HER HONOUR: These are proceedings for possession of a residential property at Cronulla. The proceedings are brought by the mortgagee of the property, Nichols Constructions Pty Ltd. The mortgagor and registered proprietor of the property is Mrs Vicki Elphick. A writ of possession has been issued against her but not executed. This judgment determines an application by Mrs Elphick's husband, Mr Ken Elphick, to stay the execution of the writ pending the determination of separate proceedings brought by him in this Court against, among others, Mrs Elphick and the mortgagee. Alternatively, Mr Elphick seeks a stay on hardship grounds in his capacity as an occupier of the property and on behalf of its other occupiers (who include Mrs Elphick).
Mr Elphick is not a party to these proceedings and has not sought to be joined. As hearing time was limited, the application proceeded on the common premise that the question whether he is entitled to the relief sought should be determined according to the merits of his contentions on the understanding that the question of standing would follow that determination.
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Circumstances in which the application is brought
The mortgage sought to be enforced by Nichols Constructions was granted to secure a loan negotiated between Mr Elphick and the principal of Nichols Constructions, Mr Leslie Nichols. At the time of those negotiations, Mr Nichols and Mr Elphick were engaged in a property development and subdivision in the area of Laidley in the State of Queensland. Nichols Constructions was the property developer. Mr Elphick was the principal of a company named Pointcorp (Australia) Pty Ltd which was granted put and call options in respect of the subdivided lots and was to market the lots.
During the course of their dealings in that context, Mr Elphick approached Mr Nichols for a loan to buy a waterfront property at Cronulla then valued at $4 million. The funds ultimately advanced to Mrs Elphick represented the whole of the purchase price of that property plus an amount for legal costs and stamp duty (a total of $4.2 million) together with an additional amount of $484,000 representing amounts payable by Pointcorp to Nichols Constructions in accordance with their arrangements relating to the sale of the lots in Laidley.
The terms of the loan were recorded in a written loan agreement dated 17 December 2013 between Mrs Elphick as mortgagor, Nichols Constructions as mortgagee and Mr Elphick as guarantor. The term of the loan was two years; Mrs Elphick agreed to pay the "final principal sum" of $4,684,000 together with interest on or before 16 December 2015. The loan has accordingly expired. The written agreement required that interest be paid by monthly instalments. It also contemplated repayment of principal by monthly repayments as set out in a spread sheet attached to the agreement.
Mr Elphick contends that, in addition to the terms recorded in the written loan agreement, there was an additional term of the agreement which was either express (oral) or implied that Mrs Elphick was to make her repayments "when the subdivided lots were sold and contracts for the construction of dwellings on those sold lots were entered into such that the amounts identified in the spread sheet were achieved".
The Laidley development suffered complications, allegedly due to failings on the part of subcontractors retained by Nichols Constructions, which in turn impeded the sale of the lots. In the result, Mrs Elphick has not made a single repayment of interest or principal. Mr and Mrs Elphick and various members of their family have lived in the property for the entire intervening period and remain in occupation of it. Mr Elphick contends that, although no repayments have been made to Nichols Constructions, it has received the benefit of Mr Elphick's contribution to the Laidley development.
The proceedings were commenced on 11 November 2014. Mrs Elphick promptly retained a solicitor, who said in a letter that the claim would be "vigorously defended". It was not; default judgment was entered on 3 February 2015. A writ of possession was issued on 5 March 2015 and was due to be executed on 21 April 2015. However, on 16 April 2015, Mrs Elphick moved the Court ex parte for a stay. After a change of solicitor and several delays in the timetable for evidence, Mrs Elphick was successful in obtaining an order setting aside the default judgment: Nichols Constructions Pty Ltd v Elphick [2015] NSWSC 940 (Harrison AsJ).
On 17 August 2015, Mrs Elphick filed a cross-claim raising Mr Elphick's contentions concerning the delays in the Laidley development. The cross-claim raised what was, in effect, a complex building case relating to a subdivision in another State. Nichols Constructions moved the Court to have the issues concerning the completion of the Laidley development determined separately from all other issues in the proceedings. I determined that application in November 2015, making orders to have those issues determined, if necessary, at a later hearing: Nichols Constructions Pty Ltd v Elphick [2015] NSWSC 1732.
The matters ordered to be determined first (which included the existence of the alleged oral or implied term of the loan agreement) were listed for hearing on 22 February 2016. Shortly before that date, Mrs Elphick sought an order referring the proceedings for mediation. I made the order sought, over the objection of Nichols Constructions Pty Ltd. Mr Elphick attended the mediation, which was conducted by Mr Kevin Lindgren AO QC. The mediation was successful and resulted in the execution of a settlement deed between Nichols Constructions, Mrs Elphick and Mr Elphick.
Following the successful mediation, on 17 February 2016, orders were made dismissing these proceedings "subject to any application by the plaintiff to enforce the confidential undertakings held by the Court in a sealed envelope".
In the events that have occurred, the undertakings are no longer confidential. By those undertakings, Mrs Elphick undertook that, if she did not pay the sum of $4.8 million by 5 pm on 29 March 2016 (in respect of which it was agreed that time was of the essence), she consented to judgment for possession and for a writ of possession to issue forthwith.
Mr Elphick undertook to the Court to withdraw a caveat that had been lodged on his behalf on the title to the property and "not to make any claim to any interest in the property or lodge any further caveat".
Mrs Elphick did not pay the sum of $4.8 million to Nichols Constructions by 29 March 2016. On 23 March 2016, Mr Elphick and Pointcorp commenced the proceedings referred to at the outset of this judgment ("the 2016 proceedings"). The defendants in those proceedings are Mrs Elphick, Mr and Mrs Nichols and Nichols Constructions. The statement of claim pleads substantially the same contentions concerning the Laidley development as were made by Mrs Elphick's cross-claim filed in these proceedings.
The first order sought in the statement of claim in the 2016 proceedings is an order releasing Mr Elphick from his undertaking to the Court given in these proceedings (to the extent necessary to prosecute that claim and to place a caveat on the title). The primary relief sought is a declaration that Mrs Elphick holds the bare legal estate in the Cronulla property as trustee conditionally upon trust for Mr Elphick and/or Pointcorp. By way of interlocutory relief, the statement of claim seeks an order restraining Nichols Constructions from taking steps to obtain a writ of possession over the Cronulla property until further order.
Nichols Constructions contends that the 2016 proceedings are an abuse of process on the basis that they were commenced in breach of Mr Elphick's undertaking to the Court in these proceedings. On 8 April 2016, Nichols Constructions filed a notice of motion seeking to have these proceedings and the 2016 proceedings transferred to the Equity Division for the purpose of there seeking expedition, an order for possession, an order that Nichols Constructions is entitled to issue a writ forthwith and an order that the proceedings commenced by Mr Elphick be struck out, dismissed or stayed.
That motion came before Stephenson J in the Equity Division who, unsurprisingly, took the view that, since the proceedings concerned a claim for possession, they should remain in this Division. Mr Elphick's written submissions as to what happened next are a little confusing; the burden of the point appears to be that orders were made by consent for an expedited hearing of Nichols Constructions' motion together with the final hearing of Mr Elphick's claim over two days in August and that, accordingly, Nichols Constructions is precluded from moving the Court for any other relief at any earlier point in time.
On 21 April 2016, Nichols Constructions filed an amended motion in these proceedings deleting all of the relief sought in the motion filed on 8 April 2016 and instead seeking judgment for possession and leave to issue a writ of possession forthwith. On the same day, Nichols Constructions' solicitor wrote to my Associate seeking to have the proceedings relisted on the basis that the circumstances contemplated in the orders made by consent on 17 February 2016 were enlivened.
In response to that request, the proceedings were listed before me on 27 April 2016. On that occasion, there was some confusion as to what matters were listed for hearing in August. Mr Elphick's solicitor, Mr Hall, understood that the listing was intended to include the hearing of Nichols Constructions' application for judgment for possession in these proceedings. Nichols Constructions' solicitor understood that it was only the 2016 proceedings that were listed and that there was no impediment to their separately pressing for an order for possession in these proceedings. In fairness to Mr Hall, the position was probably unnecessarily complicated by the application to have both proceedings transferred to the Equity Division and the events that followed.
Mr Hall submitted that, in the circumstances, it was unconscionable for Nichols Constructions to seek to enforce the writ in these proceedings. He submitted that Nichols Constructions' application to have the proceedings relisted before me operated unfairly to Mr Elphick, who would otherwise have had an opportunity to prepare for the determination of that issue in the manner contemplated in the consent orders. Nichols Constructions contended, conversely, that the 2016 proceedings were plainly commenced in breach of Mr Elphick's undertaking to the Court given following the mediation and that there should be no impediment to Nichols Constructions now proceeding to enforce the writ.
I was not persuaded that Nichols Constructions should be precluded from seeking to enforce the settlement agreement until the August hearing. Conversely, I considered that Mr Elphick should be given a further opportunity to be heard (having had less than a week's notice of the re-listing on 27 April 2016). For the reasons stated by me in an ex tempore judgment given that date, I gave judgment for possession of the property in favour of Nichols Constructions with leave to issue a writ of possession forthwith but directed that the writ lie in the office until 5 pm on 9 May 2016. It was anticipated that I would, on that date, hear Mr Elphick as to whether there should be a further stay of execution of the writ.
As events transpired, that hearing date clashed with the Court's criminal listings and had to be vacated. The stay was not formally extended but Nichols Constructions accepted that was due to oversight and did not seek to have the writ executed.
Mr Elphick's application for a further stay was heard last Thursday, 16 June 2016. He raised two primary submissions in support of a further stay. The first was a rehearsal of the matters argued before me on 27 April 2016. Notwithstanding the history recited above and the content of my ex tempore judgment given that date, Mr Hall again submitted that the application for a writ of possession in these proceedings was "subsumed within the consent orders" made in the 2016 proceedings. He submitted that the orders made to bring those proceedings to a state of readiness for the expedited hearing on 23 August 2016 "effectively dispose of order 3 of Mr Elphick's statement of claim", being the interlocutory order concerning possession of the property. Mr Hall submitted that the Court would not set aside or vary that order unless Nichols Constructions could establish a change in circumstances. He submitted that, by agreeing to the consent orders, the parties had disposed of Mr Elphick's proposed order 3 and reached agreement as to the arrangements under which they would seek judgment for possession of the Cronulla property.
Mr Hall submitted that, "in breach of the above orders and in breach of the agreed arrangement, the application for possession was filed abusively and listed for hearing before Justice McCallum". He submitted that, in the absence of any change in circumstances, the interests of justice require that the judgment granted on 27 April 2016 be stayed until Mr Elphick's application may be heard in accordance with the orders made in the 2016 proceedings.
It is not clear to me why it was thought appropriate to raise those matters again last week. I thought I had made it plain at the hearing on 27 April 2016 that I did not think Nichols Constructions should, in the circumstances, have to wait until August before seeking to enforce the writ in circumstances where the 2016 proceedings appear on their face to have been commenced in breach of Mr Elphick's undertaking to the Court given in these proceedings.
Indeed, in the circumstances, the submission that Nichols Constructions is the party that has engaged in an abuse of process is a courageous one. In hindsight, it is difficult not to conclude that the mediation was used by Mr Elphick as a device to delay the determination of Nichols Constructions' claim for possession of the Cronulla property. There is no evidence to suggest that Mrs Elphick had the smallest prospect of paying $4.8 million by the end of March 2016; all that appears to have been undertaken since she settled the proceedings on that basis is the drafting of Mr Elphick's statement of claim.
Secondly, Mr Hall submitted that there is no need for Mr Elphick to be released from his undertaking to the Court. He submitted that, on its proper construction, the deed of settlement is silent on the rights of Mr Elphick and that, accordingly, those rights remain as is his position under the general law. The submission ignored the giving of the undertaking to the Court. The construction point appeared to be that the undertaking would apply only in the circumstances agreed to in the deed and that, since Mrs Elphick has breached the deed (by failing to make the required payment by the due date), it is "commercially untenable" to hold Mr Elphick to his undertaking.
Again, I think the submission was a courageous one. I do not think it could be clearer that Mr Elphick's undertaking was intended to operate upon failure by Mrs Elphick to make the payment contemplated in the deed. Indeed, that is the only circumstance in which it could have any sensible operation.
Mr Elphick swore an affidavit faintly suggesting that the undertaking was given by him under duress. In particular, he referred to the fact that his wife was under stress and that they had had sleepless nights in the period leading up to the mediation. He also stated that there were lawyers representing his wife at the mediation but that he was not legally represented. He gave an explanation for his giving the undertaking by reference to the fact that the caveat he lodged over the property was lodged in error and that he was happy to consent to its removal in that circumstance.
The explanation offered in the affidavit is at odds with Mr Elphick's subsequent claim to an interest in the property. As to the suggestion of duress or a lack of free choice, even accepting the explanation at its highest, it did not afford a proper basis for relieving Mr Elphick of his undertaking to the Court. I note that, when I made the orders on 17 February 2016, it was confirmed (in response to a question from me) that the significance of giving an undertaking to the Court had been explained to the persons who had given such undertakings.
In my view it follows that, to the extent that the 2016 proceedings include a claim by Mr Elphick to an interest in the Cronulla property, that aspect of the claim is made in breach of his undertaking to the Court in these proceedings and is accordingly an abuse of process. Leaving aside the question of hardship, that conclusion is sufficient to dispose of the application for a stay. However, in deference to the careful written submissions provided by Nichols Constructions in opposing the application, several further points may be noted.
First, I accept, as submitted by Nichols Constructions, that Mr Elphick has had ample opportunity to seek to be joined in these proceedings. It does appear, as contended by Mr Hall, that Mr Elphick was not served with the originating process in the manner contemplated by r 6.8 of the Uniform Civil Procedure Rules (he was served with a notice to occupier but not the originating process). However, the suggestion that ignorance of the proceedings explains his not having moved at an earlier point to pursue the relief now sought is risible and was not the point made by Mr Hall; the point was a technical one. It was without merit. The purpose of the rule is to provide occupiers of land the subject of proceedings for a judgment for possession with the opportunity to assert any rights they may have against the mortgagee: Yeshiva Properties No 1 Pty Ltd v Lubavitch Mazal Pty Ltd (No 3) [2003] NSWSC 752 at [12]. As submitted by Nichols Constructions, Mr Elphick has had ample opportunity to assert any such rights.
Nichols Constructions further contended that, even if Mr Elphick's claim against Mrs Elphick is made good and she is held to hold the property on trust for him, that does not confer a right of possession on Mr Elphick: DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510 at 519F per Hope JA; Glass JA agreeing; recently applied by R S Hulme J in Aboriginal Housing Co Ltd v Munro [2015] NSWSC 1155 (the paragraph numbering in the published judgment has gone haywire; it is one of many paragraphs numbered [2]).
In the present case, it is clear that the mortgagee's right to possession has arisen. Mr Elphick's claim is not such as to defeat that right: cf Horrobin v Australia and New Zealand Banking Group Ltd (1996) 40 NSWLR 89 at 100B to C. Those additional considerations would appear to put the fate of the stay application beyond doubt. In any event, for the reasons outlined above, I have concluded that, as the 2016 proceedings were commenced in breach of an undertaking to the Court, the relief sought by Mr Elphick should not be granted.
As to hardship, the case is not strong. Mr Elphick and his family have enjoyed occupation of a substantial residential property for two and a half years making no monetary payment whatsoever. Serviced accommodation would be less costly than the interest accruing on the debt owed. There has been ample warning of the need to make alternative arrangements and, apparently, no real steps taken to that end. It is customary in circumstances such as the present to grant a short stay to allow an orderly departure from a residential property. I consider two weeks adequate in the circumstances of this case. For those reasons, I make the following orders:
1. That the application for a further stay of the writ of possession be refused;
2. That the plaintiff have leave to schedule a date for the execution of the writ no sooner than 4 July 2016.
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Amendments
22 June 2016 - typographical error on coversheet
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Decision last updated: 20 April 2018