The basic facts as found by the primary judge are not in dispute. The Lender is the registered mortgagee of the two Units at Randwick. The mortgage given by Ms Qasim dated 3 January 2023 secured a guarantee which Ms Qasim gave in respect of the obligations of her company, Rohailla Holdings Pty Ltd, as borrower of a loan from the Lender of $2,781,248.27 on 4 January 2023. This amount was applied by the Lender, at the direction of Ms Qasim, principally to refinance existing secured borrowings from NAB, for the pre-payment of interest for three months ($121,679.61), for the repayment of caveators and solicitors and an amount to the borrower ($154,282.60). The mortgage was also given over a property at Old Bar which was subsequently sold by Ms Qasim and on 14 July 2023 the net proceeds of $431,369.93 were paid to the Lender.
The primary judge found that the Lender is entitled to judgment for possession in accordance with the terms of the mortgage. His Honour observed at J[2] that whilst Ms Qasim disputed the precise date of default alleged by the first respondent, "even on her own case there has been a default". His Honour noted at J[63] that there was no dispute that pursuant to the provisions of the registered mortgage the Lender was entitled to an order for possession. His Honour found at J[64]-[65]:
Whether the principal and accrued interest were repayable on 7 July 2023 (as the Plaintiff claims, and taking into account three days' grace under cl 14.1) or on 7 January 2024 (as Ms Qasim claims), they have not been repaid. The mortgage incorporates by reference the Memorandum of Common Provisions. Clause 14.1 provides that there will be an event of default if the Borrower or Ms Qasim (as guarantor) does not pay any amount payable under the finance documents within 3 business days after it is due. The term "finance documents" includes the Finance Offer Schedule and the mortgage itself. Clause 14.3 contains a promise by both the Borrower and Ms Qasim to ensure that no event of default occurs. Clause 42 contains an unconditional guarantee from Ms Qasim for the secured money. Clause 45 provides that the Plaintiff may claim against a guarantor before it exercises any rights against the Borrower.
The front page of Registered Mortgage AS767839 provides that Ms Qasim mortgages the estate and/or interest in the Randwick properties to the Plaintiff as security for the debt or liability described in the terms and conditions set out or referred to in the mortgage. The facility between the Plaintiff and the Borrower is fully described. Clause 14.5(b) of the Memorandum of Common Provisions provides that if an event of default is continuing, the Plaintiff may immediately take legal action including starting proceedings to recover possession of collateral. By virtue of Ms Qasim's mortgage, the Randwick properties are collateral.
Addressing the dispute as to the repayment date of the loan to the borrower, the primary judge found at J[80]-[88] that the term of the loan was 3 months with three 3-month options (making a total of 12 months), as contended for by the Lender, not 12 months, as contended for by Ms Qasim. It is not in dispute that, on 9 March 2023, Ms Qasim paid a further three months' interest. The primary judge made a declaration that, in the events which have happened, the facility term was from 4 January 2023 to 4 July 2023.
The borrowing was not repaid on 4 July 2023. Since 14 July 2023, when the net proceeds of the Old Bar property were paid by Ms Qasim to the Lender, neither the borrower nor Ms Qasim have made any payments to the Lender. There is unchallenged evidence from the Lender on the motion that as of 10 November 2023, the amount of the loan, accrued interest and charges was $2,900,637.22. Interest is accruing at about $53,000 per month.
[2]
Application for stay
The principles to be applied when exercising the Court's power to grant a stay pending an appeal are well-known: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694-695, and Kalifair Pty Ltd v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737; [2002] NSWCA 383 at [17]-[20]. It is appropriate first to consider whether the appeal raises a serious question to be tried, in the sense of arguable grounds, and if so, where the balance of convenience lies.
[3]
Arguable grounds?
It is well-established that the Court will not generally speculate upon the appellant's prospects of success but may make some preliminary assessment about whether the appellant has an arguable case, in order to exclude an appeal lodged without any real prospects of success simply to gain time: Kalifair Pty Ltd v Digi-Tech (Australia) Ltd at [18]-[19]. Given that the parties diverged as to whether the appeal raises arguable grounds, it is necessary to undertake such a preliminary assessment on this application.
The notice of appeal raises three issues. Ground 1 contends that that the primary judge erred by admitting into evidence the Memorandum of Common Provisions when there was no evidence that it was served on Ms Qasim at any time. The Lender identified three substantial difficulties with this ground.
First, there was no challenge at trial to the tender of the Memorandum of Common Provisions.
Second, there is no challenge on appeal to the factual finding at J[11], that on 6 December 2022, the solicitors acting for the borrower and Ms Qasim returned by email to the solicitors for the Lender, several documents executed by the borrower and Ms Qasim which included the Memorandum of Common Provisions. That finding was supported by the evidence at trial, which his Honour summarised at J[10]-[14], namely that:
1. by email sent 5 December 2022 at 2:07 pm the solicitors for the first respondent sent to the solicitors for the appellant loan documents including the unsigned Memorandum of Common Provisions;
2. the appellant signed the Memorandum of Common Provisions; and
3. by email sent 6 December 2022 at 1:08 pm, the solicitors for the appellant sent to the solicitors for the first respondent documents including the signed Memorandum of Common Provisions.
Third, it was conceded at trial by counsel for Ms Qasim that, on 6 December 2022, Ms Qasim in the presence of her solicitor read and signed the Memorandum of Common Provisions.
In this Court, counsel for Ms Qasim accepted that Ms Qasim had read and signed the Memorandum. It is said, without reference to evidence, that Ms Qasim did not receive a copy of the Memorandum until February 2024 when Ms Craven, the solicitor for the borrower and Ms Qasim on the loan and mortgage transaction, produced the "loan documents" to the Court on subpoena in the underlying proceedings. That complaint misses the point. Even assuming that to be the case, it is not a basis for challenging either the admissibility of the Memorandum, the findings of the primary judge at J[10-[14], or the judgment for possession.
It is also said, again without reference to evidence, that Ms Qasim only had 20 minutes to read the Memorandum in the presence of her solicitor in December 2022. Even assuming that was the case, there is no ground of appeal contending that Ms Qasim is not bound by the terms of the document she signed: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [57]. Nor was any argument advanced on the stay application as to why Ms Qasim was not bound by any particular provisions of the Memorandum which she had signed. There is no substance in this ground.
Ground 2 contends that the primary judge erred in disallowing cross-examination by Ms Qasim's counsel on management charges which the Lender claimed under the mortgage. The Lender identified two substantial difficulties with this ground.
First, the management charges were not in issue on the pleadings or relevant to the real issues in dispute in the underlying proceedings. That can be accepted given the absence of reference to the management charges in the final pleadings below, and Ms Qasim's Statement of Matters of Fact and Law that are really in dispute which made no reference to the management charges.
Second, during the cross-examination of one of the Lender's witnesses, counsel for Ms Qasim asked the witness to "particularise what the expenses are for PF 473 on a monthly basis to manage a mortgage in default". The question was objected to and rejected on the grounds of relevance. Neither the grounds of appeal, nor the argument on the stay application identified any error that was made by this ruling.
In this Court, counsel for Ms Qasim said that the management charges are relevant to the amount of the secured debt, foreshadowing, it seems, a dispute by Ms Qasim as to the amount of the secured debt insofar as it includes management charges claimed by the Lender. As indicated, the existence of a default under the mortgage was ultimately not in dispute at trial. There is no challenge on appeal to his Honour's finding that Ms Qasim was in default under the mortgage. The challenge to the evidentiary ruling on the relevance of a question in cross-examination is inconsequential. His Honour's finding that the Lender is entitled to judgment for possession in accordance with the terms of the mortgage is not dependent on that evidentiary ruling. This ground is hopeless.
Ground 3 contends that the primary judge "erred in finding that s 23C of the Conveyancing Act 1919 (NSW) did not forbid changes to the core terms of the parties after 6 December 2022". As the Lender correctly pointed out in its submissions, the primary judge made no such finding. Rather at J[91]-[100], the primary judge dealt with the submission by Ms Qasim recorded at J[90] that an agreement to vary or change the agreement originally entered into on 6 December 2022 had to comply with the formal requirements of writing specified in s 23C of the Conveyancing Act.
The primary judge found at J[91], that ultimately it did not matter whether the submissions were correct or not, as the relief claimed in the proceedings is based on default under the registered mortgage. It was not argued by Ms Qasim that this finding was wrong.
The primary judge further found at J[92] that Ms Qasim's reliance on s 23C was misplaced. This was because the agreement to change the terms originally agreed between the parties on 6 December 2022 (the revised terms are set out at J[25] and J[26]) did not purport to create or dispose of an interest in Ms Qasim's properties. Rather, as the primary judge found, it constituted an agreement to create a security interest in the future, namely when the mortgage was registered and that s 23C does not apply as it is directed to the creation of interests in land and is not directed to agreements as such (Baloglow v Konstanididis & Ors [2001] NSWCA 451 at [112], [162], [190]-[192]). His Honour further found that s 23C does not apply to all agreements - whether as to creation or as to disposition of an interest - if there is no more than an agreement to assure property in the future: Khoury v Khouri (2006) 66 NSWLR 241; [2006] NSWCA 184 at [53].
In this Court, counsel for Ms Qasim properly accepted the force of this criticism of ground 3. There is no merit in this ground.
[4]
Balance of convenience
As the question of the balance of convenience or the balance of hardship, the principal issue is whether the prejudice to Ms Qasim, if Unit 3 is sold and if she is required to vacate Unit 4 and it is also sold in advance of the hearing of the appeal, is outweighed by the prejudice to the Lender of the increasing secured debt.
Ms Qasim has the onus to demonstrate a proper basis for a stay which will be fair to all parties. In this regard, counsel for Ms Qasim referred to a submission made by counsel for Ms Qasim at trial based on a document apparently prepared by her counsel at trial that the secured debt as at 4 June 2024, including accrued interest, was $2,643,886.30. (One page of this document was provided to this Court and marked as MFI-1.) It seems that this calculation excluded management charges claimed by the Lender. It is said by Ms Qasim that Lender would not be prejudiced by a delay in the sale of Unit 3 or in obtaining vacant possession of Unit 4 pending the determination of the appeal.
A major difficulty with this submission is that no evidence was adduced by Ms Qasim establishing the correctness of her trial counsel's calculation of the secured debt as at June 2024, or as to the value of the secured properties.
A further difficulty is that there was no challenge to the evidence of the Lender in the affidavit of Mr Anderson that the amount of the loan, accrued interest and charges as of 10 November 2023, was over $2.9 million. Even assuming that the accrual of further loan management fees charged by the Lender are ignored, the accrued interest since that date is about $600,000 per year. As indicated, interest continues to accrue at an amount in excess of $50,000 per month. No offer was made by Ms Qasim of alternate security, let alone to pay to the Lender interest accruing monthly between now and the determination of the appeal.
It would be unfair to the Lender to prevent it from recovering its secured debt where the appeal has no realistic prospects of success. Here, my preliminary assessment is that the grounds of appeal are either hopeless or meritless, as indicated above. Ms Qasim's indebtedness to the Lender is significantly increasing each month due to the accrual of interest, and she has not attempted to demonstrate that the Lender has sufficient security for the debt or that she has any ability to repay the secured debt other than from the sale of Units 3 and 4.
Taking into account the lack of arguable grounds of appeal and the balance of convenience or hardship, Ms Qasim has not made out a case for an extension of a stay of execution of the judgment for possession of the two Units at Randwick pending the determination of the appeal.
[5]
Other matters
After judgment was reserved on 14 October 2024 and the Court had indicated judgment would be given at 10:15 am on 15 October 2024, Ms Qasim sent an email to my Associate at 6:37 am on 15 October 2024 attaching a document described as "Application for consideration" containing further submissions, a request for the issue of subpoenas, and for a rehearing of her application for a stay. She asserted in her covering email that her counsel had been unwell at the hearing, that she should have appeared for herself on the stay application, and that once her document is "sealed. I will serve it on the other side. I am unavailable at 10 am on the 21 October as I am in another hearing".
The making of a substantive communication by a party to the Court without the consent of the other party is inappropriate. Moreover, the making of additional submissions after judgment has been reserved, again without the consent of the other party, and a request of the Court to permit a reopening, is also inappropriate.
The Court forwarded a copy of Ms Qasim's email to the solicitors for the Lender. Those solicitors informed the Court this morning that they had nothing further to say. Having read the material attached to Ms Qasim's email of 15 October 2024, there is nothing of substance which would lead to a different conclusion on the stay application to that stated above.
[6]
Orders
The application for a stay pending appeal has failed. The Court therefore makes the following orders:
1. Discharge order (1) made by Kirk JA on 9 October 2024.
2. Dismiss the notice of motion filed 16 August 2024.
3. Appellant to pay the first respondent's costs of the motion.
[7]
Amendments
15 October 2024 - Amendment made to [31]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 15 October 2024
Solicitors:
Somerville Legal (Appellant)
ERA Legal (Respondents)
File Number(s): 2024/280851
Decision under appeal Court or tribunal: Supreme Court of New South Wales
Jurisdiction: Common Law Division
Citation: [2024] NSWSC 874
Date of Decision: 19 July 2024
Before: Faulkner J
File Number(s): 2023/245456