costs on the indemnity basis.
39. That conclusion is not affected by the fact that it has ultimately been established in the 2019 proceedings that Ms Dang is not entitled to the proprietary interest in the Smithfield property that she sought to protect by the Caveat.
40. As to the Nguyens' 4 June 2019 notice of motion, that should also be dismissed. The Court will not make a direction against the Sheriff to sell the Smithfield property in execution of the renewed writ. The Court will issue a renewed writ, but then leave it to the Sheriff to determine how to respond to the renewed writ in the execution of her duties.
41. Further, the Nguyens have not established that the Court has any power to order that the Sheriff take proceedings for an order that the Caveat be withdrawn.
42. The Nguyens should be ordered to pay Ms Dang's costs of the 4 June 2019 notice of motion, but only on the ordinary basis.
43. As to the costs of the 26 May 2020 notice of motion, that motion sought relief that was as between the Nguyens and Mr Hoang, because it concerned whether there should be a further renewal of the writ. There should be no order for costs of that notice of motion.
44. Ms Dang's draft short minutes of order in the 2019 proceedings, apart from seeking the declaration referred to above to the effect that Ms Dang was entitled to an amount of $116,799.51 by way of subrogation to the mortgage, sought a declaration that $1,085,000 was deemed to be a fair market value of the Smithfield property, as well as orders that would have the effect that Ms Dang could purchase the Smithfield property for that amount.
45. It may turn out that Ms Dang's proposal is a commercially sensible one, but the Court could not make those orders without the consent of the Nguyens and Mr Hoang.
46. It may be that the only escape by the parties from the travails that have arisen in this litigation is if the Smithfield property fetches a price significantly more than $1,085,000. That is not a matter for the Court, and the accuracy of the valuation that has been obtained cannot be known.
47. The position is that both the Nguyens and Ms Dang have asked the Court to make orders that favoured themselves in an unwarranted way, and, in any event, those orders cannot be made by the Court in the terms sought by the parties.
48. The Court must require the parties to consider these further reasons and to provide to my Associate draft short minutes of order that are prepared on a realistic basis in relation to giving effect to the reasons in the principal judgment.
49. It will not assist the parties or their legal representatives if they adopt untenable positions and continue to propose orders that the Court cannot make.
50. If the parties are unable to achieve some sensible compromise that involves a realistic appraisal of their respective positions, they will have to include in their proposed short minutes of order case management orders for the continuation of this litigation, which will include ensuring that Mr Hoang has notice of any further claims in which he is interested.
51. Much of the Nguyens' submissions involved a plea to the Court to make orders that protected them from the consequences of this litigation, on the basis that the Court should do what was necessary to effectuate the judgment that it made in favour of the Nguyens against Mr Hoang, and to protect the Nguyens from the consequences of Ms Dang lodging the Caveat, now that it has been established that Ms Dang is not entitled to the interest in the Smithfield property claimed in the Caveat. That approach would not be in accordance with proper principle. If the Nguyens wish to seek compensation from Ms Dang, on the basis that she lodged a Caveat without reasonable cause, they will have to make an application under s 74P of the Real Property Act. Such a course would raise questions about whether any loss that they have suffered is a result of the lodgement of the Caveat, as opposed to the tactical decisions that they have taken in this litigation. 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: 06 August 2021