Perpetual Trustees Victoria Limited v Sheehan and Anor

CATCHWORDS : Practice and Procedure - application to extend stay of consent orders - applicable principles LEGISLATION CITED : Supreme Court Rules 1970 Pt 44 r 5 Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685; Brutan Investments Pty Limited v Underwriting and Insurance Limited (1980) 39 ACTR 47; Collier v Morlend Finance Corporation (Victoria) Pty Limited (1989) NSW Con R 55,473; Croney v Nand [1999] 2 Qd R 342; CASES CITED : Griffiths v Australian Postal Commission (1987) 87 FLR 139; Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; In Re Browbank and Miller; ex parte Loniplus Pty Limited (1986) 12 FCR 254; Powerflex Services Pty Limited v Data Access Corporation (1996) 137 ALR 498; Water Industry Salaried Officers' Union v Professional Officers' Association (NSW) (1987) 22 IR 178; Westaflex (Aust) Pty Limited v Wood (1990) AIPC 90-666; Perpetual Trustees Victoria Limited - Plaintiff PARTIES : Dr Richard Kingsley Sheehan - First defendant Maureen Patricia Sheehan - Second defendant FILE NUMBER(S) : SC 13593/01 Mr P Dowdy - Plaintiff COUNSEL : In Person - First defendant Mr M Duncan - Second defendant SOLICITORS : Heidtman & Co Solicitors - Plaintiff

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

13593 of 2001 Perpetual Trustees Victoria Limited (Plaintiff)

JUDGMENT 1 Shaw J: An interlocutory question concerning whether or not this Court should grant a stay of a judgment and order in this matter entered, by consent, by Simpson J, arises in this litigation. The plaintiff sought an order for possession of a property known as 98 Chapel Lane, Baulkham Hills of which the defendants are the registered proprietors. 2 In reliance upon the property as security the defendants borrowed an advance of $459,000 which was said to be for wholly, or predominantly, business or investment purposes, or for both purposes. A loan agreement was executed between the parties on 18 January 2001 which indicated on the part of the defendants an agreement to borrow money and, without going into the full details of the agreement, contemplated the payment of interest by monthly instalments and additional repayment amounts, also to be paid monthly. In the event of default, the agreement enabled the plaintiff to require immediate repayment in full of all money owed. One day's written notice was required to allow the defendants to remedy any such default. The agreement specified that the defendants were jointly and individually liable for all amounts due under the loan. It acknowledges the plaintiff's recommendation that the defendants should obtain independent legal advice about the loan. 3 I have earlier issued an interlocutory judgment in these proceedings on 23 July 2003 (see [2003] NSWSC 651). The effect of that judgment was to allow the defendants to challenge the consent orders made by Simpson J. The first defendant impugns those orders on the basis that he was not capable of understanding what he had consented to at the trial because of his medical condition. The second defendant impugns the orders on the basis that she had no legal advice on her rights and wishes to have the orders set aside so that the matter can be properly tried now that Mr Duncan of counsel appears to represent and advise her. 4 The plaintiff claims that it is now owed $678,000 pursuant to the loan agreement. The matter had originally settled for an amount of $613,606.78 inclusive of costs. It seems to be common ground that the defendants are not in a position to pay that sum or anything like it and hence the plaintiff sought an order for possession of the property. 5 When the proceedings came before Simpson J the parties came to an agreement which crystallised in written terms of settlement. Orders were made but have not been formally entered. Those orders included, inter alia: The judgment for possession and the judgment debt be stayed up to and including 31 October 2003. 6 Hence, the current question before this Court can be characterised as whether the agreed date for execution of the consent orders should be extended. In the earlier proceedings before me, as in the current matter, the defendants allege that because of incapacity, disability and lack of legal advice, there are arguable grounds to justify setting aside the consent orders made by this Court. This may be thought a substantial (some might think formidable) hurdle which the defendants need to overcome, but it does not render their notice of motion unarguable. The essence of my earlier judgment was that the defendants need not be put to the trouble and expense of initiating fresh proceedings to set aside the earlier judgment but that their notice of motion should be determined in the original proceedings, without any procedural unfairness to the plaintiff. 7 A notice of motion was filed by the first defendant seeking that the orders of 10 June 2003 (though perhaps this should be 11 June 2003) between the plaintiff and the defendants be stayed until the matters raised by the points of claim, filed by the defendants in accordance with my earlier judgment, on 28 July 2003, and until the motion from which the points of claim derive, has been heard and resolved by the Court. 8 In the earlier judgment I set a timetable, suggested in the alternative by the plaintiff, which has in fact slipped behind, a regrettable, but not uncommon phenomenon in litigation. In part, this is because of a request by the plaintiff for further and better particulars of the points of claim. However, I regard that departure from the timetable as being only a marginal consideration in the discretionary determination of the present matter. 9 Counsel for the plaintiff, Mr Dowdy, characterised the question before this Court as whether it was just that orders for further staying the consent orders should be made. He pointed out that the defendants had personally signed the consent document as well as the solicitor for the first defendant. The plaintiff submitted that this was a correct resolution of the controversy and urged that the Court must do justice according to the law rather than focussing on 'mercy'. He said that it would be unjust to the plaintiff to require it to bear the costs of accommodating the defendants, who purchased the property in March 1996 by using the loan monies to pay out other debtors. He pointed to the long period of default and the fact that the plaintiff was, in fact, accommodating the defendants without any repayment of interest or principal. Mr Dowdy submitted that the well known principle articulated in Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161, to the effect that there was a general principle of Equity applicable when it is sought to restrain the exercise of a mortgagee of the rights under the mortgage instrument, namely that: failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed by order upon the exercise of the respondent mortgagee's rights under the mortgage (at 169 per Barwick CJ) See also, in the New South Wales Court of Appeal, Collier v Morlend Finance Corporation (Victoria) Pty Limited (1989) NSW Con R 55,473. I must and do take account of these principles, however I also observe that:

(a) in Brutan Investments Pty Limited v Underwriting and Insurance Limited (1980) 39 ACTR 47, Sheppard J held that it was doubtful whether payment in was always a condition of obtaining interlocutory relief against a mortgagee threatening to exercise a power of sale;

(b) the parties themselves have agreed to stay any exercise of the right to possession until 31 October this year;

(c) if the defendants were to be dispossessed they would be rendered homeless without means, and there would be consequently considerable hardship occasioned to them;

(d) none of the cases cited by the plaintiff exclude a residual discretion in a court to stay a judgment in circumstances which appear to the court to be just;

(e) Part 44 r 5 of the Supreme Court Rules 1970 provides that: The Court may, on terms, stay execution of a judgment or order Kirby P has said, admittedly concerning the stay of a judgment pending appeal that no special circumstances need to be demonstrated: Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685.

(f) although estimates of the duration of the hearing of the notice of motion varied at the bar table between 1 - 5 days, depending upon the extent of cross-examination, nonetheless, it seems to me, that if a revised timetable can be formulated and all relevant evidence in chief be put on in affidavit form then the question as to whether the consent orders should stand or varied or be set aside can be dealt with reasonably expeditiously in this Court. I shall return to these procedural matters shortly. 10 Whilst not resiling from its general opposition to any further stay, the plaintiff puts an alternative submission that, if a stay were to be granted, then terms and conditions ought to be imposed. One suggestion was that interest payments of $155.92 per day should be paid by the defendants. Alternatively it was suggested that $450 per week was a fair market price for rent of the property and that should be paid by the defendants as a condition of the stay. 11 The short answer to the suggested pre-conditions for a stay put by Mr Duncan for the second defendant was that they would, in a practical sense, have the same effect as declining the stay because the defendants can not financially meet those requirements. He points to the unchallenged evidence of the second defendant that: …because we have no financial resources at all and have not been able to find any alternatives to public housing, should the agreement remain in force, there appears to be no alternative but for Richard, our children and myself becoming homeless. 12 By letter of 28 July 2003 the Department of Housing informed the first defendant that it was declining to review the Department's decision to reject his priority assistance application and remove his name from the housing register. However, it was said that he could re-apply for public housing after the sale of his property or if he experienced other changes in his circumstances. 13 In the context of an application for a stay of a primary decision pending an appeal (which I accept is somewhat different from the present position) the New South Wales Court of Appeal (Kirby P, Hope and McHugh JJA), in Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685, rejected the older, more exacting tests of 'special' or 'exceptional' circumstances and said that: …it is sufficient that the applicant for a stay should demonstrate a reason or an appropriate case to warrant the exercise of discretion in his favour. 14 This approach has been applied in other cases including Water Industry Salaried Officers' Union v Professional Officers' Association (NSW) (1987) 22 IR 178 at 183. In Re Browbank and Miller; ex parte Loniplus Pty Limited (1986) 12 FCR 254 (at 255) Beaumont J applied Cambridge Credit in a non-appellate context to support the stay of a bankruptcy notice which, it was alleged, had been irregularly entered. 15 Miles CJ, of the Supreme Court of the Australian Capital Territory, in Griffiths v Australian Postal Commission (1987) 87 FLR 139 at 141 embraced the Cambridge Credit formula governing the grant of a stay. The relevant passage from Cambridge Credit was cited with approval by Gray J in the Federal Court of Australia in Westaflex (Aust) Pty Limited v Wood (1990) AIPC ¶ 90-666, and his Honour applied that principle despite the submission that a special, stricter rule applied in patent cases. 16 Notwithstanding the application of a more stringent test in the Supreme Court of Victoria, a Full Court of the Federal Court of Australia took the view that they should follow Cambridge Credit in Powerflex Services Pty Limited v Data Access Corporation (1996) 137 ALR 498 at 499; see also, Croney v Nand [1999] 2 Qd R 342. 17 I find this test of flexibility rather than adjectival tyranny of some use, by way of analogy, in the resolution of the issue before this Court. 18 In all of these circumstances, and bearing in mind the submission that I should do justice according to law, I think the appropriate course is to order a continuation of the stay of the orders made by this Court which would involve the judgment for possession and judgment debt being stayed beyond 31 October 2003. That order will be made pending any further order of this Court, allowing for the possibility that the order may be set aside if circumstances sufficiently change or if the matter is unduly delayed. In my view the plaintiff is entitled to an expeditious hearing of the claim and I direct the plaintiff to bring in, within 7 days, short minutes of order which will reflect a revised program consistent with the procedural orders made in the earlier judgment but containing an order that the evidence in chief be given by affidavit and a timetable for the filing of those affidavits. The short minutes should also include a direction that the matter should be referred to the list judge on the next call up date for further directions and an allocation of a hearing date. 19 I shall finalize those orders once that document has been provided and served on the defendants.

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