Phillips v Hogg [2001] QSC 390

[2] The proceeding commenced by claim filed on 27 April 2001 supported by a statement of claim. There was no defence to the proceeding filed by Earle Raymond Hogg ("the respondent"). The applicant therefore applied for summary judgment in default of appearance pursuant to r 288 of the UCPR before Muir J on 26 June 2001. Muir J declared that:

"1. By clause 6 of a Deed of Guarantee and Indemnity made between the Plaintiff and the Defendant on or about 24 July 2000, the Defendant charged lot 7 on survey plan 108986 in the County of Ward, Parish of Nerang, title reference 50246682 with payment to the Plaintiff of any moneys which may after 24 July 2000 be owing to the Plaintiff by the Defendant.

2. The sum of $21,986.93 be owing by the Defendant to the Plaintiff and that the said land be charged with the payment of that sum."

[3] Muir J adjourned any further hearing of the matter to a date to be fixed. An order for sale of the property pursuant to s 99(2) of the Act had been sought in the claim.

[4] The applicant's solicitors prepared a notice of exercise of power of sale under s 84 of the Act dated 5 September 2001 and caused that to be served on the respondent on 11 September 2001 together with a copy of the order made by Muir J dated 26 June 2001.

[5] The applicant filed this application on 13 September 2001. A copy of the application and the affidavit of service in relation to the service on the respondent of the notice of exercise of power of sale and order dated 26 June 2001 were served on the respondent on 6 October 2001.

[6] When the application was heard on 12 October 2001, the respondent appeared in person to oppose the order for sale being made. The respondent did not file any affidavits, but admitted that he owed money to the applicant.

[7] I will summarise the background facts from what the respondent stated from the Bar table. The respondent is a builder who had a contract for the construction of an aged care facility and had entered into a contract with the applicant for works in respect of that construction contract. The respondent entered into the deed of guarantee and indemnity with the applicant which contains the charging clause that did not identify any specific property belonging to the respondent and that is the subject of the declaration made on 26 June 2001. The respondent has commenced arbitration proceedings against the owners of the aged care facility claiming $746,000 as unpaid under the construction contract. As a result of the non-payment of that sum of $746,000, the respondent has been unable to pay a number of subcontractors and has been able to make arrangements deferring payment with all subcontractors other than the applicant.

[8] The respondent also sought to oppose the application on the basis that he understood that his financier, Bank of Queensland Limited, had a first mortgage over the property to secure a business overdraft facility which the bank had provided to him.

[9] The search of the certificate of title of the property as at 11 October 2001 shows as the only encumbrance on the title the caveat which had been lodged by the applicant on 3 April 2001 to protect the equitable charge which is the subject of this proceeding. There are no unregistered dealings.

[10] The respondent had not informed the bank of the applicant's intention to seek an order to sell the property.

[11] The property is a factory in an industrial development where each factory has a separate title. It is the respondent's place of business. The respondent estimates that the property has a value in the vicinity of $100,000.

[12] Section 99(2) of the Act provides:

"(2) In any action, whether for foreclosure, or for redemption, or for sale, or for the raising and payment in any manner of mortgage money, the Court, on the request of the mortgagee, or of any person interested either in the mortgage money or in the right of redemption, and, even though-

(b) the mortgagee or any person so interested does not appear in the action;

and without allowing any time for redemption or for payment of any mortgaged money, may direct a sale of the mortgaged property, on such terms, subject to subsection (3), as it thinks fit, including the deposit in Court of a reasonable sum fixed by the Court to meet the expenses of sale and to secure performance of the terms."

[13] Section 99(2) of the Act has its origin in s 25 of the Conveyancing Act 1881 (Eng) and equivalent provisions have been enacted in the various Australian States. It is recognised that a provision such as s 99(2) of the Act provides the remedy of judicial sale for an equitable chargee: Tennant v Trenchard (1869) LR 4 Ch App 537, 542; AVCO Financial Services Limited v White [1977] VicRp 62; [1977] VR 561, 563, Worrell v Issitch [2000] QSC 146; [2001] 1 QdR 570.

[14] The jurisdiction conferred by s 99(2) of the Act is invoked when the chargee in an action for sale requests an order pursuant to s 99(2) of the Act. That describes what has occurred in this matter. When the jurisdiction under s 99(2) of the Act is invoked, the preponderance of authority favours the view that whether or not the court exercises the power conferred by s 99(2) of the Act is discretionary: Tyler et al Fisher & Lightwood's Law of Mortgage (Aust ed) at para 21.21, Palk v Mortgage Services Funding plc [1993] Ch 330, 340, 342, but compare BBC Hardware Limited v GT Homes Pty Ltd (unreported SC(Q), Thomas J, 17 December 1996) at 6.

[15] The applicant has already satisfied this Court of the existence of the charge. The title of the property is clear. The property has a sufficient value to pay out the amount that has been determined as secured by the charge. The respondent's bank has not sought to register any mortgage over the property. The fact that the respondent has been unsuccessful in persuading the applicant to defer seeking payment of what is owed by the respondent is not a sufficient reason to deprive the applicant of the remedy which is sought.

[16] The applicant seeks that William John Fletcher who is a registered trustee and partner with Bentleys MRI be appointed the person for the purpose of conveying the property. Mr Fletcher's firm is engaged to provide taxation advice to the applicant. If that were considered an impediment, the applicant seeks the appointment of Philip Arthur Hennessy, registered trustee and chartered accountant with KPMG, who has no interest in the subject matter of the application and is not aware of any other circumstance making it inappropriate for him to act as the person appointed to convey the property.

[17] Because of the existing relationship which Mr Fletcher has with the applicant, and the availability of Mr Hennessy, I consider it appropriate that the person appointed to convey the property should be Mr Hennessy. See Re Lloyd; Allen v Lloyd (1879) 12 Ch D 447, 451. Having regard to the nature of the relationship between the applicant and the respondent, I do not consider it appropriate that either party have the carriage of the sale.

[18] No submissions were made about the mechanics of the sale. Rule 278 of the UCPR empowers the court to appoint a party or another person to have the conduct of the sale, if the court, by a judgment, orders the sale of land. Pursuant to r 278(3) of the UCPR, the court may permit the person having the conduct of the sale to sell the land in a way that person considers appropriate or give directions about conducting the sale. In view of Mr Hennessy's experience as a registered trustee, I do not consider it necessary to make directions about the conduct of the sale, but I do consider that it is appropriate that he be appointed to have the conduct of the sale, in addition to being appointed pursuant to s 99(7) of the Act to convey the property.

[19] The procedure under s 99(2) of the Act is a different procedure from and not equivalent to a mortgagee's exercising the power to sell mortgaged property conferred by s 83 of the Act. The power to sell conferred by s 83 of the Act applies where the mortgage is made by instrument. Section 77 of the Act defines "instrument of mortgage" as including "an instrument or memorandum of mortgage under the Land Act 1994, the Land Title Act 1994 or the Mineral Resources Act" which is consistent with the term referring to an actual instrument for the purpose of creating the mortgage. That definition appears to be relevant to the words used in s 83(1) of the Act. Although "mortgage" is defined in schedule 6 of the Act as including a charge on any property for securing money or money's worth, the charging clause in the deed of guarantee and indemnity which gives rise to the equitable charge in this matter could not fairly be described as an instrument of charge, when the charging clause is ancillary to the main purpose of the deed.

[20] It is not strictly necessary to decide whether or not the applicant has the benefit of the power to sell under s 83(1) of the Act, as the applicant has elected to pursue the relief of an order for sale under s 99(2) of the Act. It was therefore not necessary for the applicant to serve a notice of exercise of power of sale on the respondent in anticipation of exercising the power to sell conferred by s 83(1) of the Act, when the applicant was at the same time proceeding to obtain an order for sale under s 99(2) of the Act. That means that all legal costs incurred by the applicant in relation to the preparation, service and proof of service of the notice of exercise of power of sale were unnecessary and should not be allowed as costs of this proceeding.

[21] The power to order a judicial sale of a debtor's land at the request of a creditor is a drastic remedy, but is one to which the applicant in this case has resorted, because of the non-payment by the respondent of the debt charged on the property. There will be costs associated with the forced sale, particularly because of the involvement of an independent person to conduct the sale. The court has a wide discretion in exercising the jurisdiction conferred by s 99(2) of the Act. If the respondent were to request it, I would be inclined to consider deferring the operation of the order for sale for a period of say 2 weeks to enable the respondent to pay out the debt of the applicant.

1. There be a sale of Lot 7 on Survey Plan 108986 County of Ward Parish of Nerang Title Reference 50246682 ("the property") pursuant to s 99(2) of the Property Law Act 1974.

2. Philip Arthur Hennessy be appointed to conduct the sale of the property and be appointed pursuant to s 99(7) of the Property Law Act 1974 to convey the property upon the sale of the property in accordance with these orders.

3. Philip Arthur Hennessy be entitled to charge reasonable expenses for his time in conducting the sale of the property and those expenses be deemed to be part of the costs of the sale of the property.

4. Philip Arthur Hennessy be entitled to deduct the costs of sale of the property from the proceeds of the sale of the property, before making payment to the applicant of the sum of $21,986.93 charged on the property.

5. The respondent pay the applicant's costs of the application to be assessed excluding the costs in relation to the preparation, service and proof of service of the notice of exercise of power of sale issued in respect of the property and dated 5 September 2001.