Solicitors:
Dentons Australia (Plaintiff)
Harris & Company (Defendants)
File Number(s): 2022/88721
[2]
ex tempore JUDGMENT (revised)
I am dealing with an application for a stay of a writ of possession in respect of a specific property, which is one of the properties subject to an order for possession made by this Court on 13 November 2023, some 11 months ago. There are three properties subject to that judgment, each of which secures loans advanced to the defendants by the plaintiff, Perpetual Corporate Trust Limited.
There has been, it may be said, more than the usual delay in terms of the execution of the writ, the reasons for which are set out in the evidence before me. Essentially, there was a complaint to the Australian Financial Complaints Authority ("AFCA") which abates the enforcement process while that complaint is pending and there was also a previous stay ordered by this Court on the basis of what was said to be a firm, if somewhat complex, proposal for refinancing the loans as part of a much wider scheme involving other properties. That proposal fell through, the stay dissolved and the process of executing the writ was reinvigorated.
The writ in respect of the three properties are to be executed at 9 a.m. tomorrow, 18 October 2024. An application for a stay in respect of only one of those three properties came before me urgently on Monday, 14 October 2024. Having heard from Mr Smorchevsky of counsel for the applicant and Ms Yu, solicitor for the plaintiff/respondent, I fixed the matter for hearing today to give an opportunity to the respondent to obtain instructions in relation whether a further stay would be consented to, and if not, to file appropriate evidence. Instructions to consent were not forthcoming and evidence to support the respondent's opposition to the stay was filed more or less in accordance with my directions, yesterday. I have also received written submissions from Mr Pokoney of counsel who now appears on behalf of the respondent.
I should say before going on that the first defendant, who is not named as a respondent, is the former wife of the second defendant, who is the applicant. Ms Raheb has taken no part in the proceedings, but the evidence before me establishes that following the breakdown of the marriage and their separation, orders have been made in the Federal Circuit and Family Court of Australia on 22 April 2024, including a declaration that the applicant is "the sole legal and beneficial owner of [real property referred to in these proceedings as "Grand Parade") subject to encumbrances".
Orders were made requiring the applicant's former wife to do all things necessary to give legal effect to that declaration within six months of the date of the orders. Unfortunately, it seems that events have overtaken compliance with that order which is still running because Ms Raheb has now been made bankrupt, which is an added complication in what is already a somewhat complicated set of circumstances.
I should say that the Grand Parade property is not one of the properties subject to the writ of possession. The third property, which is the property in respect of which the applicant applies for a stay, is referred to in the evidence and argument before me as the Chalmers Road property. The ground upon which a stay is sought is another, somewhat simpler proposal for refinance involving the Chalmers Road property and the Grand Parade property. I should say it is not the sole ground. Substantial reliance is also placed upon considerations of hardship and those considerations involve in particular the occupant of the Chalmers Road property, who is the mother of the applicant, and I will return to those circumstances directly.
In propounding the grounds of opposition to the stay, Mr Pokoney refers to the well-known decision of Johnson J, who served as the Possession List Judge for many years, in GE Personal Finance Pty Limited v Smith [2006] NSWSC 889, in particular at [19]. Mr Pokoney quite properly refers to the practical requirement, or the practice, usually applied in the Court that a borrower judgment debtor seeking a stay on the grounds of refinance is required to present "credible and reliable evidence" to demonstrate a "realistic prospect of obtaining finance to discharge the debt". It might be said that the experience of the Court underlying that statement of practice is the consideration that offers of refinance often can be readily had, which in the event go unfulfilled because the conditions imposed cannot be met by the judgment debtor.
It also follows from Johnson J's analysis in that authority, which is oft-cited, that circumstances of hardship will rarely carry the day. That consideration is based upon the Court's experience that inevitably foreclosure of a mortgage on residential premises involves the borrower and occupants of the property in substantial hardship. That may not be a universal rule, but it is very common.
However, that's not to say that hardship is irrelevant. For example, where an application is made in a timely way, a short stay may be granted on that ground, depending on the circumstances, of course, and generally when leave is granted for a judgment creditor to issue a writ of possession, a relatively generous time prior to enforcement is permitted for the avoidance of hardship. Having made that observation, a writ in this matter has been on foot for a considerable time already and, I repeat, that a stay has previously been sought and granted.
There is a disagreement between the parties about the amount of the debt owing to the judgment creditor. The judgment creditor, on the one hand, calculates that debt at $7,495,919.31, while on the other, the calculation of the applicant is said to be $7,192,999.23. I am told by Mr Smorchevsky, and Mr Pokoney I think agrees, that the difference in the calculation relates to the post-judgment rate of interest applied. The judgment debtor contends that the relevant rate is the Court rate for post-judgment interest. The judgment creditor says it is entitled to rely upon the terms of its mortgage which allow for a higher interest rate when the borrower is in default.
I accept that that is the difference between the parties. Mr Smorchevsky relies upon the doctrine of merger. It would seem to me that whether or not that doctrine applies in the given circumstances will in the end depend upon the legal interpretation of the terms of the mortgage, a proposition to which I think Mr Smorchevsky acceded. I also observe that for a number of reasons this is not the occasion for me to resolve that issue. First, there is the urgency of the application given the time for execution. Secondly, I am not fully equipped with the arguments of counsel in relation to that matter. Thirdly, in terms of dealing with the matter in a practical sense, unless the judgment creditor is satisfied that its debt has been fully extinguished, the refinance arrangements, even if they are otherwise put in place, cannot be finalised because the matter cannot settle unless the judgment creditor provides a discharge of mortgage.
In any event, the strong argument advanced by Mr Pokoney is that, looked at objectively and dispassionately, the proposal for refinance does not measure up to the practice of being either supported by "credible and reliable evidence" or having a "realistic prospect" of success within the time sought.
The complexities of the case are many. They include considerations which apply not only to the Chalmers Road property, but also to the Grand Parade property. In respect of the latter, as I have said, the registered proprietor, Ms Raheb, is now bankrupt. Her financial affairs are in the hands of her trustee in bankruptcy. I do accept, and I think Mr Pokoney acknowledged, that the trustee will pay due regard to the federal court orders made on 22 April 2024.
Apart from anything else, the federal court involved is a court of bankruptcy, not that it was exercising bankruptcy jurisdiction in this case, but, in any event, as a public official, even if acting in a private capacity, the trustee in bankruptcy is bound to obey the law, including court orders. Although I would have preferred to have seen a letter from the trustee to that effect, I am satisfied that the title to which the applicant is entitled can be secured.
The difficulty, really, is that title is subject to encumbrances. There is a first registered mortgage due to the National Australia Bank. That, in my judgment, probably does not present a particular problem because it can easily be discharged if the offer of finance is realised. The real issue relates to a number of caveats securing what I am told from the Bar table, and accept, are probably contractual charges securing other debts which total a sum of $1.35 million or thereabouts. They are four in number as I understand it from the evidence of the applicant.
The Grand Parade property has been valued by a registered valuer at $6.5 million. That valuation was undertaken on 16 January 2024. The value of the Chalmers Road property is said to be $5.6 million. However, that valuation was undertaken in February 2023. I am prepared to rely upon it. The trend in property values to appreciate is not necessarily universal and I will not speculate about what its present value is likely to be. Rather, I am prepared to act upon that valuation supported by the opinion of the certified practising valuer.
Without going through all of the numbers, it is obvious that - assuming for the moment the refinance is successfully put in place - they are going to be tight. Mr Pokoney says too tight for me to be satisfied at the appropriate level today that there is a realistic prospect of the refinance occurring on that ground alone. He points out, for instance, that the numbers propounded by the applicant make no allowance for the necessary costs of sale which, given the value of the properties, may not be insignificant.
Mr Smorchevsky accepts that it might be tight, but he submits the evidence before me is such that I can be satisfied to the relevant level, which is somewhat less than the balance of balance of probabilities (I am prepared to accept) that there is a realistic prospect that the available funds are sufficient to discharge the judgment creditor's debt even if I work on the basis of the higher rather than the lesser figure.
There is also the evidence of Mr Raheb, who I should observe is, apart from what other business interests he has, a legal practitioner and an officer of this Court, and I accept what he says about the availability of funds from family members to make up any shortfall. Although I may have preferred to have seen that in writing from the people involved.
Quite apart from the sums involved there is the very short timeframe. The stay is sought for a period of effectively 13 days and doubtless that short period was put forward to make the proposition more attractive to the Court, given the fact that there was an earlier stay which has been dissolved. Having said that, I do not doubt the sincerity with which the proposition is put forward. It is obviously a situation where, if I can put it this way, the position of the applicant is bordering on the desperate and it behoves people in that situation to attempt to move heaven and earth to realise the prospect of salvaging the situation; and I am prepared to accept that will be done.
There are many conditions of the loan, not all of which will be easily satisfied, but I am not satisfied that they cannot be met in the time available.
A particular difficulty relates to the position of the caveats on the Grand Parade property. Mr Pokoney acknowledges that those matters are beyond his client's ken given his client has no interest in that property. At the same time, inquiries have been made on behalf of his client and I accept that it is unlikely that the caveators would readily give up their priority in respect of what they assert are unregistered but secured debts. Two of them are the subject of proceedings in this Court and may involve court applications. One relates to a small debt in the Local Court and compared to the total indebtedness involved here might be fairly described as "a mere bagatelle". Another relates to a loan which is not the subject of litigation according to the evidence before me. That adds, as I have said, yet another layer of complexity to the task ahead.
I am also concerned in relation to whether granting a stay of the writ so far as it relates to the Chalmers Road property would result in undue further delay in the judgment creditor realising its security. This is not an insignificant consideration in matters of this type. A secured debt is just that and it behoves the Court to facilitate the realisation of security when there has been default and a judgment entered in respect of the rights of the mortgagee over the property. Already this judgment has been outstanding, as I will say for the third time, for 11 months. That long period of time relates to the steps taken by the judgment debtor to preserve his position rather than any laches on the part of the judgment creditor. As against that, doubtless Mr Smorchevsky says "it is only two weeks, your Honour" which is not a long time in respect of the current situation.
I return to the hardship issue. As I have said, hardship would rarely found a stay other than for a short period of time. The occupant of the home is, as I have said, the mother of the applicant. She is a lady of some 78 years, and she has quite significant health problems which I need not go into. She has lived in the area for 20 years. Her church is locally situated and, as occurs with persons who reside in an area for that length of time, she has strong neighbourhood supports, quite apart from the attentions of her family. There would doubtless be a very significant personal effect upon her if she was required to move permanently from her home to which she has understandably a very significant sentimental attachment and a valid one. Residential premises are not merely commercial properties; they are referred to by all of us in society as "our homes" and the dislocation of an old - meaning no disrespect - person from her home of some 20 years is a very significant consequence.
Having said that, the property has been mortgaged and the law must take its natural course in due course. However, I am of the view that her hardship - and unlike perhaps other home-owners caught in this unfortunate type of situation, her own conduct or actions have not brought about the hardship, other than by perhaps trusting her son - I have formed the view that her personal hardship, coupled with what I regard as a good chance of this refinance coming to fruition, even if it falls somewhat short Johnson J's "realistic prospect", persuades me that on the balance of convenience a short stay should be granted.
I do not propose to pronounce a stay, however, until further order. I propose to grant a stay for the fixed term sought. In answer to my inquiry, I am told that given the writ is still valid, an eviction can be organised on 14 days' notice and as a condition of granting the stay I propose to grant the judgment creditor leave to forthwith contact the Sheriff's Office to arrange another date for eviction after 1 November 2024.
My orders then are:
1. Under ss 67 and 135 Civil Procedure Act 2005 (NSW), the writ of possession in respect of the property at XX XXXXXXXX XXXX, XXXXXXXXXXX, New South Wales, XXXX, being the land comprised in certificate of title folio identifier X/XXXXX be stayed until 5pm on 1 November 2024.
2. It is a condition of the stay that the judgment creditor be permitted forthwith to arrange with the Sheriff of New South Wales a further appointment for execution of the writ of possession in respect to the said property on the first available date after 1 November 2024.
By reference to the prayers in the notice of motion, the applicant seeks an order for his costs if the application was unsuccessfully opposed. However, I am of the view that there remains what is referred to as a matter of practice as the "indulgence rule". This is a very significant indulgence of the grant of a second stay of possession in respect of a writ of execution to enforce a judgment for possession which is 11 months old.
In all the circumstances I am of the view that I should make the following order.
1. The second judgment debtor, the applicant on the motion, to pay the judgment creditor's costs of this application.
2. These orders are entered forthwith in accordance with my pronouncement of them.
[3]
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Decision last updated: 21 October 2024