NPC Advisory (SD) Pty Limited (in liq) v Tannous Holdings Pty Limited as trustee for the Tannous Family Trust

Application for an adjournment

1. Last Friday, 16 August 2024, these proceedings were listed for hearing by the Chief Judge in Equity before me on Tuesday of this week, 20 August 2024.
2. The Chief Judge was quite properly told by counsel last Friday that no defendant had filed a defence or any evidence in opposition to relief sought.
3. When the matter was called on for hearing on 20 August 2024, the fifth defendant, by her solicitor, applied for an adjournment of the hearing. No evidence was relied on in support of the application for an adjournment, but submissions were made from the Bar table. The essential basis put forward for the adjournment was that a refinancing was imminent which would pay out the plaintiff's debt and that this had been the fifth defendant's focus rather than the filing of a defence.
4. I adjourned the hearing of the matter to this morning so as to provide the fifth defendant with an opportunity to convince the plaintiff that a payout was likely so that it should not prosecute its claim, or to put on proper evidence to support an application for an adjournment.
5. This morning the fifth defendant appeared by counsel and again sought an adjournment of the hearing. In support of that application, the fifth defendant relied on the affidavit of Yasmine Fardous sworn today. Ms Fardous essentially deposes to the correspondence between the parties in relation to a potential payout of the plaintiff.
6. The current status of the refinance is set out in an email from the solicitor for the proposed incoming lender to the fifth defendant's solicitors dated 20 August 2024.
7. In essence, finance documents have been signed but there appears to be a number of conditions precedent including an annulment of the bankruptcy of Mr Tannous. No detail is given in the email or in the affidavit as to the likelihood of this occurring, although the solicitor for the proposed incoming lender expresses the opinion that: I would expect that conservatively we should be able to settle the transaction within four to five weeks of today, and possibly earlier.
8. The affidavit also includes correspondence from the solicitor for the fifth defendant to the plaintiff's solicitor where it is asserted that the fifth defendant will only pay to the plaintiff the amount outstanding as at February 2024, of approximately $600,000.
9. No evidence was put before the Court this morning of there being any defence of the fifth defendant, although it was asserted by counsel that there was a strong defence based on Yerkey v Jones (1939) 63 CLR 649 (Yerkey v Jones).
10. The fifth defendant's fall-back position was an adjournment to 2pm today to enable evidence to be put before the Court as to an available defence.
11. Having heard argument I declined to grant an adjournment. These are my reasons.
12. The applicable principles are well understood. They were recently summarised by Meek J in Al Dakhili v Al Kheurallah [2023] NSWSC 47 at [227]ff.
13. The power of adjournment is to be exercised in accordance with the overriding purpose of the Civil Procedure Act 2005 (NSW) (CPA) on the rules, to facilitate the just, quick and cheap resolution of the real issues in the proceeding (s 56 CPA) and in accordance with the dictates of justice described in s 58 CPA.
14. I was not satisfied that it was in the interests of justice to grant the adjournment sought.
15. The fifth defendant has had ample opportunity to file a defence and any evidence in support.
16. On 25 March 2024, an appearance was filed on behalf of the fifth defendant.
17. On 5 April 2024, Peden J made orders including for the fifth defendant to file and serve any defence on or before 3 May 2024.
18. On 10 May 2024, Peden J made orders including that the time for the fifth defendant to file and serve any defence be extended to 31 May 2024, and that the fifth defendant serve any evidence on which she relied on or before 26 July 2024.
19. Her Honour otherwise stood the matter over for directions on Friday, 16 August 2024.
20. Prior to the directions hearing on 16 August 2024, the solicitor for the plaintiff notified, inter alia, the solicitor for the fifth defendant, that at the directions hearing on 16 August 2024 the plaintiff intended to seek a hearing date. In response, the solicitor for the fifth defendant asked if the solicitor for the plaintiff could mention the fifth defendant's appearance and stated: We are amenable to any hearing date that may be allocated.
21. In response, the solicitor for the plaintiff notified the solicitor for the fifth defendant that they did not have instructions to mention the appearance of the fifth defendant and that in circumstances where the plaintiff was seeking a hearing date, it was appropriate that all parties appear.
22. There was no appearance on behalf of the fifth defendant. On 16 August 2024, and having regard to what he was told about no defences having been filed and no evidence, the Chief Judge listed the matter for hearing before me on Tuesday of this week.
23. No evidence was filed as to any available defence despite this being one of the bases on which I adjourned the hearing on Tuesday.
24. In relation to the submissions from the Bar table about a strong defence based on Yerkey v Jones, I note that the inter partes correspondence that has been tendered by the fifth defendant is premised on the plaintiff being paid out, rather than there being no liability at all. Further, the evidence discloses that Mrs Tannous received independent legal advice prior to entering into the relevant loan and guarantee documents.
25. For these reasons, I was not satisfied that the fifth defendant should be given a further opportunity to put on a defence and any evidence in opposition to the claims made.

Overview of the facts

1. On 21 December 2020, the plaintiff entered into a Loan, Security and Guarantee Agreement (Loan Agreement), with the first defendant, Tannous, pursuant to which the plaintiff agreed to provide Tannous with a cash advance facility with a limit of $1,000,000.
2. Mrs Margo Tannous, the sole director and shareholder of Tannous at the time Tannous entered into the Loan Agreement, was also a party to the Loan Agreement and guaranteed the performance by Tannous of its obligations under the Loan Agreement. As security for her obligations under the Loan Agreement, Mrs Tannous mortgaged and charged in favour of the plaintiff all of her interest in any freehold land in Australia, present or future, and agreed that the plaintiff had, in respect of such land, those powers given to a mortgagee by the Real Property Act 1900 (NSW) (RPA) and the Conveyancing Act 1919 (NSW) (the Act) where the mortgage is by deed.
3. Mrs Tannous was a registered proprietor of the Cabarita property, holding 99 of 100 shares as a tenant in common with Mr Tannous, who held one of 100 shares.
4. The plaintiff advanced a total sum of $435,476.45 to Tannous pursuant to the Loan Agreement (Principal Sum). Tannous was obliged to pay capitalised interest on the Principal Sum pursuant to clause 3.1 of the Loan Agreement.
5. It was an express term and condition of the Loan Agreement that Tannous pay to the plaintiff all moneys owing by Tannous to the plaintiff by no later than 4 December 2021 (Due Date).
6. Tannous failed to repay the Principal Sum and any interest by the Due Date. Further, Mrs Tannous unfortunately passed away on 22 April 2021. Both of those events were events of default under the Loan Agreement, entitling the plaintiff to enforce various rights.
7. Despite demands for repayment, neither Tannous nor the estate of Mrs Tannous have paid the plaintiff the moneys owing to it under the Loan Agreement.
8. The plaintiff also seeks to recover costs it has incurred in seeking to recover the amount owing to it under the Loan Agreement, and also in acting as attorney for Tannous in proceedings commenced by Tannous in this Court against IVE Group Australia Pty Ltd.
9. With respect to costs, Tannous granted the plaintiff an indemnity against any loss, interest, fee, damage, cost and expense of any nature which the plaintiff sustained or incurred or which the plaintiff became liable at any time in respect of or arising from any loss or damage occasioned by or liability incurred by the plaintiff in the exercise, non-exercise or purported exercise of any of the plaintiff's powers, rights, and privileges contained in or implied by the Loan Agreement.
10. Likewise, Mrs Tannous indemnified the plaintiff against all claims and/or losses, costs, liabilities and expenses incurred by the plaintiff because Tannous did not pay the money owed to the plaintiff under the Loan Agreement. It was also an express term and condition of the Loan Agreement that Mrs Tannous must pay on demand all costs and expenses incurred by the plaintiff in respect of the Loan Agreement, including legal costs on a solicitor and client basis and the reasonable hourly costs (as fixed by the plaintiff) of its officers and employees in protecting, administering, exercising a power under or attempting to exercise a power under the Loan Agreement.

Consideration

1. As set out above, none of the defendants have filed defences to the statement of claim. Accordingly, the allegations of fact contained in the statement of claim are taken to be admitted: see Kenneth Charles Ward v Brian Charles Ward & Anor [2011] NSWSC 107 at [28] per Brereton J.
2. I am satisfied that two events of default have occurred under the Loan Agreement - namely the death of the guarantor and the failure to repay the Principal Sum on the Due Date.
3. I am satisfied on the evidence that the amount owed under the Loan Agreement by both Tannous as borrower and Mrs Tannous as guarantor is $828,525.87 made up of the following components: Principal Advanced $435,476.45 Capitalised Interest $83,218.46 Interest under s 100 of the Civil Procedure Act $82,351.07 Costs $227,479.89

1. I note that no submissions were made in opposition to any of the amounts set out above. In relation to the third of the components set out above, I am satisfied that it is appropriate to award pre-judgment interest at Court rates from the date of breach in the absence of any provision for interest covering the period in the Loan Agreement.
2. I am also satisfied that, pursuant to clause 8.1 of the guarantee contained in the Loan Agreement, the plaintiff holds an equitable mortgage or charge over the interest of the fifth defendant in the Cabarita property, in her capacity as executor of the estate of Mrs Tannous.
3. The plaintiff seeks an order appointing trustees for sale of the Cabarita property, either pursuant to s 66G of the Act or an order for judicial sale.
4. There is ample power under s 66G of the Act. The authorities were considered by Sackar J in Catherine Margaret Thorn, as Executrix of the Estate of the late Betty McAuley v Ian Geoffrey Boyd and Dawn Kathleen Boyd [2016] NSWSC 1344 (Thorn) at [47]-[61].
5. For the reasons set out by Sackar J, an equitable mortgagee or chargee is an "incumbrancer" and thus falls within the definition of co-ownership and co-owner in s 66F of the Act. As set out above, the plaintiff is an equitable mortgagee or chargee.
6. The authorities make it clear that an applicant is entitled to a s 66G order almost as of right: see Thorn at [58], and the authorities there referred to.
7. No submissions were advanced against an order being made appointing trustees for sale.
8. I am satisfied that such an order should be made.
9. The plaintiff has proposed two trustees - Darren Vardy and Andre Lakomy, each of whom has consented to act. No objection was raised to the appointment of either.
10. The remaining orders sought by the plaintiff are ancillary to the appointment of trustees for sale. No objection was raised to any of these orders. They are appropriate and should be made.

Should there be a stay of the orders?

1. I raised with the parties whether the orders appointing trustees for sale should be stayed for approximately 28 days to essentially give the fifth defendant a further short period to refinance.
2. The fifth defendant supported this.
3. The plaintiff opposed any stay or alternatively contended that the stay should be for a short period of seven days to see if the fifth defendant could produce any better evidence that there is a likelihood of a refinance occurring that will pay the plaintiff out.
4. The essential basis on which the plaintiff opposed any stay was one of utility - there being no proper evidence that a refinance is likely at all, or one which would pay out the total of the plaintiff's debt, which exceeds the figure of about $600,000 which is referred to in the evidence adduced by the fifth defendant as to the amount that it was prepared to pay.
5. The plaintiff also relied on the fact that the Cabarita property was presently occupied and as such, obtaining possession would take some period of time and that in a practical sense the fifth defendant would still have a period to seek to progress the refinance absent any stay.
6. Reference was also made to the position of the NAB who holds a registered mortgage over the Cabarita property. Its position, as set out in a letter from Dentons to the solicitors for the plaintiff dated 19 August 2024 and as reflected in a notation to the orders I am asked to make is: 1. the NAB holds judgment for possession of the Cabarita property; 2. the NAB intends to file a notice of motion for writ of possession of land pursuant to the default judgment from Thursday, 22 August 2024, pending the first defendant's failure to provide evidence of a proposed refinance.
7. Whilst perhaps a little unclear, the position of the NAB appears to be that, whilst it holds judgment for possession of the Cabarita property, it is presently holding off in filing a notice of motion for a writ of possession to see whether the fifth defendant is able to provide evidence of a likely refinance. It is not clear for how long the NAB may be prepared to wait before enforcing its rights.
8. Notwithstanding the somewhat unsatisfactory state of the evidence, I think that it is appropriate in the circumstances to grant a stay of the orders appointing trustees for sale and associated orders for a period of 28 days. This will enable the fifth defendant one last opportunity to refinance the various debts and to pay out the NAB and the plaintiff. An outcome whereby the Cabarita property does not need to be sold is clearly preferable, although the fifth defendant has already had a considerable period to bring about this outcome. I have chosen the period of 28 days as an appropriate period given the statement made by the solicitor for the incoming lender that I have quoted above.
9. I make the following orders: 1. The Court declares that the Plaintiff holds an equitable mortgage or charge over the interest of the Fifth Defendant, in her capacity as executor of the estate of Margo Tannous, in the real property situated at and known as 7 Medora Street, Cabarita New South Wales 2137, being the whole of the land comprised in Certificate of Title, folio identifier 30/5167 (Cabarita Property), which mortgage secures the amount of $828,525.87 owing by the First Defendant and the Fifth Defendant, in her capacity as executor of the estate of Margo Tannous, to the Plaintiff pursuant to the Loan, Security & Guarantee Agreement dated December 2020 between the Plaintiff, the First Defendant and Margo Tannous dated December 2020 (Loan Agreement). 2. The Court orders, pursuant to the Court's inherent jurisdiction or s 66G of the Conveyancing Act 1919 (NSW), that: 1. Darren John Vardy of Insolvency Options Pty Ltd, Suite 38, 3 Box Road, Caringbah, New South Wales and Andre Lakomy of AL Restructuring, Level 13, 50 Margaret Street, Sydney, New South Wales be appointed as trustees for the sale of the Cabarita Property (Trustees); 2. the Cabarita Property immediately vests in the Trustees upon the making of these orders; and 3. the Trustees conduct and complete the sale of the Cabarita Property in accordance with these orders and convey title to the Cabarita Property upon completion of the sale. 1. The Court orders that, except to the extent that the Court may direct otherwise in these orders or from time to time, the Trustees shall act at all times in relation to the selling of the Cabarita Property in accordance with the duties owed by a mortgagee in exercising a mortgagee's power of sale and otherwise as the Trustees see fit. 2. The Court orders that the Trustees conduct the sale of the Cabarita Property by public auction and, if not sold at auction, by further public auction or by private sale. 3. The Court orders that, prior to offering the Cabarita Property for sale, the Trustees shall consult with and obtain advice from a real estate or valuer before fixing a reserve sale price for the Cabarita Property. 4. The Court orders that the Trustees are appointed to transfer the Cabarita Property to the purchaser(s) thereof to effect the sale and the Trustees are granted the power to transfer Cabarita Property to the purchaser(s). 5. The Court orders that the Fourth Defendant and the Fifth Defendant give vacant possession of the Cabarita Property to the Trustees within twenty one (21) days of the date of these orders. 6. The Court grants leave to the Trustees to issue a Writ of Possession forthwith. 7. The Court orders that the Fourth Defendant and the Fifth Defendant, within five (5) business days after being requested in writing by the Trustees, deliver to the Trustees any documents in their possession or under their control relating to the Cabarita Property that are reasonably required by the Trustees to conduct or complete the sale of the Cabarita Property. 8. The Court orders that the proceeds of the sale of the Cabarita Property be paid in the following order: 1. first, all of the costs and expenses relating to the sale of the Cabarita Property, including any agent's fees and commissions, taxes, levies or rates and the Trustee's costs and expenses; 2. second, the whole of the amount due to the Second Defendant pursuant to registered mortgage AJ825479; 3. third, 1% of the remaining proceeds of sale be paid into Court; 4. fourth, from 99% of the remaining proceeds of sale: 1. first, the amount of $828,525.87 be paid to the Plaintiff; and 2. second, any remaining proceeds of sale be paid into Court. 1. Without prejudice to the interests and the priority of interests claimed in the caveats registered by the Third, Fourth, Fifth and Sixth Defendants, the Courts orders, pursuant to section 74MA(2) of the Real Property Act 1900 (NSW), that each of the Second, Third, Fourth, Fifth and Sixth Defendants withdraw the caveats lodged by them on the title of the Cabarita Property within seven (7) days of the date of this order. 2. Liberty to any of the parties to apply with respect to any matter that may arise with respect to the sale of the Cabarita Property or the distribution of the proceeds of the sale of the Cabarita Property. 3. Judgment for the Plaintiff against the First Defendant in the amount of $828,525.87 4. Judgment for the Plaintiff against the Fifth Defendant, in her capacity as executor of the estate of Margo Tannous, in the amount of $828,525.87. 5. The Court orders that the First Defendant pay the Plaintiff's costs of these proceedings on an indemnity basis. 6. The Court orders that the Fifth Defendant, in her capacity as executor of the estate of Margo Tannous, pay the Plaintiff's costs of these proceedings on an indemnity basis. 7. The Court notes: 1. the Second Defendant holds judgment for possession of the Cabarita Property; and 2. the Second Defendant intends to file a notice of motion for writ of possession of land pursuant to the default judgment from Thursday, 22 August 2024, pending the First Defendant's failure to provide evidence of a proposed refinance. 1. I stay orders 2 to 12 until 5 pm on 19 September 2024. 2. There be liberty to apply on 48 hours' notice.

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: 26 August 2024