Plaintiff v Defendants

2 Alleyfelt mortgaged the Property to the plaintiff in December 2006. It is in default under the mortgage and the plaintiff is entitled to possession of the Property under the mortgage and the Transfer of Land Act 1958 (Vic) ('the Act'). The mortgage restricts the right of the mortgagor to let the Property. It can only do so if the plaintiff gives written consent. Alleyfelt does not have that consent.

3 Alleyfelt let four separate parts of the Property to the defendants by short form lease agreements, each dated 27 June 2012. Alleyfelt and the four defendants are all controlled by the same person, Mr Klopper. He claims that in April 2012, well after the date of the mortgage, officers of the plaintiff verbally consented to the then month to month tenancies under which the defendants, or predecessor entities that operated their businesses, occupied the several parts of the Property. The defendants say this gives rise to a waiver of the term requiring written consent and, as well, the plaintiff is estopped from relying on the absence of any written consent.

4 The plaintiff disputes that any such consent was given and says, in any event, that no consent could have been given for written leases that post-date the so called consent, waiver or estoppel.

5 The issue is whether, despite the acknowledged lack of any written consent by the plaintiff to the four written lease agreements, the circumstances deposed to by Mr Klopper raise a sufficient dispute as to the existence of a waiver of the requirement for writing, or an estoppel, to warrant the application being dismissed or ordered to continue as if begun by writ under Rule 4.07 of the Rules.

6 For the reasons which follow I have concluded that there is no factual dispute that denies the applicability of the Order 53 procedure. Such factual dispute as exists does not stand in the way of the plaintiff's entitlement to possession because even if there was a verbal consent given in April 2012 by the plaintiff, it cannot operate as a waiver of the requirement for written consent to the later lease agreements entered into in June 2012; nor on the facts can an estoppel be properly raised.

7 The plaintiff relies on the following affidavits:

(a) Paul Andrew Nicholson sworn 30 September 2014;

(d) Nicholas Patrick Koutsoukas sworn 22 October 2014;

8 The defendants relied upon the affidavit of Kim Laurence Klopper sworn 21 October 2014.

9 On about 13 December 2006 the plaintiff agreed to provide a finance facility to Alleyfelt with a limit of $2,507,2507 comprising a Property Investment Facility with a limit of $2,285,000 (to assist with the purchase of the Property) and a GST Companion Facility with a limit of $222,000.

10 On about 20 December 2006, Alleyfelt granted to the plaintiff a mortgage over the Property in favour of the plaintiff. The mortgage was registered in the Office of Titles on 2 January 2007 ('the Mortgage').[2] That Mortgage refers to a Memorandum of Common Provisions retained by the Registrar of Titles in AA893. Alleyfelt also granted a fixed and floating charge over all of the present and future assets and undertaking of Alleyfelt ('the Charge').

11 The Memorandum of Common Provisions includes a term that:

Subject to the provisions of any Legislation, the Mortgagor shall not without the prior written consent of the Bank ... Deal with the Mortgaged Property.[3]

12 The definitions in clause 1.1 in Section A of the Memorandum of Common Provisions provide, in its effect, that 'Deal' includes a lease or sub-lease or parting with possession of the property.

13 Clause 10.1 of the Memorandum of Common Provisions provides:

The Bank doesn't waive its Powers except where those Powers have been waived in writing by an Authorised Officer.

14 In the definitions section 'Power' is defined to include 'any right, power, authority, benefit or remedy of the Bank under the Mortgage or Legislation'. 'Authorised Officer' which means any director, associate director, secretary or any class of manager of the Bank.

15 The facility provided by the plaintiff to Alleyfelt was varied on 1 August 2011 so as to extend its expiry date to 31 March 2012.

16 By 9 November 2012 Alleyfelt was in default under the Mortgage. It had failed to pay to the plaintiff the amount then owing, being $2,479,582.24.

17 On 16 November 2012 the plaintiff appointed Mr J.D. Walsh and Mr A.P. Nikitins as joint and several receivers and managers of the Property. Subsequently, on 19 March 2013, the plaintiff retired the receivers and managers and appointed them, jointly and severally, as its agents with respect of the Property to exercise any of its rights, powers and remedies exercisable pursuant to the Mortgage and the Charge.

18 On 28 February 2013 the plaintiff's solicitors sent a Notice to Pay pursuant to ss 76 and 77 of the Act demanding that Alleyfelt pay the amount then due. As at the date of the application and the principal supporting affidavit of Paul Andrew Nicholson, Alleyfelt had failed to comply with the Notice to Pay and had failed to pay any part of the amount due. As at 16 September 2014 the total amount outstanding and due and payable by Alleyfelt amounted to $5,906,022.43.

19 In early March 2013, Alleyfelt, by its director Mr Klopper, produced to Mr Walsh and Mr Nikitins copies of lease agreements between Alleyfelt and each defendant dated 27 June 2012. Each lease agreement is a two page document under which Alleyfelt agrees to lease to each of the defendants a discrete portion of the Property and the buildings on it (as defined by a plan annexed thereto) for a term of five years commencing on 1 July 2012. It is noted that the defendants were incorporated as follows:

(a) The first defendant, Sunlongsolar Pty Ltd, on 19 May 2011;

(b) The second defendant, Panelcast Pty Ltd, on 9 August 2007;

(c) The third defendant, Fibrework Australia Pty Ltd, on 9 August 2007; and

(d) The fourth defendant, Kimlin Property Pty Ltd, on 27 June 2012.

20 It is not in dispute that none of the defendants had been incorporated at the time of the grant of the mortgage to the plaintiff. It follows that the plaintiff's consent is necessary before any of the defendant lessees are able to assert any rights against the plaintiff.

21 It is not in dispute that the plaintiff has not, at any time, consented in writing to any of the lease agreements. The evidence of the plaintiff goes further and is to the effect that it has never consented to any occupation of any part of the Property by any of the defendants.[4]

22 Mr Klopper in his affidavit gives an account of the history of the occupation of the Property by Alleyfelt and by companies that he controlled, including a company called Fibrework Industries Pty Ltd and Kimlin Nominees Pty Ltd (the latter being a guarantor of the plaintiff's facility and the trustee of the Klopper Family Trust). Fibrework Industries Pty Ltd was deregistered on 11 April 2010. Kimlin Nominees is a different corporate entity from the fourth defendant Kimlin Property.

23 Mr Klopper says that in mid-2006 he had contact with a Mr Peter Anderton, a relationship manager and representative of the plaintiff, for the purposes of entering into a facility to purchase the Property and at that time Mr Anderton was aware that two businesses conducted by Mr Klopper (a concrete panel business and crane equipment business) were approved to occupy the Property, as they had been doing under a lease from the previous owner, Bubble Tech Pty Ltd. Mr Anderton was made fully aware of the proposed current and future use of the Property for manufacture and storage by the group of companies that were in occupation, and were planned for future occupation, including the continued occupation of the Property by Mr Klopper's concrete panel enterprise, the Firework interests and the Kimlin interests.

24 About six years later, on 19 April 2012, a meeting took place at Mr Klopper's office, which was at 105 Corio Quay Road, North Shore (near Geelong in Victoria) with personnel from the plaintiff, including Mr Graeme Ferguson (the retiring Victorian property manager), Mr Nicholas Koutsoukas (the manager from the Sydney office) and Mr Colin McManus (the property manager of the plaintiff from Brisbane).

25 At the meeting Mr Klopper says that he discussed with these representatives of the plaintiff the businesses carried on, he says, by the four defendants from the Property and gave them brochures relating to the businesses being conducted by the first defendant (Sunlongsolar) and the third defendant (Firework Australia). He exhibits to his affidavit a brochure relating to Sunlongsolar, which had an address at 105 Corio Quay Road, Northshore. He also exhibits a brochure of 'Klopper insulation solutions' which refers to Fibrework Australia as having an address at the Property.

26 Mr Klopper says that although the leases entered into by the defendants had not been entered into at the time of this meeting, those companies were in occupation of the premises on an oral lease from month to month. He says:

The officers at Suncorp Metway were aware that they were in occupation and carrying on business at the premises and they consented to the occupation of the premises and for them to carry on the businesses they were conducting.

27 Mr Koutsoukas, by an affidavit sworn on 22 October 2014,[5] confirms that a meeting was held on 19 April 2012, as deposed to by Mr Klopper. He says the purpose of the meeting was to discuss how Alleyfelt would repay the amounts due to the plaintiff. He says that one of the options discussed for repayment of the facility was by a sale of the Property with vacant possession. He says his understanding at that time was that there were no tenants in occupation of the Property and that any sale of the Property in order to repay the facility would be a sale with vacant possession.

28 Mr Koutsoukas swears that, as at 19 April 2014, he was aware that the Property was being used; but understood from what he was told by Mr Klopper that it was Alleyfelt and not the defendants who were in occupation. He says he was not aware of any lease between Alleyfelt and any other persons and that he did not consent on behalf of the plaintiff (in writing or otherwise) to the occupation of the Property by the defendants or to any lease by Alleyfelt to the defendants. He did not hear either Mr Ferguson or Mr McManus give their consent. Indeed, the giving of consent would have been inconsistent with a sale of the properties with vacant possession.

29 Each of the written agreements to lease specifies an annual rent. There is no evidence that the plaintiff was in receipt of this rent and the whole basis upon which the parties proceeded before me was that if any rent was being paid it was being paid to Alleyfelt.

30 Order 53 is headed 'Summary Proceeding for Recovery of Land'. Rule 53.01 of the Rules provides:

(1) Subject to paragraph (2), this Order applies where the plaintiff claims the recovery of land which is occupied solely by a person or persons who entered into occupation or, having been a licensee or licensees, remained in occupation without the plaintiff's licence or consent or that of any predecessor in title of the plaintiff.

(2) This Order does not apply where the land is occupied by a mortgagor or successor in title and the claim is made by the mortgagee or successor in title.

31 The words of Rule 53.01(1) make it plain that the pre-requisites to the application of Order 53 are that the person or persons in occupation of the land are:

(a) a person or persons who entered into occupation without the plaintiff's licence or consent or that of any predecessor in title of the plaintiff; or

(b) a person or persons who, having been a licensee or licensees, remained in occupation without the plaintiff's licence or consent or that of any predecessor in title of the plaintiff.[6]

32 The authorities establish the following matters in relation to the operation of Order 53:[7]

(a) It is intended to enable a speedy resolution in favour of the proprietor of land of a dispute whereby trespassers are keeping the proprietor out;[8]

(b) It is intended to apply only in clear cases where there is no question to try;[9]

(c) The existence of a factual dispute does not deny the applicability of Order 53 where it is possible to resolve the dispute readily and fairly.[10]

(d) While an order for possession may be made notwithstanding that there is a factual dispute between the parties, such an order will only be appropriate if the Court is able to satisfy itself as to the material facts that bring the case within O 53;[11]

(e) The jurisdiction should be exercised with great care;[12]

(f) Where an issue does emerge, the judge has discretion whether simply to dismiss the proceeding, to determine the issue or cause the issue to be subsequently tried. This includes giving directions as to the further conduct of the proceeding or ordering the proceeding to continue as if begun by writ pursuant to Rule 4.07 of the Rules;[13] and

(g) Where the Court gives judgment for possession under Order 53, it may grant a stay of execution.[14]

33 A lease granted by a mortgagor after the grant by the mortgagor of the mortgage, and without the mortgagee's consent, does not bind the mortgagee: Commonwealth Bank of Australia v Figgins Holdings Pty Ltd;[15] Commonwealth Bank of Australia v Baranyay.[16]

34 The logic of this conclusion is not in question in this application. Nevertheless, in a compressed form that logic is as follows:

(a) At common law a mortgagor could not make a lease which would be good against the mortgagee without the mortgagee's authority or concurrence. That applies to an equitable lease as well to a legal lease;[17]

(b) Though in a mortgage under the Act the title remains in the mortgagor, its right to make a lease which shall bind the mortgagee is equally limited;[18] and

(c) Upon the sale of the mortgaged land by the mortgagee pursuant to the rights arising under the mortgage and Division 9 of Part IV of the Act, and in particular by the operation of s 77(4), the mortgagee is able to pass to a purchaser an unencumbered title, subject to the exceptions set out in that section only; and

(d) The reference in s 42(2) of the Act to an interest of a tenant in possession of the land preserves (as against the mortgagee) interests of tenants in possession of the land at the time of the creation of the original interest of that mortgagee and not any interest of a tenant in possession at the time when the mortgagee exercises his power of sale.[19]

35 In Commonwealth Bank of Australia v Figgins Holdings Pty Ltd, Hayne J considered a submission that a bank had consented to a variation in a lease that had the effect of reducing rental to a nominal sum, because it took no action when it became aware of the variation shortly after it was made. His Honour said:[20]

Figgins Holdings pointed to no positive act or statement on behalf of the bank as constituting consent. Rather it was submitted that the bank knowing of the transaction, its consent should be inferred from its silence. It was submitted that the bank "could not stand by" in those circumstances and later assert that it had not consented. Why it could not stand by was not explained in argument, counsel for Figgins Holdings expressly disclaiming any reliance upon doctrines of estoppel. Indeed, that disclaimer was inevitable given that there was no evidence at all that Figgins Holdings had acted in any way in reliance upon any act or omission on the part of the bank.

In my view the bank did not consent to the transaction. It knew something of it, but knowledge of a transaction falls far short of consent to it, and in the end all that Figgins Holdings was able to point to as evidence of consent was the bare fact of knowledge.

36 The submissions of the plaintiff were relatively straightforward. They relied upon the statement of the law that I have set out above and contended that, in the absence of any written consent, the result was that the lease agreements did not bind the plaintiff and, as the plaintiff was entitled to possession of the Property as against the mortgagor, the plaintiff was entitled to possession of the Property and the Court should so order.

37 The defendants contended that there were triable issues as to whether:

(a) Officers of the plaintiff had consented to the occupation of the premises by the defendant;

(b) There was a waiver of the requirement in the mortgage that the plaintiff give its written consent to the agreements for lease;

(c) The plaintiff is estopped from asserting the wrongful occupation of the Property by the defendants in respect of the movement to and occupation by the defendants of the Property based upon the principles set out in Waltons Stores (Interstate) Ltd v Maher.[21]

38 The defendants also submitted that, having regard to the principles applicable to Order 53, no resolution of the factual dispute could be had readily and fairly. Accordingly, the application for summary recovery of possession of the Property should be refused or, if possession of the Property was given, the defendants should have a reasonable opportunity to 'withdraw from the property', by way of a stay of execution.[22]

39 The evidence of Mr Klopper as to the giving of consent by the officers of the plaintiff at the meeting on 19 April 2012 was objected to, albeit faintly, on the basis that it was simply a conclusion without any facts exposing who gave consent and to what. There was no positive act or statement on behalf of the plaintiff constituting the alleged consent. It was then said to be of minimal weight for the same reasons. The evidence of Mr Koutsoukas clearly rejected the proposition that any consent was given at all. The defendants say that this raises a dispute that can only be fairly and readily tried at a trial, which involved a definition of the issues and a full hearing with cross-examination.

40 It seems to me to be evident that the dispute is a distraction. There can have been no consent by the plaintiff to the agreements to lease that were ultimately entered into on 27 June 2012. The proposition that the plaintiff consented to an oral lease from month to month by one or more of the defendants (and it could not have been the fourth defendant because it was not incorporated until 27 June 2012) does not stand up under any close examination:

(a) A lease from month to month is an entirely different thing from an agreement for a lease for a term of 5 years. If it is assumed that the plaintiff had consented to the occupancy of the defendants, or at least some of them, on a monthly tenancy (and one arising after the mortgage), it cannot be supposed that such a tenancy could stand in the way of the rights of the mortgagee recovering possession, having regard to the extensive notice in fact given by the plaintiff to the defendants to vacate the Property;[23]

(b) There is no possibility that any consent given by the plaintiff could apply to the fourth defendant as it was not incorporated until the day of the lease agreement, 27 June 2012; and

(c) The proposition that the first defendant was one of the companies in occupation in April 2012 is contradicted by the brochure in evidence.

41 In any event, there is no basis for the proposition that the consent, if given in April 2012, was a consent to the transactions comprised in the agreements for leases dated 27 June 2012. That, in the end, is the answer to the proposition advanced by the defendants that there was a dispute as to fact that could not be fairly and readily decided in a summary application.

42 For the same reasons, there is no scope for a waiver or an estoppel giving rise to a dispute. There is, in any event, no evidence that the defendants had acted in any way in reliance upon any act or omission on the part of the plaintiff.

43 Mr Isles of Counsel, who appeared for the defendants submitted that this was a case where it is appropriate to grant a stay of execution so as to allow the defendants a reasonable time to remove their goods and equipment, which is substantial, from the property. I consider a stay of 60 days in the prevailing circumstances (including the looming Christmas and New Year holidays) should be sufficient for that purpose.

44 For these reasons, I find that the plaintiff is entitled to possession and there is no factual dispute as to the giving of consent, no waiver nor any estoppel that can be raised against the plaintiff by the defendants.

[1] The property is land under the Transfer of Land Act 1958 (Vic) and is more particularly described in Certificate of Title Volume 10685 Folio 033.

[4] Affidavit of Paul Nicholson [17], [22].

[5] The defendants took objection to the admission of this affidavit. However, the affidavit of Klopper to which it responded was itself late and was filed the same day. In the circumstances I determined to allow it.

[6] See Pappas v Bowmark Pty Ltd [1998] VSCA 120 [13].

[7] Approved in Framlingham Aboriginal Trust v McGuinness and Chatfield per Ginnane J [2014] VSC 354 [6].

[8] Pappas v Bowmark Pty Ltd [1998] VSCA 120 [13].

[9] Palazzo v Pullen (Unreported, Supreme Court of Victoria, Brooking J, 24 July 1992, BC9200663).

[10] Pappas v Bowmark Pty Ltd [1998] VSCA 120 [13]; Melbourne Anglican Trust Corporation v Greentree (Unreported, Supreme Court of Victoria, Vincent J, 29 May 1997); Tolhurst Druce & Emerson v Maryvell Investments Pty Ltd [2007] VSC 271 [193]-[195]; Byrne v Ritchie [2009] VSC 114 [17].

[11] Byrne v Ritchie [2009] VSC 114 [17].

[12] Melbourne Anglican Trust Corporation v Greentree (Unreported, Supreme Court of Victoria, Vincent J, 29 May 1997); Max Moar & Queenbridge Pty Ltd v Shazia Duman [2007] VSC 266 [2].

[13] Palazzo v Pullen (Unreported, Supreme Court of Victoria, Brooking J, 24 July 1992, BC9200663).

[14] See Parker v Mielicki [2003] VSC 263; and Rule 66.16 of the Rules.

[15] [1994] VicRp 72; [1994] 2 VR 505.

[16] [1993] VicRp 43; [1993] 1 VR 589.

[17] Corbett v Plowden (1884) 25 CD 678, 681; Op Cit Wilson v Kelly [1957] VicRp 19; [1957] VR 147, 148.

[18] Wilson v Kelly [1957] VicRp 19; [1957] VR 147, 148; and see s 81 of the Act.

[19] Commonwealth Bank of Australia v Baranyay [1993] VicRp 43; [1993] 1 VR 589, 599.

[20] Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] VicRp 72; [1994] 2 VR 505, 511.

[21] [1988] HCA 7; (1988) 164 CLR 387.

[22] Parker v Mielicki [2003] VSC 263.

[23] Notices to Vacate were given to the defendants on 11 April 2014 allowing the defendants 30 days to vacate. They have in fact had longer by far.