By a Summons filed on 6 June 2017, the plaintiff seeks declarations and orders in relation to a registered mortgage given in 1995 over a property in Croydon. The plaintiff complains that the money supposed to be advanced pursuant to the mortgage was never advanced, such that there has been a total failure of consideration. The mortgage is sought to be set aside and cancelled.
The defendant lives in South Korea. There is evidence that she has been served with the Summons, the affidavit in support of the Summons sworn by the plaintiff on 30 May 2017 (together with the exhibit to the affidavit), and a notice under Uniform Civil Procedure Rules 2005 (NSW), r 11.7.
Yoon v Lee [2017] NSWSC 1338 | Case summary | Zoe
The evidence of service is found in two affidavits sworn by the plaintiff's solicitor, Mr Shad, on 29 June 2017 and 15 August 2017, and an affidavit sworn by Mr Yunseok Lee (an accredited Korean/English translator) on 25 August 2017. Service of the documents was effected on 18 July 2017. The documents were delivered to the defendant at her address and left with her. She signed an acknowledgement of receipt. I accept the submission of counsel for the plaintiff, Mr Leaver, that personal service within the meaning of Uniform Civil Procedure Rules, r 10.21 was thereby effected (see Ainsworth v Redd (1990) 19 NSWLR 78 at 85-6 and 89.)
As the subject matter of the proceedings plainly falls within paragraph (e) of Schedule 6 to the Uniform Civil Procedure Rules, leave was not required to serve the originating process outside of Australia (see Uniform Civil Procedure Rules, r 11.4).
The defendant has not filed an appearance, and did not appear today. The 42 day period stipulated in Uniform Civil Procedure Rules, r 11.8 for the filing of an appearance has expired. The plaintiff now seeks leave to proceed against the defendant in accordance with Uniform Civil Procedure Rules, r 11.8AA. The rule was introduced in December 2016. The rule has had predecessors, including former Supreme Court Rules 1970 (NSW), Pt 10, r 2 (which was considered in Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41) and former Uniform Civil Procedure Rules, r 11.4.
In Rossiter v Core Mining Ltd [2015] NSWSC 360 Adamson J stated at [11]:
In Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at [50]-[61] the High Court addressed the matters to be considered in deciding whether leave under UCPR r 11.4 (1) ought be granted are whether:
(a) the defendant has been properly served;
(b) the claims in the originating process fall within UCPR, Sch 6;
(c) the plaintiff has an arguable case, in the sense that it would be sufficient to survive an application for summary judgment; and
(d) the local forum is clearly inappropriate and there is another more appropriate forum.
As to (a), I have already indicated that personal service was effected upon the defendant on 18 July 2017. In my view, that mode of service is sufficient to comply with the requirements of Uniform Civil Procedure Rules, rr 10.20(2) and 11.8AC. I do not think it is necessary for the plaintiff to go further and establish that service was effected in accordance with the law of South Korea (see Bulldogs Rugby League Club v Williams [2008] NSWSC 822 at [30]).
As to (b), the claims made in the Summons clearly fall within paragraph (e) of Schedule 6, as I have said.
As to (d), the subject matter of the proceeding, namely land in New South Wales, suggests that this forum is the appropriate forum. There is no reason to think that it is in any way inappropriate, or that there is another forum that is more appropriate.
That leaves the question whether the plaintiff has an arguable case. The plaintiff's affidavit includes evidence to the following effect:
1. that the mortgage dated 4 August 1995 was given in connection with a promised donation (of 30 million Korean won - about $AUD 40,000) to the Korean Baptist Church, of which the plaintiff is a Minister;
2. that the promised donation was never made;
3. that the $50,000 principal sum referred to in the mortgage was never received, notwithstanding the acknowledgement of receipt contained in clause 2 of the Annexure to the mortgage;
4. that the mortgage provided for the principal sum, or so much of it as remained unpaid, to be repaid on 1 June 1998;
5. that on about 14 December 1998 the plaintiff (and his wife, now deceased, who was formerly a joint tenant with the plaintiff of the mortgaged property) received from a solicitor acting for the defendant a letter of demand to repay the principal sum of $50,000;
6. that a further letter was sent to the plaintiff and his wife in December 2000, from a different firm of solicitors acting for the defendant, in which it was stated that proceedings for possession of the property had been commenced;
7. that the plaintiff contacted that solicitor and informed him, amongst other things, that he never received any money;
8. that the plaintiff did not hear further from the solicitor and no documents were ever served upon the plaintiff, who thus believes that no proceedings were ever commenced against him;
9. that the defendant resides permanently in Korea; and
10. that the plaintiff requests the Court to find that there is no amount owing to the defendant under the mortgage, and order that the mortgage be discharged.
In my view, the plaintiff's evidence establishes a strong prima facie case for at least relief under s 98 of the Conveyancing Act 1919 (NSW). The case would certainly survive an application for summary dismissal.
Having considered the circumstances of the case, in particular the matters referred to by Adamson J in Rossiter v Core Mining Ltd (supra), I am satisfied that the plaintiff should be granted leave to proceed against the defendant pursuant to Uniform Civil Procedure Rules, r 11.8AA.
Mr Leaver provided written submissions in support of the plaintiff's claim. The submissions refer to aspects of the evidence which, it is said, make out either a case of fraud within the meaning of s 42 of the Real Property Act 1900 (NSW), or an in personam claim against the defendant, such that the defendant's mortgage does not enjoy indefeasibility and ought be set aside.
However, proceedings on a claim based on an allegation of fraud must be commenced by Statement of Claim (see Uniform Civil Procedure Rules r 6.3(c)). That has not occurred in this case. Only a Summons has been filed and served. Furthermore, it is a fundamental requirement of fairness that fraud be pleaded distinctly and with particularity (see Nadinic v Drinkwater [2017] NSWCA 114 at [45]-[46] and the cases there cited). This has not occurred either. In these circumstances, I do not think it would be appropriate to proceed to consider any such case against the defendant.
As I have said, the plaintiff's evidence establishes a strong prima facie case for relief under s 98 of the Conveyancing Act. Section 98(1) provides:
Where land is subject to a mortgage and the person empowered to reconvey the land or, where the land is under the provisions of the Real Property Act 1900, to execute in respect thereof a discharge referred to in section 65 of that Act, is out of the jurisdiction, cannot be found or is unknown, or if it is uncertain who the person is, or if the person is dead and no personal representative has been or is likely to be appointed for the person or it is uncertain who the personal representative is, the court may, upon the application of the person for the time being entitled to redeem the mortgaged land, determine in such manner as the court thinks fit whether or not all amounts due under the mortgage have been paid and, if not, the amount thereof outstanding.
The section provides, in certain circumstances, a means for effecting a discharge of a mortgage where it appears that there are no amounts outstanding on the mortgage (see s 98(1F) and s 98(4A); see also Re Estate of Angelidis; Sotiropoulos (2004) 12 BPR 22,661; [2004] NSWSC 1184 at [10] and [17] per Palmer J, and Re Bochenek [2011] NSWSC 435 at [3] per Brereton J).
It is true that the prayers for relief in the Summons do not refer to s 98. However, the prayers for relief include an order for the cancellation of the mortgage and a prayer for such further orders as the Court deems fit. The plaintiff's affidavit also requests that the Court make a finding that there is no amount owing under the mortgage. In these circumstances, I think it is open to the Court to consider whether relief should be given under s 98. The plaintiff wishes the Court to do so.
The pre-conditions for the exercise of the power in s 98(1) have been satisfied in this case. The person empowered to execute a discharge of the mortgage is out of the jurisdiction. The plaintiff, as the surviving joint tenant entitled to redeem the land, can therefore apply to the Court for a determination as to whether or not all amounts due under the mortgage have been paid and, if not, the amount outstanding.
The plaintiff's evidence is that the principal sum under the mortgage was never received; nevertheless, the acknowledgement of receipt (clause 2) and the covenant to repay (clause 4) are incorporated into the registered mortgage. The mortgage, once registered, conferred an indefeasible title upon the defendant, who could enforce the mortgage against the plaintiff and the plaintiff's wife. The principal sum was, according to clause 4 of the mortgage, due to be repaid on 1 June 1998. No payment was ever made so the mortgage fell into default (see also clause 6 of the Memorandum to the mortgage).
Any claim for enforcement of the repayment obligation would need to be brought by 1 June 2010, or would not be maintainable (see s 42(1)(a) of the Limitation Act 1969 (NSW)). The evidence shows that even if proceedings for repayment were commenced within that time, they were never served upon the plaintiff. There is no evidence of any confirmation within the meaning of s 54 of the Limitation Act. I am satisfied that any claims for repayment of moneys owing under the mortgage are, and have been for many years, statute barred. The mortgagor can no longer be required to pay any money under the mortgage.
In these circumstances I think that any amounts that were ever due under the mortgage ought be considered paid for the purposes of s 98(1) of the Conveyancing Act, and there is no amount outstanding on the mortgage. Section 98(1) is concerned with determining whether there are any amounts that are due and unpaid, and hence an amount outstanding (see also s 98(1D) and s 98(1E). Where there are no such amounts, the amount due is effectively regarded as having been repaid (see s 98(1F). I appreciate that this approach involves some straining of the language of s 98. The principal sum has not actually been repaid. However, having regard to the evident purpose of the provision to facilitate the redemption of mortgaged land where there is difficulty in seeking out the mortgagee, I do not think that the language is strained "beyond its proper limits" (see Re Estate of Angelidis; Sotiropoulos (supra) at [17] per Palmer J). It seems to me that relief is available under s 98 when the mortgagor cannot be required to pay any money under the mortgage.
The Court will therefore make an order under s 98(1) of the Conveyancing Act that all amounts due under registered mortgage O436626 in respect of the land in folio identifier 20/4/733 have been paid and that no amount remains outstanding.
The Court will further direct that the Registrar may give a certificate under s 98(1F) to the effect that s 98 has been complied with in relation to registered mortgage O436626 in respect of the said land.
As for costs, based upon the affidavit of Mr Shad sworn 20 September 2017, I am satisfied that in the circumstances of this case costs in the sum of $31,601.90 are reasonable costs of the plaintiff in obtaining the determination under s 98(1). There is no evidence of what the reasonable costs of the mortgagee would have been in discharging the mortgage. However, I am satisfied that those costs would not exceed about $600. In those circumstances it seems to me that the amount of costs for which the defendant is liable pursuant to s 98(1A) is the sum of $31,000.
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Decision last updated: 03 October 2017