Perpetual Limited (formerly known as Perpetual Trustees Australia Limited) v Marwa Dilati

Judgment 1HER HONOUR: These are proceedings for possession brought by Perpetual Limited against the registered proprietor of a property at Greenacre, Ms Marwa Dilati. The application presently before the court is a notice of motion filed by an occupier of the property, Mr Khalid Ali Khalid, seeking an order that he be joined as a defendant to the proceedings and a stay of execution of a writ of possession issued against Ms Dilati following the entry of default judgment against her. 2The circumstances in which Mr Khalid's application is made are as follows. The proceedings were commenced by statement of claim filed on 12 November 2009. On 15 February 2010, a notice of appearance was filed on behalf of the defendant. Apparently at around the same time, a document headed "Consent Judgment" and dated 10 February 2010 was placed on the court file. The terms of the consent judgment included an order for possession of the property and judgment in a money sum. The document was signed on behalf of the defendant by the solicitor who subsequently entered the appearance. 3Although there was no evidence on this issue, I was informed from the bar table that the circumstances in which that document was provided to the court were that agreement had been reached contemplating a schedule for payment of arrears in the loan secured by the mortgage. I was further informed that the payments were not made as agreed. It appears to have been intended that the consent judgment could, in those circumstances, be entered. However, what in fact occurred was that default judgment was entered on 3 March 2011 for possession and judgment in what was presumably the updated amount then claimed to be outstanding under the loan. 4At the time the proceedings were commenced, the applicant on the present motion was not named as a defendant and there does not appear to be any reason to think that Perpetual was aware of his claimed status as an occupier of the property. 5According to the evidence relied upon by Perpetual, on 16 November 2009, shortly after the statement of claim was filed, a Notice to Occupier, together with a copy of the statement of claim, was left at the security property as required by rule 6.8 of the Uniform Civil Procedure Rules 2005. There is a contest as to that contention. Mr Khalid's evidence on affidavit was that his family had been living at the property since at least August 2009 and that no copy of the Notice to Occupier or statement of claim ever came to his attention. 6Before August 2009, substantial renovations to the property were undertaken. There is some evidence suggesting that even after members of the family moved into the house in August 2009, some renovations may have been continuing. A possibility exists that that is the explanation for a document left at the premises going missing. 7Conversely, there is the possibility that the document was not left at the premises in accordance with the requirements of the Uniform Civil Procedure Rules. I am unable, on an interlocutory application, to resolve that factual issue. It does appear, however, that the document may not in fact have come to the attention of Mr Khalid, whether or not it was left at the premises in accordance with the rules. 8The circumstances in which Mr Khalid and his family came to be living at the property are a little unusual. According to his evidence, he entered into an oral agreement in 2004 to buy the property for $840,000. The registered proprietor of the property, as I have said, is Ms Marwa Dilati. Mr Khalid states that he did not negotiate directly with her because it is the Arab custom for a man not to have direct dealings with a woman who is not a member of his family. He says that, for that reason, most of his negotiations were with Ms Dilati's husband, Mr Mohammed Dilati, and her son, Mr Ahmed Dilati. 9Separately, Mr Khalid says that, in accordance with the precepts of his Islamic faith, he did not wish to borrow money from a financial institution in order to acquire the property since it was his understanding in 2004 that Islam prohibits borrowing money at interest. In those circumstances he agreed with the defendant, through her husband and son, to pay the fixed sum of $840,000 over a period. He was told by Mohammed Dilati, "When you have paid the price then we will transfer the property to you but you can live in the house in the meantime." 10Mr Khalid does not say in his evidence when he first became aware of the existence of the mortgage of the property by Ms Dilati to Perpetual. It appears, however, that he has been aware of its existence since at least October 2008. He sought during that year to have the mortgage removed from the property before making any further payments to Ms Dilati. Ultimately, however, after the parties consulted their Imam, Mr Khalid agreed to pay the outstanding balance of the purchase price notwithstanding the fact that the mortgage remained on the title. 11In 2010, Mohammed Dilati began to press Mr Khalid for payments towards the mortgage against the threat of losing the house. Mr Khalid agreed to make the payments. He states that he was not told at that time that the mortgagee had brought proceedings for possession of the property. He further states that he did not become aware of the existence of the writ of possession until he received a Notice to Vacate from the Sheriff in March of this year. It was only then that he approached lawyers for assistance in defending his occupation of the property. 12The present application came first before Johnson J on 6 May 2011. His Honour granted a stay of the execution of the writ of possession until yesterday: see Perpetual Limited v Dilati [2011] NSWSC 441. His Honour declined to make an order that day joining Mr Khalid as a party to the proceedings. However, orders were made which, to his Honour's mind, were designed to allow Mr Khalid "to acquire a clearer and more complete understanding of what has happened between the plaintiff and the defendant for the purpose of determining what step he takes". 13Application had been made to Johnson J for an order that the plaintiff provide copies of the loan documentation to Mr Khalid so that he could assess that material. His Honour noted the plaintiff's concern as to the making of such an order because it would involve the provision of documents containing personal information with respect to Ms Dilati. In those circumstances, his Honour made orders calculated to bring the making of the application to her notice. His Honour said: "If the defendant does not appear and seek to resist such an order the court, on the next occasion, may be prepared to make such an order. The plaintiff ought be in a position, having gathered the documents, to comply with such an order promptly. However, I make no such order today as there is a legitimate question raised about the prospect of there being personal or confidential information concerning the defendant held by the plaintiff." 14It is implicit in his Honour's reasons that his Honour contemplated that, pending an opportunity for Mr Khalid to consider such documents as the court may order be provided, there would also be an extension of the stay. 15When the proceedings came before me yesterday, Mr Khalid sought a further stay of execution of the writ of possession and orders for the provision of a more extensive list of documents than had previously been identified. Mr Young, who appears for Mr Khalid, stated that the purpose of seeking those orders was to enable the applicant to investigate whether there was a proper basis for the judgment entered against Ms Dilati. 16Mr Young relied first upon the requirement of r 6.8 of the Uniform Civil Procedure Rules that, if a person not joined as a defendant is in occupation of the land, the plaintiff must either state that he does not seek to disturb the occupier's occupation of the land or must serve the originating process on the occupier, together with the Notice to Occupier. Mr Young further noted that pursuant to r 6.24 of the Uniform Civil Procedure Rules a person in that position, that is, of being in occupation of the land, may be added as a defendant to proceedings, it being implicit in that rule that the joinder of such a person will in some circumstances be proper or necessary. 17Mr Young identified four sub-bases on which Mr Khalid should be let in to defend his entitlement to occupy the premises. First, he noted that if there had not been compliance with the requirement of r 6.8 to serve a Notice to Occupier, that is an irregularity which would be a basis for the court to set aside the default judgment obtained against Ms Dilati. 18Secondly, he noted that judgment entered by default may always be set aside in the exercise of the court's discretion. He submitted that, if it transpires that Ms Dilati could have mounted a proper defence to Perpetual's claim, that might afford a basis for such an order. 19Thirdly, Mr Young relied upon s 87 of the Real Property Act 1900 and submitted that, in the present case, the property might be held by Ms Dilati on constructive trust for Mr Khalid, either as to the whole of the property or in the proportion of the amount that has already been paid of the purchase price to the agreed purchase price. I note in that respect that the evidence appears to reveal that Mr Khalid has paid most of the agreed purchase price. 20Mr Young acknowledged that he had been unable to find any useful jurisprudence as to the application of s 87 to the present circumstances, but invited the application of common sense. He submitted that surely such a rule would include a circumstance where, in the absence of the conduct of the defence by the beneficiary, there was otherwise no proper contradictor to the plaintiff's claim. 21Finally, Mr Young submitted that Mr Khalid would be entitled to bring a suit for specific performance against Ms Dilati for completion of the agreement for sale of the property which would, so it was submitted, include a requirement that she do all reasonable things to transfer the title of the property to Mr Khalid. 22Separately, it was indicated on Mr Khalid's behalf that, even if there is no defence to the proceedings which might properly have been maintained by Ms Dilati or, indeed, no juridical avenue to reopening the defence of the proceedings on the application of Mr Khalid, he would be in a position within the near future to pay out the whole of the judgment debt owed to Perpetual by Ms Dilati. As to that separate ground for the seeking of a stay, I note that Perpetual does not contend that the equity in the property is being eroded by the delay of its present efforts to have the writ executed. 23Subject to one matter, it seems to me that Mr Khalid's proposal to pay out the mortgage alone warrants a further stay of the execution of the writ of possession. In an affidavit sworn 22 May 2011, Mr Khalid stated that he is confident that he will be in a position to pay the debt owed by Ms Dilati to Perpetual within four to six weeks. Although there are no financial documents in support of that particular contention, there is evidence that Mr Khalid has already paid a substantial portion of the purchase price to Ms Dilati. Further, as I have already noted, Perpetual does not contend that it will be prejudiced in the sense of there being inadequate proceeds of sale to meet the judgment debt if the exercise of its power of sale is delayed. If the stay is not granted, the prejudice to Mr Khalid is manifest. 24The one qualification is that, as correctly noted by Ms Bearup on behalf of the plaintiff, there is potential prejudice to Ms Dilati if the sale is deferred and she is, in due course, visited with additional interest due to the delay and Perpetual's legal costs of these arguments. Any such prejudice may, however, be met by an offer made in correspondence on behalf of Mr Khalid to put up the sum of $20,000 against the risk of such costs being wrongly imposed on Ms Dilati. 25Even leaving aside my conclusion that a further stay is appropriate on the basis of Mr Khalid's proposal to pay out the judgment debt, it seems to me that the arguments raised by Mr Young do also warrant a further stay of the execution of the writ of possession. First, although there is evidence in the form of an affidavit of service that the notice to occupier was left at the property, the competing evidence read on behalf of Mr Khalid discloses that there is a real issue to be tried as to whether the notice was served, although in fairness it must be observed that on the present state of the evidence, there does not appear to be any reason to doubt that the notice was left on the land as stated by the author of the affidavit of service. 26Equally, however, as I have indicated, there does not seem to be any reason to doubt that the notice did not in fact come to the attention of Mr Khalid. Although in those circumstances there may not have been an irregularity in the entry of default judgment, it seems to me that the court may, as a matter of discretion in determining whether to grant a stay, take into account the points that might have been raised by the occupier had the existence of the proceedings come to his attention before default judgment was entered. 27The jurisprudence as to the reason an occupier is entitled to be made aware of the proceedings and to be joined as a defendant if he so wishes does not reveal a clear statement of principle to inform that issue. In ANZ Banking Group v Wright (unreported) 3 July 1997 Giles CJ Comm D (as his Honour then was) said: The provisions of the Rules to which I have referred are referred (sic) are protective of the occupier of land of which a plaintiff claims possession from a defendant. The occupier may have rights good against the plaintiff which the defendant is not concerned to uphold, and if the plaintiff seeks to disturb his occupation is given the opportunity to assert his rights. A case such as Minet v Johnson (1890) 63 LT (NS) 507 illustrates the mischief addressed: although the note to Pt7 r8 in Ritchies' Supreme Court Procedure states that the purpose of the rule is "to prevent collusive ejectment actions", the occupier is protected even in the absence of collusion between the plaintiff and the defendant. 28As his Honour there noted, the decision in Minet v Johnson (1890) 63 LT (NS) 507stands as authority for the proposition that even in the absence of collusion between the plaintiff and the defendant, the occupier "is protected". A close examination of the judgment in Minet v Johnson , however, discloses that there is a limit to the extent of the protection. In that decision Lord Esher MR expressed the view that even where an occupier was let in to defend his entitlement to possession after the entry of default judgment, the judgment "must not be set aside as between the plaintiff and [the mortgagor]; it can only be set aside so far as it concerns [the occupier]" (at 508). 29Mr Young acknowledged that he cannot point at present to any particular defence. The purpose for seeking to extend the stay and to inspect the documents sought was to ascertain whether there was any defence that could have been raised by Ms Dilati. 30The difficulty faced by an occupier in the position of Mr Khalid is that he can be in no better position now than he would have been in had he been let in to defend the proceedings before default judgment was entered. There may have been some debate at that point as to his entitlement to the range of documents now sought. Conversely, he would in all probability have been able to postpone the issue of a writ pending investigation of those issues. 31I come then to the difficult question of what documents, if any, the applicant should now be entitled to inspect. The documents sought are listed in an email dated 18 May 2011 annexed to the affidavit of Mr Khalid's solicitor, Mr Pope. There is force in my view in Ms Bearup's contention that it is a broad ranging request which goes well beyond what Mr Khalid might have been entitled to compel production of had he been let into the proceedings at an earlier stage. Conversely, if any content is to be given to the object of protecting an occupier against the possibility of "collusive ejectment", it seems to me that an occupier joined as a defendant at an early stage of the proceedings would be entitled to see at least the primary security documents, statements of account as to the debt allegedly outstanding and any notices served upon the defendant mortgagor. 32What is sought by Mr Young on behalf of the applicant goes beyond those descriptions in the following respects. First, as Mr Young frankly conceded, he has framed the request in broad terms, seeking copies of "any and all" agreements to which both Perpetual and Ms Dilati are parties and so as to catch other documents, such as documents referred to in the documents described, which might otherwise slip through the net and not be produced. 33Secondly, Mr Young seeks the loan application, all documents provided in support of the loan application, any declarations of legal or financial advice and Consumer Credit Code declarations. That category of documents is plainly directed to investigating defences that only the defendant, and not the occupier, might have against the plaintiff. I am not persuaded, from the brief arguments I have heard as to the effect of s 87 of the Real Property Act , that even in the unusual circumstances of this case the occupier stands in the shoes of the defendant to that extent. I do not think Mr Khalid is entitled to production of those documents. 34For those reasons I have concluded that Perpetual should produce to Mr Khalid, by reference to Mr Pope's e-mail: as to category 1, only those documents Perpetual seeks to enforce in these proceedings (which plainly would include the loan agreement); any document in category 2; any document in category 3; as to category 4, records of payment only in so far as they are referable to the loan account the subject of the proceedings; any document in category 5; not category 6 (the loan application documents) and any document in category 7. 35I direct the plaintiff to provide the documents identified in this judgment within seven days. I direct the applicant, within a further 21 days after receipt of the documents, to notify the plaintiff whether any further application will be made and if so to articulate the orders sought in a notice of motion to be served by that date. 36I extend the stay granted by Johnson J on 6 May 2011 and extended by me yesterday up to and including 27 June 2011. I stand the proceedings over to that date before the duty judge. 37I note that the extension of the stay is conditional upon the applicant paying into his solicitor's trust account the sum of $20,000 for payment out to the plaintiff or the defendant if so directed by the court upon any application being made in that respect. 38I direct the solicitor for the applicant to provide a copy of the orders made today to the solicitor on the record for the defendant under cover of a letter requesting him to take such steps as are within his control to bring the orders to the attention of the defendant.