Sayer v McHugh

CASES CITED : Sayer v McHugh (1985) 1 NSWLR 440 King Investment Solutions v Hussain [2005] NSWSC 1076

TEXTS CITED : Jacobs Law of Trusts in Australia, (7th ed), LexisNexis Butterworths, Australia, 2006

Commonwelath Bank of Australia (Plaintiff) PARTIES : Rihab Al Nabi (First Defendant) Samara Samir (Second Defendant

COUNSEL : N Manousaridis (Plaintiff) R Newton (First Defendant)

SOLICITORS : Commonwealth Bank of Australia (Plaintiff) David Legal (First Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2009/290854 COMMONWEALTH BANK OF AUSTRALIA v RIHAB AL NABI AND ANOR JUDGMENT 1 Before the court is an application for judgment in default. 2 In accordance with an order for substituted service, an amended statement of claim was served on 28 June 2010. Neither the first defendant, Rihab Al Nabi, nor the second defendant, Samara Samir, filed a defence. Nor did either make any payment towards the discharge of the amount due to the plaintiff, Commonwealth Bank of Australia. 3 In terms of the Uniform Civil Procedure Rules 2005, Pt 16 r 16.10 the Bank is entitled to judgment against Mrs Al Nabi and Ms Samir to which it appears to be entitled on its statement of claim. 4 On 12 October 2010 I made orders for further notification to Mrs Al Nabi and Ms Samir of the application seeking judgment in default. I required service upon both of them of all material to be relied upon with a letter addressed to each of them informing them that the notice of motion would be heard by Bergin CJ in Eq at 10.00 am on Wednesday 27 October 2010 in court 7A. Substituted service of that material was effected on Mrs Al Nabi and Ms Samir on 19 October 2010. 5 On 19 October 2010, Mr Newton of counsel appeared for Mrs Al Nabi. There was no appearance for Ms Samir. The matter was stood over before me. Ms Samir did not appear but Mr Newton acted amicus curiae with respect to her interests. 6 In the amended statement of claim the Bank alleged that under a loan agreement made on or about 21 September 2005 it agreed to advance to Ms Samir an amount to enable her to purchase from Mrs Al Nabi, her mother, land at Bossley Park, New South Wales. 7 Pursuant to the loan agreement, the advance was to be secured by mortgage over the land. Ms Samir executed the mortgage and the bank drew cheques used to discharge liabilities owed by Mrs Al Nabi. At the time the bank advanced these amounts it received from Mrs Al Nabi an executed transfer of her interest in the land and a certificate of title. 8 Before the Bank registered the transfer, it together with the certificate of title and the mortgage was lost. 9 Mr Newton tendered a fresh transfer executed by Mrs Al Nabi the previous day to replace the lost transfer. The document was not stamped and Mr Newton was not in a position to give any undertaking that it would be. It was marked Exhibit 1 as a matter of identification but in the absence of an undertaking to stamp it, I reject any use of it (Duties Act 1997, s 304(2)). 10 The amended statement of claim alleged that Ms Samir had defaulted in making payments under the loan agreement and under the mortgage as a result of which, as of 15 October 2010 when the notice of motion was filed, the evidence in accordance with the Uniform Civil Procedure Rules, Pt 16 r 16.6 established that the amount of the debt claimed in the amended statement of claim was $514,629.61. Since the commencement of the proceedings the Bank has received no payments or credits accrued to reduce that amount and the interest that had accrued on that amount since the date on which the statement of claim was filed up to 15 October 2010 was $27,890.50. Thus a default judgment should be entered against Ms Samir in the claimed amount of $542,520.11. 11 The amended statement of claim alleged that Mrs Al Nabi was a bare trustee of her interest in the land in favour of Ms Samir and was liable to an order under the Trustee Act 1925, s 71 that her legal title in the land be vested in Ms Samir. 12 The Trustee Act, s 71(2)(o) provides that a vesting order may be made where property is vested in a trustee whether by way of mortgage or otherwise either solely or jointly with any other person and it appears to the court to be expedient to make a vesting order. 13 The term "trust" is defined in the Trustee Act, s 5 to include implied and constructive trusts and the term "trustee" is defined to have a meaning corresponding with that of a trust. 14 Sayer v McHugh (1985) 1 NSWLR 440 is cited in Jacobs Law of Trusts in Australia, (7th ed), LexisNexis Butterworths, Australia, 2006 at [2505] for the proposition that since the jurisdiction extends to constructive trusts, on a declaration of the existence of a constructive trust the court has power by its decree to vest the trust property in the beneficial owner. A similar conclusion arises in the present case. 15 In my view, the Bank has made good its entitlement to an order vesting the land in Ms Samir. 16 It was a term of the mortgage that Ms Samir do anything the Bank asked to enable the Bank to exercise its rights in connection with the land. It was a further term of the mortgage that in the event of her defaulting under the mortgage, Ms Samir appointed the Bank as her attorney to do anything she was obliged to do. As attorney for Ms Samir, the Bank is entitled to apply to have the legal title in the land vested in her under the Trustee Act, s 71(2)(o). 17 Mr Newton submitted there was some problem in relying upon the power of attorney in a mortgage the Bank no longer has. But secondary evidence of the lost document has established the existence of the power of attorney and I see no impediment to the Bank seeking the vesting order under the power of attorney that existed in the original mortgage document. 18 The amended statement of claim went on to allege that under its equitable mortgage the Bank was entitled to an order for judicial sale of the land to enable it to recover the amount outstanding under the mortgage. 19 It was pointed out by Campbell J in King Investment Solutions v Hussain [2005] NSWSC 1076 at [81] that the interest of a mortgagee of Torrens title land, even when the mortgage is registered, is in the nature of a statutory charge and that an unregistered mortgage would, likewise, be regarded by Equity as conferring an equitable charge and the standard way of enforcing an equitable charge is by an order for judicial sale. The Bank is entitled to an order for judicial sale. 20 The Bank seeks the appointment of receivers. Ms Samir has leased out the property under an exclusive management agency agreement and is in receipt of the rent. 21 Where a security becomes enforceable through a default in the payment of principal or interest or in the performance of some other covenant, a mortgagee can apply to the court for a receiver. The court will grant such relief if default is established at the hearing. 22 As alleged in the amended statement of claim, Ms Samir has defaulted under the loan agreement and the mortgage. Consents to act as receivers have been received from Timothy Paul Heesh and Stephen Wesley Hathway and their execution of the consents has been verified. 23 Mr Newton submitted that the appointment of receivers was costly and a more economical solution might be to require Ms Samir by her servants and agents to look after the rent for the plaintiff. But there is a question as to the mental capacity of Ms Samir such that an undertaking may not be possible. 24 Mr Newton suggested that on the evidence it was open to make a mandatory injunction requiring her to take such steps. But there has been no defence filed by Ms Samir and she has demonstrated a complete lack of attention to any of the court's orders. I am not minded to refuse the Bank its entitlement to receivers. 25 Mr Newton submitted that Mrs Al Nabi had acted with dispatch when she received the letter and the accompanying documentation and an order for costs should not be visited upon her. But neither she nor Ms Samir acted with dispatch when the statement of claim and the amended statement of claim were served and I see no reason to depart from the ordinary rule that costs follow the event. 26 The court will make the following orders:

1. Judgment be entered against the second defendant in the amount of $542,520.11. 2. Pursuant to s 71 of the Trustee Act 1925 the legal interest of the first defendant in the land contained in certificate of title folio identifier 126/261660 and which is situated at 4 Wallaby Close, Bossley Park in the State of New South Wales ( Land) , be vested in the second defendant. 3. The Land be sold subject to the supervision of the Court, and that the proceeds of the sale be applied to pay to the plaintiff: (a) the amount referred to in paragraph 1; (b) the amount of the legal costs, fees and disbursements of and incidental to the sale of the Land including real estate agent's fees and disbursements in relation to acting on the sale, and all other fees and charges payable under the terms of the loan agreement and mortgage referred to in the amended statement of claim; and (c) interest that accrues on the amount referred to in paragraph 1 after 27 October 2010. 4. The plaintiff have the conduct of the sale of the Land including the power to enter into a contract for sale of the Land and to execute a transfer in its own name to be signed by it or by its attorney. 5. The plaintiff be entitled to sell the Land by either public auction or tender or private treaty but subject to the approval of the Court of the price in the event the Land is sold by private treaty. 6. Pending the sale of the Land: (a) Timothy Paul Heesh and Stephen Wesley Hathway ( Receivers) be jointly and severally appointed without security receivers to collect, get in and receive the rents and profits of the Land; (b) the Receivers be paid remuneration in the amount or rate approved by the Court; and that the remuneration be paid to the Receivers out of the net proceeds of the rents and profits; and (c) while so ever the second defendant is indebted to the plaintiff the Receivers account to the plaintiff for the net rent referred to in (b) less remuneration paid to the Receivers. 7. There be liberty to apply to the Court in the event of any difficulties arising in connection with the sale of the Land or the implementation of these orders. 8. The defendants pay the plaintiff's costs of these proceedings.

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