Noble Solutions v Young

Judgment (EX TEMPORE - REVISED 6 SEPTEMBER 2013) 1HIS HONOUR: The plaintiff seeks judgment for possession of land at Fletcher in the state of New South Wales and orders in effect for sale of that land under the direction of the court. 2The plaintiff's case is that on 2 April 2012, it agreed to lend $17,930 to the first and second defendants. It says that the loan contract which came into existence entitles it, among other things, to the benefit of security over the land in question, and that, the first and second defendants having made default, it is entitled to enforce its rights. 3The contract in question is one of those which instinctively raises questions as to the commercial morality of the transaction. The net amount paid to the borrowers was $15,000. On top of that they borrowed, so that they might pay to others, $2,930 - a little under 20% of the net amount of the loan to them. As the agreement makes clear, that additional sum was required to enable various fees, including to or for the benefit of the plaintiff and of some intermediary, to be paid. 4In addition, of course, the first and second defendants were obliged to pay interest. The "standard interest rate" was 1.4% per week and the "default interest rate" was 2.5% per week. Those rates amount, on an annualised basis, to 72.8% and 130% respectively. 5The application proceeds by way of an application for summary judgment against the first defendant and for default judgment against the second defendant. I should have mentioned that there is also a third defendant, a bank, which has a first registered mortgage. The third defendant has indicated that it has no objection to the relief sought today, and indeed that it consents to all but one aspect of that relief, which is that the plaintiff itself is to sell the property. 6The first defendant's defence raised, in a defective form which is no doubt attributable to the fact that he represented himself, a defence of "non est factum" and an assertion of forgery. The first defendant has provided no evidence in support of that defence. The loan agreements in question are in evidence. On their face, they show that each of the defendants signed the loan agreement in the presence of a witness who was, in the one case, a pharmacist (or perhaps a Justice of the Peace, the attestation is not clear) and, in the other case, in the presence of a Justice of the Peace. 7Each attestation contained solemn and sincere declarations by the first and second defendants that they understood what they were doing, could afford to make the payments, and knew "that these facilities are only cost effective in comparative to alternative if use [sic] over a short-term". 8Each of the first and second defendants also attested that the loan was for business purposes. 9Neither of the first or second defendants got independent legal or accounting advice. They said that they had been offered the opportunity of obtaining such advice, but did not wish to do so. 10Personally, I have very grave reservations at accepting the assertions that: the loan was for business purposes; the first and second defendants had been given the opportunity to take independent legal advice; or that they had any real understanding of the usurious interest rate which they contracted to pay. But since neither of the defendants has put on evidence to give me a basis to make findings instead of expressing reservations, I shall not take the matter any further. 11I am satisfied that each of the first and second defendants was served with the statement of claim. I am satisfied that each of them was served with notice of today's application (including by being served with the second further amended notice of motion which is returnable today) and with notice of the affidavits on which the plaintiff relies. 12Equally, it is clear that the only step taken by either of those defendants is the filing of the defence to which I have referred. 13In those circumstances, I am satisfied in principle that the plaintiff is entitled to default judgment against the second defendant. 14I turn to the claim for summary judgment. It may be said that the defence shows what is in law an arguable ground of defence, non est factum. However, there is evidence, obtained through the plaintiff's bank, that in fact the first defendant obtained the benefit of the $15,000 which was the net amount of the advance. Taking that into account, together with the clear evidence that each defendant's execution of the document was witnessed by an independent person who was a pharmacist or a Justice of the Peace (indeed, may have been both), I am satisfied that the plaintiff has made good its claim against the first defendant for summary judgment on the one issue tendered. 15I am satisfied, on the basis of the evidence, that the first and second defendants have made default. 16That leads to the question of what are the plaintiff's entitlements. 17The loan agreement is an extremely poorly drawn document. It contains a clause, clause 7, dealing with "security of mortgage". When read in conjunction with the schedule, it is I think the better view of clause 7 that it gives the plaintiff a security interest over the property described in that schedule. That property comprises a motor vehicle said to be owned by the second defendant and the property at Fletcher which, a title search shows, is owned by both defendants. 18Although with some considerable hesitation, I do think the better view is that the plaintiff has a charge and a security interest over the property thus described. 19There is no doubt that the plaintiff is entitled to exercise its rights on default (that is to say, in the event of default that has occurred). That is made clear by, among other things, clause 8.6. 20Thus, it seems to me, there is a ground for the plaintiff to be entitled to the assistance of equity. 21I have drawn attention already to the interest rate, and described it as usurious. There are other words that could be used. I do not think additional adjectival condemnation will make any difference. 22I have some considerable difficulty in seeing why a Court of Equity - as it used to be called, a court of conscience - should lend its aid to enforcing an usurious mortgage. However, with some reluctance, I conclude that the evidence makes good the proposition that the plaintiff and the first and second defendants have reached a short term agreement, enforceable at law, under which the defendants were not able to meet their commitment. In those circumstances, and as I have said with considerable reluctance, I do not think that I should enquire further into the conscionability of the interest rate. 23Thus, I think, the plaintiff is entitled to have the Court's assistance in selling the property. 24The plaintiff has sought possession of the property. I think the better view is that an equitable mortgagee or chargee does not have a legal right to possession. However, there are authorities (including, for what it is worth, a decision of my own) which suggest that an order for possession may be made as an incident of ordering judicial sale. Since the matter is somewhat questionable, that is the course I propose to take. Thus, it seems to me, being satisfied (as on balance I am) that an order for judicial sale should be made, I think it is appropriate to order, as an incident of that sale, that the first and second defendants give the plaintiff vacant possession of the property. 25Of course, that order cannot bind the third defendant, the registered mortgagee. If it chooses to intervene and exercise any rights it may have, so be it. 26That leaves the question of costs. The agreement, poorly drafted though it is, entitles the plaintiff to its costs. But there are two matters that seem to me to warrant particular attention. The first is that this matter came on for hearing on 5 August 2013 before White J. It appeared on that occasion that the agreement in question had not been stamped, and thus that it was unenforceable. His Honour, accordingly, declined to admit evidence of the agreement. In those circumstances, the plaintiff was forced to seek an adjournment so is that it could stamp the agreement. The matter has come back before me today, stamping having been attended to in the mean time. 27I do not see why the first and second defendants should be burdened with the costs of what I described in argument as, and I remain of the view is, a botched attempt to obtain summary relief. Accordingly, I propose to make orders intended to ensure that no part of those effectively wasted costs are charged by or recoverable against the first and second defendants, or taken out of the proceeds of sale of the land. 28The other question as to costs, which is of a much more minor nature, relates to the affidavits on which the plaintiff relies. In defiance of the rules, none of those affidavits is paginated. There have been judges of this Division who would not receive such affidavits into evidence. Had that happened, the plaintiff must have failed. I have not taken so extreme a course. But nonetheless, I do not see why a defendant should be forced to pay the costs of preparation of affidavits where, in the respect I have described, no attempt was made to have the affidavits comply with the rules. 29Accordingly, I proposes to order that no part of the costs of preparation of those affidavits be allowed or recovered, in the way that I have outlined. 30The process on which the plaintiff moves (the second further amended notice of motion) seeks summary and default judgment respectively against the first and second defendants), possession and issue of a writ of possession, and an order for sale. It also seeks, in the alternative, an order for appointment of trustees for sale under s 66G of the Conveyancing Act 1919 (NSW). That was sought, apparently, on the basis that the Court might not be satisfied that judgment should be given against each defendant. Since I am satisfied that such judgment should be given, there is no need to pursue that matter further. 31Otherwise, the orders sought are of the usual kind. I do note, however, that they do not appear to include any provision for the plaintiff, as vendor, to obtain advice from a real estate agent or valuer before seeking to fix a reserve sale price of the property. They do provide for the plaintiff to consult with the third defendant, but I have to say that I would be comforted if there were, in addition, some mechanism (apart from the broad and general reference to general law and statutory duties) imposing some level of inquiry to establish a reasonable range of selling prices. 32In those circumstances, having indicated in general the orders that I will make, I will direct the plaintiff to bring in short minutes of order at some convenient time next week. They should include orders 1, 2, 3, 4, 6, 7, and 9 to 16 of the second further amended notice of motion, augmented by the references I have made to obtaining advice from a real estate agent or valuer and including the proscriptive costs orders that I have said I wish to impose. 33I will add to what I have just said; that Mr Davies of counsel for the plaintiff, has properly pointed out that the duties had in fact been paid but that the problem before White J was that the plaintiff did not produce a stamped copy of the agreement. That is but a different species of botching; it does nothing to change the conclusion to which I came as to costs. 34I stand the matter over to 10 o'clock on Thursday, 12 September 2013 for orders.