This is an application to set aside a judgment entered by consent. The power to set aside the judgment is found in rule 36.15 Uniform Civil Procedure Rules 2005 (NSW), which extends to, inter alia, judgments entered irregularly. The contended irregularity is that the judgment was entered contrary to the terms of an agreement as to compromise entered into by the parties and reduced to a Deed of Settlement.
The respondent concedes that if the judgment was entered contrary to the deed, the applicant has established a requisite irregularity entitling him to the relief sought.
The Deed of Settlement arose out of proceedings in the Possessions List. A mortgagee sued the mortgagor, alleging relevant default. A cross-claim was raised and the parties entered into settlement negotiations, which culminated in an agreement, as I have said, reduced to the terms of a deed.
The Deed of Settlement was executed by the applicant as mortgagor on 4 May 2012. Its substantial terms included the promise of the mortgagor to pay to the mortgagee the sum of $790,000 on or before Friday, 29 May 2015. Settlement was to be made by bank cheque to the mortgagee's solicitors in the sum of $790,000 on or before Friday, 29 May 2015. Upon receipt of the bank cheque, the mortgagee promised to deliver to the mortgagor a duly executed discharge of mortgage and the Certificate of Title.
The parties prepared, signed and annexed to the deed proposed short minutes of order to resolve the litigation if the deed was duly performed by both parties in accordance with the provisions of clauses 2, 4 and 5 of the deed. Those consent orders provided for a dismissal of the statement of claim with no order as to costs. The deed also provided for default. Clause 6 is in the following terms:
In the event that the conditions set out in clauses 2 and 4 are not satisfied strictly in accordance with their terms, the lender shall be entitled to enter Consent Judgment pursuant to Consent Orders set out in Annexure B. In this regard the parties agree to procure that their legal representatives execute said consent orders on exchange of this Deed.
Those consent orders were signed by the solicitor for the mortgagor and provided for judgment in favour of the mortgagee in the sum of $790,000, an agreement as to continuing interest, as well as judgment for possession of the security property. Leave was given to issue a Writ of Possession forthwith and the cross-claim was to be dismissed. That consent judgment is silent as to the costs of the proceedings brought by the mortgagee. The consent judgment also provided for disbursal of the cross-claim with no order as to costs.
Settlement did not take place as contemplated by the deed. It is necessary to say something about the circumstances that occurred.
On 26 May 2015, that is to say, three days before the due date provided for by the deed, the mortgagor's solicitor proposed to the mortgagee's solicitor that settlement be delayed until Wednesday, 3 June. The explanation given for that request was that finance available to enable settlement in accordance with the deed was at the extremely high rate of 18 per cent per annum. It was explained that other finance was available at a more regular rate of 5.5 per cent per annum, but that lender would not be in a position to settle until 3 June.
By e-mail dated 27 May 2015, the solicitor for the mortgagee informed the solicitor for the mortgagor:
In the event settlement does not occur on 29 May 2015 in accordance with the deed judgment will be entered on Monday, 1 June 2015.
I interpolate, in accordance with the consent orders signed to cover the contingency of default as contemplated in the deed.
Before dealing with the other facts, I should point out, as I have not already done so, that, quite apart from the terms of clause 6, which required strict compliance with the terms of the deed, clause 30 of the deed was in these terms:
Time is of the essence of this Deed.
As an attachment to an e-mail despatched at 4:26pm, the solicitor for the mortgagee wrote to the solicitor for the mortgagor in the following terms:
We refer to the Deed of Settlement.
We nominate settlement to take place at 12pm, 29 May 2015 at this office. The Certificate of Title and discharge of mortgage will be handed over upon receipt of the settlement funds in the amount of $760,000 (SOC).
We note that time is of the essence.
There are two things which are obvious. The first is that the solicitor for the mortgagee chose her words carefully in using the expression "nominate", rather than some more emphatic word when fixing, or suggesting, a time and place for settlement.
The second aspect is that the figure provided in relation to the settlement was, having regard to the issues between the parties, I will put it this way, not in accordance with the terms of the deed. It was a figure of $30,000 less than that agreed between the parties and, or specified in the deed.
There is no evidence as to any action taken by the mortgagor's solicitor in relation to that discrepancy between receiving the e-mail and attachment, which in his affidavit of 9 June 2015 he says he received at about the time it was sent, 4:26pm.
The solicitor for the mortgagee, in her affidavit sworn on 17 June 2015, says the following, at 16 and 17:
I was unaware of the error until about midday [29 May 2015]. Following discovery of the error, I forwarded [further correspondence] to [the mortgagor's solicitor].
I received no communication, oral or written, from the solicitor for the Defendant between the forwarding of (the 28 May e-mail) and 1 June 2015 [with one exception]. I have spoken with [the partner with carriage of the matter] and he has informed me and I believe that, during the same period, he received no communications from the solicitors for the Defendant.
The solicitor for the mortgagee states that she was in the office between 11am and 5pm on 29 June and no-one from the mortgagor's solicitor's office attended or contracted her during those hours.
When she discovered her mistake, and I accept it was a mistake, the mortgagee's solicitor again e-mailed the solicitor for the mortgagor pointing out her error in an attached letter. That e-mail was despatched at 12.02pm. She explained that the mistake was, "a typing error", and specified the correct amount of $790,000, as previously agreed.
In his affidavit, the solicitor for the mortgagor confirms that he received that e-mail at about 12.02pm.
There was no evidence from the solicitor for the mortgagor that he said or did anything about that e-mail or, indeed, about settlement of the matter in accordance with the terms of the deed until 5.44pm, when he wrote an e-mail in these terms:
I appreciate the correction to $790,000. We are proposing to book in settlement on Wednesday and pay $790,000 on settlement, together with additional interest calculated in accordance with the Deed of Settlement.
That, of course, was written after normal business hours on a Friday, when it would be unsurprising if lawyers had ceased business for the weekend.
At 8am on Monday morning, the partner with carriage of the matter for the mortgagee wrote to the mortgagor's solicitors in the following terms:
Our instructions are to enter judgment.
I will seek instructions on your proposal this morning. However, I will need evidence that your financier is ready to book - please provide written confirmation from the financier that they are ready to book on Wednesday and I will get instructions.
The evidence is silent as to whether the requested information was, indeed, provided, but, in any event, at 8.48am on the same day, the partner informed the solicitor for the mortgagor that the person I have referred to as the solicitor for the mortgagee would be attending court to seek entry of judgment in accordance with the settlement deed. Even so, he asked whether the mortgagor is prepared to make any application and, again, sought evidence of the mortgagor's capacity to settle, together with an agreement to pay additional costs connected with the delay, which were assessed at $1,500.
Judgment was duly entered and the mortgagee, by letter dated 1 June 2015, demanded possession by Wednesday, 3 June 2015.
The case for setting aside the judgment is based upon an asserted breach of the duty of parties to an executory contract to co-operate in all things necessary to bring about settlement. That matter, as the authorities referred to by Mr Fernon of learned counsel for the mortgagor demonstrate, will generally be implied by law. In this case, there is an express term in that regard in clause 24 of the deed.
Mr Fernon argues that there is a close analogy between the circumstances of this case and the vendor and purchaser cases, which he has referred to in his helpful written submissions, including Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd [1979] HCA 51; 144 CLR 596 at 607-608, and Strickland v Grieve (1996) NSW ConvR 55-762 at 55,859.
In that latter case, Young J (as his Honour then was) said:
The parties intend, when they enter into a contract for the sale of land, that each party will co-operate and be sensible about its performance. They do not expect performance to be measured out in coffee spoons, but that each will sensibly give the other the notice that is required in order for people to put their affairs in order. At a time when a majority of people require finance to complete conveyancing transactions it is only to be expected that notice is needed to activate the process of obtaining the money from the financier. The parties would not expect the vendor that has waited until the very last moment of a three month period to then snap his fingers and require settlement the next day leaving the purchaser too little time to activate his finance. The counter-argument that the purchaser must be able to call up his finance at least on the last day of the eight week period is quite unattractive. The idea the purchaser must pay interest on money when the vendor may not be in a position to settle because of the contractual date for compliance is completely unattractive.
Reliance is also placed upon Foran v Wight [1989] HCA 51; 168 CLR 385 at 424, where Brennan J (as the Chief Justice then was) pointed out, in the circumstances of a notice to complete, that both parties must be ready and willing to settle and "readiness or willingness imports capacity to perform as well as is the disposition to perform".
The point being made is that the erroneous specification of the figure of $760,000 was a matter relied upon by the mortgagor as indicating that the mortgagee was not in a position to, or, to put it another way, ready and willing to settle in accordance with the terms of the Deed of Settlement.
Mr Rogers of learned counsel for the mortgagee submits that the terms of the deed are clear. There was no evidence of any actual reliance upon the mistake. It would have been obvious to anybody that the error in the mortgagee's solicitor's letter was just that and, indeed, it would have been obvious to persons who were parties to the deed and who were privy to the surrounding circumstances known to both parties that brought it into being that the specification of the sum of $760,000 was a mistake.
Moreover, that there was no evidence of any actual reliance; that the mortgagor, for instance, did not attend at the offices of the mortgagee's solicitors with a cheque in the sum of $760,000 proposing to settle in accordance with the letter of 28 May 2015. Indeed, there was only silence between the mortgagor's solicitor's correction at two minutes past midday on the Friday and the e-mail after five o'clock on the Friday.
I am not satisfied that the circumstances of this case do provide an analogy with the ordinary vendor and purchaser case, as Mr Fernon has urged upon me. This is quite a different situation, in my judgment. Here, the parties had been in dispute about the mortgage. The dispute had resulted in litigation; that was settled, the terms of the settlement being reduced to a deed. The terms of the deed itself specified the amount to be paid and the date for payment. The terms of the deed read as a whole make it quite clear that, contrary to the usual situation in respect of a private treaty, that the terms of the deed were to be strictly complied with and, in particular, in that regard, time was of the essence.
In a deed settling a conveyancing dispute the significance of clause 30 could not be overlooked. Those provisions make it quite clear that, unlike the usual situation in a contract for the sale of land, where the date specified for completion will be interpreted as though it read, "or within a reasonable time", where the words, "time is of the essence" are used, strict compliance is called for and a party who fails to strictly comply with the terms of the deed does so at his, her, or its own peril.
The circumstances of the case are, perhaps, unfortunate. It is understandable that when an usurious rate was being charged by the financier who could facilitate the settlement on 29 May 2015, the mortgagor's solicitor sought to renegotiate the terms to settle at a slightly later date with a lender who was prepared to offer a rate more in accordance with the prevailing market conditions.
However understandable that is, the simple fact of the matter is that the terms of the deed are clear. The obligations of the mortgagor under it were clear and even if a party's strict insistence upon the letter of the law does not always present it in the most pleasing light, the mortgagee was entitled to insist upon strict compliance with the terms of the agreement, including clause 30.
I am not satisfied that the mistake was a misrepresentation that was, in fact, relied upon by the mortgagor to his detriment. Had that been the case, as I remarked in the course of argument, one would have expected that the mortgagor would have attended at the nominated time, cheque in hand, to settle the matter; that did not occur.
It seems to me that the mistake was obvious and would have been obvious to everybody involved in this particular transaction. In my mind, it does not evidence a situation where the mortgagee was not ready and willing to settle in compliance with its obligations under the deed of settlement.
For these reasons, I am not satisfied that the mortgagor has established that the judgment was entered irregularly and I dismiss the motion filed on 9 June 2015 with costs.
[3]
Amendments
23 June 2015 - Date of Decision amended.
Texts cited amended
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Decision last updated: 23 June 2015