Ageist Pty Ltd v Samuel M Holdings Pty Ltd (Receiver and Manager Appointed)

[2021] NSWSC 988

Supreme Court

New South Wales

Medium Neutral Citation:

Ageist Pty Ltd v Samuel M Holdings Pty Ltd (Receiver and Manager Appointed) [2021] NSWSC 988

Hearing dates:

22, 29 and 30 July 2021 and 6 August 2021

Date of orders:

06 August 2021

Decision date:

06 August 2021

Jurisdiction:

Equity - Duty List

Before:

Henry J

Decision:

Order that that the caveats be withdrawn and the first defendant’s director and the second and third defendants be restrained from lodging any further caveats without leave.

Catchwords:

LAND LAW – Caveats – Extension of operation of caveats – where caveats claim interests based on bad faith by mortgagee in exercising its power of sale – where bad faith alleged in relation to mortgagee’s removal of property from auction and decision to sell to third party – caveats ordered to be withdrawn

Legislation Cited:

Real Property Act 1900 (NSW), s 74MA

Supreme Court (Corporations) Rules 1999 (NSW), r 2.13(1)(a)

Cases Cited:

Ageist Pty Ltd v More Than Skin Pty Ltd [2020] NSWSC 1117

Ageist Pty Ltd v More Than Skin Pty Ltd(No 2) [2020] NSWSC 1176

Barns v Queensland National Bank Ltd (1906) 3 CLR 925; [1906] HCA 26

Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd [2011] NSWCA 39

Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491; [1981] HCA 70

Commonwealth Bank of Australia v Hadfield [2004] NSWCA 350

Forsyth v Blundell (1973) 129 CLR 477; [1973] HCA 20

Fuge v Commonwealth Bank of Australia [2019] FCA 1621

Hanson Construction Materials Pty Ltd v Roberts (2016) 93 NSWLR 1; [2016] NSWCA 240

Hawkesbury Development Co Ltd v Landmark Finance Pty Ltd (1969) 2 NSWR 782

Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1994) 8 BPR 15,581

Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; [1972] HCA 74

Jonsue Investments Pty Ltd v Balweb Pty Ltd [2013] NSWSC 325

Kennedy v De Trafford [1897] AC 180

Oswal v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) (2013) 295 ALR 708; [2013] FCAFC 9

Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; [1912] HCA 9

Perpetual Nominees Ltd v Springfield Retail Pty Ltd [2009] NSWSC 188

Samuel M Holdings Pty Limited v The Trust Company (PTAL) Limited [2020] NSWSC 248

Sinclair v Hope Investments Pty Limited [1982] 2 NSWLR 870

Stone v Farrow Mortgage Services Pty Ltd (in liq) [1999] NSWCA 435

The Trust Company (PTAL) Limited v Samuel M Holdings Pty Limited [2020] NSWSC 863

The Trust Company (PTAL) Ltd v Samuel M Holdings Pty Ltd [2020] NSWSC 556

The Trust Company (PTAL) Ltd v Samuel M Holdings Pty Ltd [2020] NSWSC 556

Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646; [2004] NSWSC 114

Texts Cited:

E L G Tyler, P W Young and C E Croft, Fisher & Lightwood’s Law of Mortgage (3rd ed, 2014, LexisNexis Butterworths)

Category:

Principal judgment

Parties:

Ageist Pty Ltd (Plaintiff)
Samuel M Holdings Pty Ltd (Receiver & Manager Appointed) (First Defendant)
Lila Stojcevski (Second Defendant)
Lupco Stojcevski (Third Defendant)

Representation:

Counsel:
A G Martin (Plaintiff)

Solicitors:
Summer Lawyers (Plaintiff)

In person:
L Stojcevski (Second and Third Defendants)
S Murabito (Granted leave to make submissions)

File Number(s):

2021/00192918

Publication restriction:

Nil

Judgment

1. The plaintiff, Ageist Pty Ltd, is the second registered mortgagee in possession of a property located in Port Kembla, New South Wales (Port Kembla property). By Amended Summons filed on 23 July 2021, the plaintiff seeks orders pursuant to s 74MA of the Real Property Act 1900 (NSW) for the removal of two caveats lodged by the defendants against the Port Kembla property and for the defendants to be restrained from lodging any further caveats or otherwise taking any steps to interfere with, or delay, the sale of the Port Kembla property.

2. The first defendant, Samuel M Holdings Pty Ltd (Receiver and Manager appointed) (SMHPL), is the registered proprietor of the Port Kembla property. The Receiver and Manager of SMHPL’s property is Mr Michael Smith (Receiver). SMHPL’s sole director is Mr Steven Murabito.

3. The second defendant is Ms Lila (also known as Lilly) Stojcevski. The third defendant is Mr Lupco Stojcevski. Ms Stojcevski is the sister of Mr Stojcevski and the partner of Mr Murabito. Ms Stojcevski and Mr Stojcevski are the children of Bosilka Stojcevska.

The proceedings, the hearing and the evidence

4. The plaintiff commenced these proceedings by Summons filed on 6 July 2021 seeking an order in relation to a caveat lodged against the title to the Port Kembla property by Mrs Stojcevska. That caveat had prevented completion of a contract of sale entered into by the plaintiff in the exercise of its mortgagee’s power of sale that had been scheduled for 30 June 2021.

5. On 19 July 2021, Darke J made orders that Mrs Stojcevska withdraw her caveat, be restrained from lodging, whether by herself or at her direction, any further caveats on the Port Kembla property, and pay the plaintiff’s costs on an indemnity basis: Ageist Pty Ltd v Stojcevska (Supreme Court (NSW), Darke J, 19 July 2021, unrep) (ex tempore reasons).

6. On 22 July 2021, the proceedings came before me as Duty Judge on the plaintiff’s application to remove another caveat, AR256711, that had been lodged in relation to the Port Kembla property on 20 July 2021 by Mr Murabito that identified the caveator as SMHPL (SMHPL Caveat). The plaintiff sought an urgent hearing in the context where completion of the contract of sale had been rescheduled to take place at 5 pm that day.

7. During the course of the urgent hearing before me, the plaintiff became aware that another caveat, AR265339, had been lodged that day by Ms Stojcevski and Mr Stojcevski and made an urgent application for that caveat (Stojcevski Caveat) to also be removed.

8. The hearing of the plaintiff’s application to remove the SMHPL and Stojcevski Caveats was not completed that afternoon. It continued on 29 July 2021 and finished at around 6.00 pm on 30 July 2021. Judgment was reserved, although the parties were granted leave to serve further documents and short supplementary submissions in relation to matters that had been raised during the hearing by 2 August 2021.

9. The hearing was conducted by telephone on 22 July and by audio-visual link (via Microsoft Teams) on 29 and 30 July 2021. The plaintiff was represented by Mr Martin of counsel. There was no appearance by SMHPL’s Receiver, although the plaintiff adduced evidence that the Receiver consented to its application to withdraw the SMHPL Caveat.

10. The plaintiff’s application is supported by two affidavits of Stephanie Jin, a solicitor at Summer Lawyers, dated 6 July 2021 and 28 July 2021, documents tendered at the hearings (which are marked as Exhibits A, B, C, D, E and F), written submissions dated 28 July 2021, submissions in reply dated 2 August 2021 and documents attached to those submissions (which are marked as Exhibit G).

11. Mr Murabito appeared on 22, 29 and 30 July and was granted leave to be heard and make submissions pursuant to r 2.13(1)(a) of the Supreme Court (Corporations) Rules 1999 (NSW). Ms Stojcevski appeared for herself and on behalf of Mr Stojcevski.

12. Ms Stojcevski and Mr Murabito made oral submissions and rely on an affidavit of Theo Bellas dated 29 July 2021, an affidavit of Steven Murabito dated 29 July 2021, and two affidavits of Ms Stojcevski dated 30 July 2021. Ms Stojcevski also tendered documents at the hearing (which are marked as Exhibits 1 and 3) and some email correspondence received on 2 August 2021 (which are marked as Exhibit 4) and further relies on written submissions received by email at 10.07 am, 10.47 am and 2.24 pm on 2 August 2021.

13. There was no cross-examination of any witnesses.

Mr Murabito’s adjournment application

14. At the start of the resumed hearing on 30 July 2021, Mr Murabito applied for an adjournment for seven days. Mr Murabito submitted that he needed more time as he had come across some “additional information” which was crucial to this case” the previous night and told the Court that he was feeling unwell following his second Pfizer vaccination the previous day. He provided a medical certificate dated 29 July 2021 which stated that he was unfit for work on 30 July 2021.

15. The plaintiff opposed the adjournment. It submitted that any further delay would only serve to exacerbate the deficit in the amount owing to it after the Port Kembla property is sold as fees and interest continued to be accrued.

16. I refused Mr Murabito’s application and the hearing proceeded. In my view, the interests of justice did not favour an adjournment. My reasons for this ruling are as follows.

17. First, the adjournment application was made on the third day of the hearing of an urgent application and the other parties were ready to proceed. The Court had provided time to the parties and Mr Murabito to prepare evidence and submissions to enable the matter to come on for a contested hearing. It had also accommodated an earlier request for an adjournment and granted Mr Murabito leave to rely on evidence that had been served late.

18. On 22 July 2021, orders were made for the defendants and Mr Murabito to prepare evidence and submissions and file notices of appearance and Mr Murabito informed the Court that he would be conferring with his legal team and his barrister and would be “ready next week”. Despite this, Mr Murabito (and the second and third defendants) did not comply with the orders or arrange for legal representatives to appear for him or SMHPL on 29 or 30 July 2021. While Mr Murabito indicated that his non-compliance was because he had only received the plaintiff’s material late on Wednesday, 28 July, there was evidence that indicated that the plaintiff had served its material on Ms Stojcevski on 23 July in accordance with the Court’s orders, noting she had undertaken to make those materials available to Mr Murabito. There was also evidence that the plaintiff had contacted Ms Stojcevski by way of follow-up on the morning of 27 July to which Ms Stojcevski had not responded. On 29 July, Mr Murabito had also requested and was granted an adjournment of the hearing over the plaintiff’s opposition to enable him (and the second and third defendants) to adduce further evidence by 9 am on 30 July. Leave was granted to Mr Murabito (and the second and third defendants) to rely on the affidavits that were served late when the hearing resumed at 2 pm on 30 July.

19. Second, it was not unreasonable to expect Mr Murabito to be in a position to put on evidence in support of the interest claimed in the SMHPL Caveat in a timely manner in circumstances where he had lodged a caveat in very similar terms in January 2020. He could also have been expected to have anticipated that the plaintiff would apply to the Court for the SMHPL Caveat to be withdrawn after making its application in relation to Mrs Stojcevska’s caveat. It was relevant that Mr Murabito did not identify the nature of the additional information or how it related to the bad faith claim asserted in the SMHPL Caveat which, during his submissions at the hearing on 22 July, was asserted to arise from the plaintiff’s dealings in relation to Mrs Stojcevska rather than SMHPL as mortgagor.

20. Third, in my view, it was in the interests of all relevant parties for the plaintiff’s application to be dealt with expeditiously. The evidence demonstrated that completion of the contract of sale had already been delayed by around six months due to the lodgement of various caveats by Mr Murabito and parties associated with him. In addition to the plaintiff’s interests, the interests of the first mortgagee and the third-party purchaser of the Port Kembla property also needed to be considered and could be expected to be impacted by a further delay in the hearing being finalised.

21. Fourth, although Mr Murabito was granted leave to make submissions, there was an issue as to whether he had any authority to act for SMHPL given the Receiver’s appointment. There was also a question about his authority to lodge the SMHPL Caveat at all as the evidence on the application indicated that Mr Murabito had not sought or obtained the Receiver’s consent to lodge the SMHPL Caveat on behalf of the company.

22. Finally, at the same time as seeking the adjournment,    Mr Murabito asked the Court to grant him leave to rely on an affidavit of his which he had apparently amended the night before or during the course of the morning, but which had not been served until around 1.13 pm. It was also apparent from the content of her submissions that Ms Stojcevski was in a position to advance matters on behalf of Mr Murabito in support of the continuation of the SMHPL Caveat.

23. Thus, the hearing proceeded in the afternoon of 30 July 2021. I note that Mr Murabito appeared throughout the hearing by audio-visual link from, apparently, the office of another person (T35.40, 30 July 2021), made oral submissions regarding the interest claimed in the SMHPL Caveat and responded to questions that were put to him.

Factual matters

24. As noted above, SMHPL is the registered proprietor of the Port Kembla property. SMHPL is also the trustee of the Bosilka Trust, which was established by a trust deed dated 2 November 2015, and the Vasa Family Trust, a unit trust which was established by trust deed dated 17 June 2017. The primary beneficiaries of the Bosilka Trust are Ms Stojcevski and Mr Murabito. The unit holders of the Vasa Family Trust are Mrs Stojcevska, who holds 50 units, and Ms Stojcevski and Mr Stojcevski, who each hold 25 units.

25. Under the Bosilka Trust Deed, SMHPL, as trustee, may deal with the Trust Fund as if it were the absolute beneficial owner and as it thinks fit. It has the express power to borrow money or raise financial accommodation from any person: cls 5.1 and 5.2(g).

26. Under the Vasa Family Trust Deed, SMHPL, as trustee, has the power to borrow and raise moneys by mortgage or otherwise upon such terms as the trustee shall deem fit and is empowered to execute any mortgage for the purpose of securing payment of money to the trustee: cl 12.3. The Vasa Family Trust Deed also provides that the discretion vested in the trustee is absolute and uncontrolled and that every power of the trustee is exercisable in the trustee’s absolute and uncontrolled discretion without any obligation to consider competing claims of Unit Holders: cl 15. The Vasa Family Trust Deed was varied on 15 November 2017 to provide, amongst other things, that the trust would be a fixed trust for NSW Land tax purposes in accordance with s 3A of the Land Tax Management Act 1956 (NSW). The amendments to the Vasa Family Trust Deed did not vary cls 12.3 or 15.

27. On or about 29 June 2017, a transfer of the Port Kembla property was registered on the title as dealing AM5200841. Based on submissions made by Ms Stojcevski and Mr Murabito that the Port Kembla property was Mrs Stojcevska’s home, it seems likely that the transfer registered on 29 June 2017 was from Mrs Stojcevska to SMHPL, although there is no evidence of who the transferor was or the terms on which that transfer was made. It is common ground that Mrs Stojcevska occupied the Port Kembla property until July 2020, when a writ of possession in favour of the plaintiff was executed.

28. On or about 18 February 2019, SMHPL entered into two loan agreements and mortgages relating to the Port Kembla property.

29. The first was with The Trust Company (PTAL) Ltd (PTAL) for the principal amount of $1,760,000. PTAL was granted a first mortgage over the Port Kembla property and two other properties as security for the loan, which mortgage is registered with dealing number AP69621 (first mortgage).

30. The second loan and mortgage were with H & H Mezz Pty Ltd (H & H Mezz) for the principal amount of $400,000. The principal debtor and borrower of the second loan and mortgage is SMHPL in its corporate capacity and as trustee for the Bosilka Trust. SMHPL in its corporate capacity and as trustee for the Vasa Family Trust, Mr Murabito and Ms Stojcevski are each guarantors.

31. H & H Mezz was granted a second mortgage over the same three properties that were the subject of the first mortgage, which includes the Port Kembla property, and a further property in Leichhardt. The second mortgage to H & H Mezz is registered with dealing number AP69622 (second mortgage).

32. On 6 June 2019, H & H Mezz issued a notice of default under s 57(2)(b) of the Real Property Act. No action was taken by SMHPL in relation to that notice.

33. By deed of appointment and indemnity dated 30 July 2019, H & H Mezz appointed Mr Michael Smith and Mr Robert Kite as Receivers and Managers to SMHPL and to the Port Kembla property by reason of SMHPL’s default under the second mortgage.

34. On 2 September 2019, PTAL issued a notice of default under s 57(2)(b) of the Real Property Act. No action was taken by SMHPL in relation to that notice.

35. On 14 November 2019, PTAL commenced possession proceedings in relation to the Port Kembla property. Consent judgment for possession was filed on 17 December 2019 and, on 28 January 2020, a writ of possession in favour of PTAL was issued.

36. On or about 4 March 2020, H & H Mezz assigned the second mortgage to the plaintiff. Notices of that assignment were sent by the plaintiff by registered post to each of SMHPL, Mr Murabito and Ms Stojcevski [1] under cover of letters to them dated 11 March 2020.

    1. Although the cover letter to the notice of assignment refers to “Mr” L Stojcevski, I note that the notice refers to “Lila Stojcevski” as a “debtor” and the cover letter and notice are addressed to the address identified for Ms Stojcevski as a guarantor in the loan and mortgage documents in evidence (see Exhibits G and 3).

37. By deed of appointment and indemnity dated 11 March 2020, the plaintiff appointed the Receiver to the Port Kembla property and the other three properties the subject of the second mortgage on the basis that SMHPL was in default of the second mortgage and the plaintiff was entitled to enforce the mortgage as assignee from H & H Mezz.

38. Also on 11 March 2020, Mr Murabito filed a notice of motion seeking an ex parte stay of the PTAL writ of possession which was due to be executed the following day. Cavanagh J granted the stay, noting in his reasons that there was an allegation that the Receivers had not been properly appointed: Samuel M Holdings Pty Limited v The Trust Company (PTAL) Limited [2020] NSWSC 248 at [9].

39. On 26 March 2020, the transfer of the second mortgage from H & H Mezz to the plaintiff was registered on the title to the Port Kembla property, with dealing number AP968245.

40. On 14 May 2020, Button J dismissed the application made by Mr Murabito on behalf of SMHPL to stay the PTAL writ of possession: The Trust Company (PTAL) Ltd v Samuel M Holdings Pty Ltd [2020] NSWSC 556. In dismissing the motion, his Honour noted:

1. on 22 August 2019, Mr Murabito had become aware of the appointment of Receivers by H & H Mezz: at [10];

2. the attack against the appointment was no longer pressed: at [17]; and

3. despite Mr Murabito claiming that the appointment of the receivers was not supported by the security documents, his Honour was satisfied that those documents granted a right to appoint receivers: at [23].

41. On 5 June 2020, a writ of possession of the Port Kembla property was issued to the plaintiff following proceedings that were commenced on 7 April 2020 and default judgment for possession being obtained on 4 June 2020. According to Ms Jin’s evidence, no actions were taken by SMHPL in response to the plaintiff’s possession proceedings and default judgment.

42. On 25 June 2020, Mr Dominic Carbone, solicitor, purported to appear for SMHPL on instruction from Mr Murabito before Wright J and sought a stay of the PTAL writ of possession to allow Mrs Stojcevska four days to move from the Port Kembla property. Her Honour granted a stay until 12.01 am on 1 July 2020.

43. On 2 July 2020, a further stay application of the PTAL writ of possession was made by Mrs Stojcevska and Mr Stojcevski, which application was dismissed by Adamson J: The Trust Company (PTAL) Limited v Samuel M Holdings Pty Limited [2020] NSWSC 863.

41. On 2 July 2020, the Sheriff executed the PTAL writ of possession. According to Ms Jin’s affidavit, on or about 6 July 2020, the police were called to remove Mrs Stojcevska from the Port Kembla property. On the same day, PTAL provided authorisation to the plaintiff to sell the Port Kembla property by way of a mortgagee sale.

Sale of the Port Kembla property

45. An auction was scheduled on 15 August 2020 for the sale of the Port Kembla property by the plaintiff in the exercise of its mortgagee’s power of sale. It is common ground that the auction did not proceed.

46. According to Ms Jin’s affidavit, the auction was cancelled due to interference and threats by the mortgagors, resulting in police attendance.

47. According to the evidence from Ms Stojcevski and Mr Murabito, the real estate agent announced that the auction was pulled on instructions from the vendors. They gave evidence that prospective purchasers, including Mrs Stojcevska, were told by the real estate agent that, to register as a bidder at the auction, they needed to have a bank cheque available for a deposit of $65,000. According to Ms Stojcevski’s evidence, Mrs Stojcevska wanted to purchase the Port Kembla property to have the home “returned” to her and Ms Stojcevski was told by the real estate agent that a deal could be done for Mrs Stojcevska to purchase the property on the Monday after the auction.

48. On 17 August 2020, Ms Stojcevski sent an email to Paul Reese of Summer Lawyers, the plaintiff’s solicitor, stating that she and Mrs Stojcevska had attended the auction to purchase the Port Kembla property and were told they could not register as a bidder because they did not have a bank cheque available in the sum of $65,000. In her email, Ms Stojcevski asked for the details of who the cheque could be made out to and whether an electronic transfer of $65,000 that day was acceptable so that they could proceed to perform valuations and settle the purchase expeditiously.

49. Later the same day, Paul Reese sent an email to Mr Carbone in relation to the sale of the Port Kembla property. Mr Reese advised that the mortgagees would exchange a contract to sell the Port Kembla property to Mrs Stojcevska subject to the conditions that any caveats lodged by the Stojcevskis or related parties were removed from the other three properties in respect of which the second mortgage was granted and them not taking any steps to frustrate or delay the mortgagee’s sale of those properties including, but not limited, to lodging AFCA complaints, commencing court proceedings, or lodging caveats. Mr Reese’s email indicated that, following completion of the sale of one of the three other properties, the mortgagee would enter into a contract to sell the Port Kembla property to Mrs Stojcevska for the purchase price of $650,000 with a 10% deposit to be paid immediately and unconditionally, completion to take place within 42 days of exchange. The sale was also subject to the condition that if it was not completed within a further period of 14 days, the mortgagee would be free to sell the Port Kembla property and no steps would be taken to frustrate or delay that sale. The email also referred to the conditions needing to be encapsulated in a forbearance deed, following which the Port Kembla property would be removed from public sale.

50. There is no evidence of any responses to the 17 August emails.

51. Pausing here, around the time of the auction and the 17 August emails, Mr Murabito and the plaintiff were involved in other proceedings in this Court arising out of a caveat lodged by Mr Murabito against the title to the Leichardt property that was the subject of the second mortgage: see Ageist Pty Ltd v More Than Skin Pty Ltd [2020] NSWSC 1117 and Ageist Pty Ltd v More Than Skin Pty Ltd(No 2) [2020] NSWSC 1176.

52. Following the cancelled auction, the plaintiff continued to market the Port Kembla property and sought to negotiate a sale with prospective purchasers, including with Mrs Stojcevska. There is evidence that suggests a deposit was taken from a prospective purchaser, Mr Gonzales, although there was a dispute regarding whether any exchange of contracts took place. A contract with Mr Gonzales did not proceed.

53. On 27 November 2020, Mr Stojcevski sent an email to Mr Reese at Summer Lawyers in which he asserted that he and Mrs Stojcevska had an interest in the Port Kembla property as owners, referred to the auction being cancelled, and stated that Mrs Stojcevska’s home needed to be returned to her for the value of the property. In an email in response, Mr Reese advised Mr Stojcevski to make contact with the real estate agent and asserted that “there has been plenty of opportunity for the [Port Kembla] property to be purchased” by Mrs Stojcevska but that nothing has happened.

54. On 30 November 2020, Mr Reese sent an email to Mr Stojcevski, copied to Mr Carbone, advising that the plaintiff would sell the Port Kembla property to Mrs Stojcevska for $650,000, with a non-refundable deposit of $65,000 to be paid immediately on exchange of contracts and completion within no more than 42 days. Mr Reese’s email states that, until contracts were exchanged with Mrs Stojcevska, the plaintiff would continue to market the property for sale to the highest bidder, and that nothing in the email construes that any agreement to sell the property had been reached with her. I pause to observe that Mr Reese’s email makes no reference to any other conditions, such as the withdrawal of court actions or caveats as conditions of any sale to Mrs Stojcevska at that time.

55. On 4 December 2020, Mr Stojcevski advised Mr Reese that Mrs Stojcevska had signed the contract for sale and s 66W certificate, asked whether she could attend Mr Reese’s office that day to provide the documents and requested bank account details to make a transfer of the deposit of $65,000.

56. Mr Reese’s email in response, sent on 7 December 2020, requested Mr Stojcevski to send through a scanned version of the proposed exchange contract for the plaintiff’s consideration.

57. At 5.04 pm on 10 December 2020, Stephanie Jin of Summer Lawyers sent an email to Mr Stojcevski, copied to Mr Pope and Mr Carbone, advising that, should contracts not be exchanged by noon the following day, the plaintiff would be accepting an alternate offer on the Port Kembla property.

58. At 6.25 pm on 10 December 2020, Mr Carbone sent an email to Stephanie Jin of Summer Lawyers advising that he held an original contract for sale and requested the method by which the $65,000 deposit should be paid by 9 am. Mr Carbone’s email also refers to a previous email he purportedly sent to Mr Reese and Ms Amy Rijono of Summer Lawyers on 8 December 2020 enclosing the contract for sale signed by Mrs Stojcevska and the executed 66W certificate. Pausing here, the 8 December email from Mr Carbone appears to have been sent to incorrect email addresses for Mr Reese and Ms Rijono at Summer lawyers. On that basis, I am not satisfied that the 8 December 2021 email was received by Summer Lawyers that day.

59. At 10.54 am on 11 December 2020, Mr Stojcevski sent an email to Summer Lawyers asking Stephanie Jin to speak to Mr Carbone as “same day transfers are being arranged” which they were hoping could be done before 12 pm, but noted that “it might be a little later until you see cleared funds”.

60. What happened next is the subject of dispute.

61. The plaintiff contends that $50,000 was paid into Summer Lawyers’ trust account on Friday 11 December 2020 and exchange of contracts with Mrs Stojcevska did not occur by 12 noon that day. At 5 pm on 11 December 2020, Summer Lawyers wrote to Mr Stojcevski, copied to Mr Carbone, and confirmed that an insufficient amount had been received by way of deposit and, in any event, the funds had not yet cleared

62. Ms Stojcevski and Mr Murabito contend that Mrs Stojcevska complied with the conditions and paid the deposit of $65,000 on 11 December 2020. They also submit that the plaintiff’s handling of the sale of the Port Kembla property to Mrs Stojcevska was in bad faith in the context of the timing of the above correspondence and, more generally, a submission which I deal with later in these reasons.

63. In my view, the evidence does not support Ms Stojcevski and Mr Murabito’s contention that the deposit of $65,000 was received by Summer Lawyers on 11 December 2020. While emails sent to Summer lawyers by Mr Stojcevski and Ms Stojcevski refer to various amounts having been transferred to Summer Lawyers on 11 December 2020 which total more the $65,000, the other emails and documents in evidence indicate otherwise. For example, the emails from Summer Lawyers dated 11 and 14 December 2020 identify that only $50,000 had been received and was held in their trust account. Another email sent by Ms Stojcevski to Summer Lawyers at 7.10 pm on 11 December 2020 requests the return of “Mrs Stojcevski’s money immediately to [Mr Carbone’s] trust account of $50,000”. Further, Summer Lawyer’s trust account receipt and electronic deposit record identify that it received $15,000 from Ms Stojcevski on behalf of Mrs Stojcevska on 16 December 2020, not earlier (Ex F).

64. In any event, it seems clear from the evidence that Ms Stojcevski, Mr Stojcevski and Mr Carbone (who presumably was representing Mrs Stojcevska or one of the other related parties at the time) were aware by late on 11 December 2020 that not only did the plaintiff contend that it had not exchanged contracts with Mrs Stojcevska, but that it had entered into a contract for sale with another purchaser. The exchange with another party was confirmed in an email from Summer Lawyers to Ms Stojcevski, Mr Stojcevski and Mr Carbone sent on Monday 14 December 2020, in which Summer Lawyers asserted that Mrs Stojcevska did not comply with the conditions upon which the agreement was to be made. Although emails sent by Ms Stojcevski and Mr Stojcevski around this time refer to initiating court action, no action was taken to enforce any contract between Mrs Stojcevska and the plaintiff.

The Sale Contact and various caveats lodged

65. The contract for sale of the Port Kembla property between the plaintiff and the current purchaser, Ms Janica Nordstrom, was exchanged on 11 December 2020 for the purchase price of $650,000 (Sale Contract). The date for completion of the Sale Contract was 29 January 2021.

66. Completion on 29 January 2021 was delayed due to the lodgement of various caveats over the Port Kembla property by the second and third defendants, Mr Murabito and Mrs Stojcevska. Those caveats were:

1. Caveat AQ733385 lodged by Mr Murabito in the name of SMHPL on 17 January 2020 claiming an interest over the land by virtue of being a registered unit holder and the mortgagee having entered into a contract for sale in bad faith. This caveat was rejected by the NSW Land Registry Services (LRS) on 12 April 2021.

2. Caveat AQ733383 lodged by Mr Stojcevski on 18 January 2020 claiming an interest on the basis that the contract for sale had been entered into in bad faith. That caveat was registered on 12 April 2021 and lapsed on 18 June 2021 following a lapsing notice issued by the plaintiff.

3. Caveat AQ739663 lodged by Ms Stojcevski on 21 January 2020 claiming an estate by virtue of a beneficial interest as a unit holder in the Vasa Family Trust. That caveat was registered on 12 April 2021 and lapsed on 25 June 2021 following a lapsing notice issued by the plaintiff.

4. Caveat AQ743276 lodged by Mrs Stojcevska on 24 January 2021 claiming an equitable interest by virtue of an instrument dated 11 December 2020, which was rejected by the LRS on 12 April 2021.

67. As noted above, the rescheduled settlement of the Sale Contract on 30 June 2021 did not occur because of Mrs Stojcevska’s caveat which had been lodged on 30 June 2021. Mrs Stojcevska’s caveat, AR193850, claimed an estate in fee simple by virtue of a beneficial interest in the Vasa Family Trust.

Other matters

68. The evidence on this application indicates that:

1. as at 6 July 2021, the amount owing to PTAL under the first mortgage is $386,043.78; and

2. as at 5 July 2021, the amount owing to the plaintiff under the second mortgage is $1,001,202.88.

69. According to Ms Jin’s evidence, the net proceeds from the sale of the Port Kembla property to Ms Nordstrom will first be applied to pay out and reduce the amount owing to the first mortgagee, with the balance to go towards reducing the amount owing to the plaintiff.

70. According to documents in evidence on the application, the finance approval obtained by Ms Nordstrom would lapse if it was not taken up by 22 July 2021. On 30 July 2021, plaintiff’s counsel informed the Court that Ms Nordstrom’s finances had been extended but that he was not aware of the period of that extension and, although the current position is that the purchaser is still able to complete, it was “certainly not an open-ended transaction”.

71. Mr Bellas, a director of Artos Espresso Pty Ltd, gives evidence that, had he been told that the Port Kembla property was being auctioned for a second time from August to December 2020 or was available for purchase, he would have attended the auction of the property at that time or attended to purchasing the property. He deposes that he has made an offer to SMHPL in its own capacity and in its capacity as trustee for the Vasa Trust and to Mr Murabito and his solicitors to purchase the property for $710,000. He gives evidence that he has made similar offers to Summer Lawyers previously and was led to believe that the property was being relisted for auction, that he has a 10% deposit available to be made for exchange, annexing a screenshot of $55,000 of available funds and deposing to having $16,000 available in cash as a deposit, and that he is ready, willing and able to proceed with the purchase and settlement of the property.

72. Mr Bellas also gives evidence that, in September 2020, he purchased the Leichardt property that the plaintiff had taken into possession, which property was the subject of Robb J’s judgments referred to at [51], and that he settled that purchase within 2 weeks.

Legal principles

73. The principles that apply on an application for withdrawal of a caveat under s 74MA of the Real Property Act are well known.

74. The Court approaches the application by applying the principles analogous to an application for an interlocutory injunction. The caveator has the onus of establishing that there is a serious issue to be tried as to the existence of the interest claimed in the caveat. Once the caveator discharges that onus, the continuation or removal of the caveat depends on the Court’s assessment of the balance of convenience. Relevant to that question is the strength of the caveator’s claim to an interest in the land. That is consistent with the well-established principle that the apparent strength of each party’s case is a material factor in assessing the balance of convenience on an application for an interim injunction: Hanson Construction Materials Pty Ltd v Roberts (2016) 93 NSWLR 1; [2016] NSWCA 240 at [77], [79].

75. On such an application, it is not necessary for the Court to make a final determination as to the interest claimed by the caveator or the priority that the caveator may or may not have over competing interests. If no interlocutory injunction would be granted to the caveator, the caveat should be ordered to be withdrawn: Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd [2011] NSWCA 39 (Bayblu) at [20].

76. The interest protected by a caveat must be a legal or equitable interest in land; a mere contractual or personal right will not be sufficient.

77. A registered proprietor may be entitled to maintain a caveat if they are able to demonstrate a legal or equitable entitlement over and above the fact of their registered proprietorship. This includes where they can establish there is a serious question to be tried that a mortgagee has breached its duty to the mortgagor by an improper exercise of its power of sale and thus is a voidable transaction: Sinclair v Hope Investments Pty Limited [1982] 2 NSWLR 870 at 872, 875.

78. The power of sale given to a mortgagee is for their own benefit for the purpose of enabling them to realise sufficient proceeds to satisfy their claim and return any balance to the mortgagor: Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 (Pendlebury) at 699 (Isaacs J); [1912] HCA 9. The mortgagee is not a trustee of the power for the mortgagor: Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491 at 502 (Mason J); [1981] HCA 70.

79. A mortgagee’s power of sale must, however, be exercised in good faith: Pendlebury; Commonwealth Bank of Australia v Hadfield [2004] NSWCA 350 (CBA v Hadfield) at [9] (Bryson JA, Giles and Tobias JJA agreeing). The mortgagee cannot fraudulently, wilfully or recklessly sacrifice the property of the mortgagor: Forsyth v Blundell (1973) 129 CLR 477 at 481 (Menzies J); [1973] HCA 20, quoting Kennedy v De Trafford [1897] AC 180 at 185; CBA v Hadfield at [14]; Barns v Queensland National Bank Ltd (1906) 3 CLR 925 at 943; [1906] HCA 26.

80. Mere negligence or carelessness in carrying out the sale does not constitute a breach of the mortgagee’s duty: Pendlebury at 700 (Isaacs J). Any departure from reasonable standards must be so serious as to be properly characterised as unconscionable: Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1994) 8 BPR 15,581 at 15,583.

Consideration and determination

81. The interest claimed in the SMHPL Caveat is an interest as the registered proprietor who has granted a mortgage and the mortgagee having entered into a contract for sale of the Port Kembla property in bad faith in the purported exercise of its power of sale.

82. The interest claimed in the Stojcevski Caveat is a charge by virtue of an agreement dated 29 June 2017 between Ms Stojcevski and Mr Stojcevski on the one hand and SMHPL on the other. The details supporting the claimed interest refer to it as an equitable interest whereby the mortgagee has entered into a contract for sale of the Port Kembla property in bad faith in the purported exercise of the power of sale.

Submissions

83. Mr Murabito and Ms Stojcevski’s main complaint is that the plaintiff’s conduct in relation to the sale of the Port Kembla property from August 2020 involved bad faith on its part, particularly as that conduct related to Mrs Stojcevska.

84. It was submitted that the plaintiff had engaged in bad faith in the manner in which it had dealt with the offers made to Mrs Stojcevska for her to purchase the Port Kembla property. Mr Murabito referred to the plaintiff’s offer to Mrs Stojcevska as being a “sham” and asserted that it had broken its contract with Mrs Stojcevska, contending that the plaintiff had been “in contract” with Mrs Stojcevska and that its solicitors had held her deposit for months. He referred to the plaintiff’s conduct as bad faith as it was playing with a “74 year old woman’s life” and “home”.

85. It was also submitted that, contrary to what was asserted by the plaintiff’s solicitors, Mrs Stojcevska did not have plenty of opportunity from the time of the failed auction to 11 December 2020 to purchase the property. Emphasis was placed on the fact that, on the afternoon of 10 December 2020, Mrs Stojcevska was only given until noon the next day to get her deposit to Summer Lawyers. It was submitted that the handling of the sale within the hours following the 10 December email from Ms Jin (referred to at [57]) was in bad faith. Ms Stojcevski contended that Summer Lawyers must have held the deposit of another person in trust to enable an exchange to take place in advance of the offer made by Mrs Stojcevska, which was advantageous to another buyer.

86. Mr Murabito also submitted that it was bad faith for the plaintiff to pull the auction after imposing the condition requiring bidders to have a bank cheque available and that not enough was done post-auction to sell the property. He submitted that the Port Kembla property was being sold by the plaintiff to Ms Nordstrom at an undervalue, contending that property prices had increased 30% since last year and that there were other purchasers ready, willing and able to pay a higher price in reliance on Mr Bellas’ evidence. Ms Stojcevski also referred to a valuation of the Port Kembla property of $740,000, which I note was not in evidence, and submitted that the property had a special value to Mrs Stojcevska and Mr Stojcevski as they had resided there for a long time.

83. It was submitted that there was overarching bad faith by the plaintiff as mortgagee as it has taken possession of the Port Kembla property, purported to sell it via auction and to other purchasers, and incurred expenses in doing so in order to gain “some sort of an advantage” over Mr Murabito. Reliance was also placed on the plaintiff conditioning the sale of the Port Kembla property to Mrs Stojcevska on the withdrawal of the court proceedings involving Mr Murabito and caveats on the other secured properties, referring to the terms of the 17 August 2020 email from Mr Reese (referred to at [49]). This was also said to be bad faith against SMHPL, Ms Stojcevski, in her capacity as a guarantor of the loan, as well as against her and Mr Stojcevski in their capacities as unit holders of the Vasa Family Trust.

84. In supplementary submissions received on Monday, 2 August 2021, new matters were raised by Ms Stojcevski in support of the bad faith argument, including that the assignment of the mortgage was invalid because notice had not been given to or consent obtained from the borrower, guarantor or unit holders. Reference was made to the assignment of the mortgage to the plaintiff who did not hold an accredited Australian Credit Licence in accordance with ASIC regulation RG 203.46. Reference was also made to the consumer credit code position and the property being the home of Mrs Stojcevski.

85. It was further asserted that the mortgage contract may be unjust or unsuitable under responsible lending laws, referring to Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48 and Commercial Bank of Australia v Amadio (1983) 151 CLR 447; [1983] HCA 14, the mortgage that was entered into was not in the interests of the guarantors as it was not made for business purposes, that there was a conflict between SMHPL, Mr Murabito, and the beneficiaries of the Vasa Unit Trust that owns the Port Kembla property, and that the Receiver was appointed over the borrower’s property and not the guarantors’.

86. The plaintiff submitted that the Court should conclude that there are no serious questions to be tried in respect of the interests claimed in the SMHPL and Stojcevski Caveats. Particular reliance was placed on the fact that the plaintiff was exercising a legal right under its registered mortgage to sell the Port Kembla property. It was submitted that the purported equitable interests claimed by the caveators were not capable of interfering with the plaintiff’s indefeasible legal right in this case. The plaintiff submitted that the mortgagee’s power of sale arose following the mortgagee issuing a notice under s 57(2)(b) of the Real Property Act on 6 June 2019, in response to which no action was taken by SMHPL. It was also submitted that this power was exercised properly by entry into the Sale Contact with an arm’s length, third party purchaser, Ms Nordstrom.

87. As to bad faith and the failure to auction, it was submitted that a mortgagee is free to determine the time and manner of sale as the power of sale is given to a mortgagee for the mortgagee’s own benefit, relying on E L G Tyler, P W Young and C Croft, Fisher & Lightwood’s Law of Mortgage (2^nd ed, 2005, LexisNexis Butterworths) at 496–500. It was further submitted that a court would not inquire into a mortgagee’s motives in exercising a power of sale in a particular way and that it was open to the mortgagee to “pull” the auction as it saw fit, although it submits that there was a plausible ground for doing so in this case, relying on the evidence from Ms Jin, referred to at [46]. It was also submitted that there had been no sale or concluded contract with Mrs Stojcevska on 11 December 2020 and that she had opportunities to purchase the property but failed to do so.

88. The plaintiff submitted that the only evidence relevant to the question of bad faith is that of Mr Bellas which it says should be given little weight and could only be applicable to the SMHPL Caveat. It contends that there was no evidence at all in support of the interest claimed in the Stojcevski Caveat as it was based on an agreement about which no evidence had been adduced.

89. In relation to the SMHPL Caveat, the plaintiff also relied on the fact that SMHPL had been in receivership for some time, which it said was significant in circumstances where the Receiver did not, and does not, consent to Mr Murabito lodging the SMHPL Caveat.

90. The plaintiff submitted that, even if the Court proceeded on the assumption that a serious question to be tried exists, the balance of convenience weighed heavily in favour of the removal of the SMHPL and Stojcevski Caveats, referring, in particular, to the deficit that would remain after the sale of the property to Ms Nordstrom and the inability of SMHPL to give a valuable undertaking as to damages, relying on the Court of Appeal’s reasoning in Bayblu.

91. The plaintiff also submitted that the Court should conclude that the SMHPL and Stojcevski Caveats were not lodged bona fide. The plaintiff points to the conduct of Ms and Mr Stojcevski and Mr Murabito in lodging multiple caveats that, in some cases, claimed the same or similar interests, and the failure of Ms Stojcevski to inform the Court at the urgent hearing on 22 July that she, together with Mr Stojcevski, had in fact lodged the Stojcevski Caveat that day.

Determination

96. Having regard to the submissions made and the evidence on this application, I have concluded that the SMHPL Caveat and the Stojcevski Caveat should both be withdrawn.

SMHPL Caveat

97. While there is significant force to the submissions advanced by the plaintiff regarding the lack of any serious question to be tried, I have concluded that the SMHPL Caveat should be withdrawn primarily on balance of convenience grounds. However, relevant to that conclusion is my assessment, based on the evidence on this application and the submissions made, that the strength of the defendants’ case in relation to the claimed interest in the SMHPL Caveat is weak and that other factors weigh in favour of the plaintiff being granted the relief it seeks.

98. As to the serious question to be tried, in my view, the defendants’ submission that the Sale Contract was entered into in bad faith would be difficult to sustain in circumstances where the Receiver does not take issue with the terms of that sale and Mr Murabito, Ms Stojcevski and Mr Stojcevski accept that $650,000 was, and is, an appropriate price for the sale of the property to Mrs Stojcevska.

99. The position of the Receiver is significant as it raises doubts about Mr Murabito’s authority, the validity of the SMHPL Caveat and the interest claimed by the Caveat. While the Receiver’s appointment may not have stripped Mr Murabito of all his powers and duties as a director of SMHPL, in the normal course, his powers in relation to the Port Kembla property would be superseded during the receivership. It is to be expected that Mr Murabito would have no authority to exercise the ordinary business-management functions of SMHPL over that property: Oswal v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) (2013) 295 ALR 708; [2013] FCAFC 9 at [54]; Hawkesbury Development Co Ltd v Landmark Finance Pty Ltd (1969) 2 NSWR 782 at 790. It is the Receiver, not Mr Murabito, who is the agent of SMHPL in respect of the Port Kembla property and the “external administrator” of it: The Trust Company (PTAL) Ltd v Samuel M Holdings Pty Ltd [2020] NSWSC 556 at [25].

100. Even if it was accepted that Mr Murabito had authority to lodge the SMHPL Caveat, the defendants’ submissions rely, in large part, on the plaintiff’s alleged bad faith dealings with Mrs Stojcevska. Those submissions were, in essence, that there is a contract between Mrs Stojcevska and the plaintiff and that the plaintiff dealt with her unjustly or unconscionably having regard to her position as the “owner” of the property and the other legal proceedings involving Mr Murabito. There are a number of difficulties with those submissions.

101. First, the evidence before the Court does not, in my view, establish a seriously arguable case that a binding contract between Mrs Stojcevska and the plaintiff exists. As noted above, the evidence indicates that the $65,000 deposit was not received by Summer Lawyers by 12 noon on 11 December 2020, in accordance with the conditions imposed.

102. Second, Mrs Stojcevska is not the registered proprietor of the Port Kembla property. She has not been the owner since at least 29 June 2017 when a transfer was registered on title, presumably to SMHPL. As previously noted, there is no evidence before the Court as to the circumstances in which any transfer by Mrs Stojcevska of the property to SMHPL occurred. While Mrs Stojcevska occupied the property until about July 2020, no challenge was made to the plaintiff’s s 57(2)(b) notice, possession proceedings or execution of the writ at the relevant times. In those circumstances, it is difficult to see the basis on which the plaintiff can be said to have acted in bad faith towards Mrs Stojcevska as the owner of that property.

103. Third, even assuming it is seriously arguable that the plaintiff dealt with Mrs Stojcevska harshly or unfairly in relation to the manner in which the offers to purchase were made to her post-auction, including on the basis of the 17 August email and the plaintiff accepting a deposit from her on 11 December 2020, it does not follow that there is a serious question to be tried that the plaintiff breached its duty of good faith to SMHPL as the mortgagor and the registered proprietor of the Port Kembla property, such that SMHPL has a caveatable interest to protect.

104. A mortgagee’s duty of good faith in selling a mortgaged property is owed to the mortgagor and anyone else interested in the equity of redemption, such as another mortgagee or a guarantor of the mortgage debt: E L G Tyler, P W Young and C E Croft, Fisher & Lightwood’s Law of Mortgage (3^rd ed, 2014, LexisNexis Butterworths) (Law of Mortgage) at [20.22] and the cases there cited. In this case, Mrs Stojcevska is not the owner, mortgagor or guarantor of the property. That Mr Murabito wishes to appear “in support of Mrs Bosilka Stojcevska in her rightful engagement of purchasing her home which these individuals have prevented her from doing so” (T8.49–50, 29 July 2021) does not seem to me to support a strong arguable claim that SMHPL has a caveatable interest by virtue of the mortgagee’s breach of duty of good faith to the registered proprietor as the mortgagor in entering into the Sale Contract. This is particularly as the interest that is the subject of the SMHPL Caveat is not expressed to be based upon an agreement to purchase the Port Kembla property involving Mrs Stojcevska.

105. In my view, it is also relevant that the evidence establishes that SMHPL made only one payment of $20,000 under the loan on 14 April 2019 and has made no payments since that time. There is, therefore, evidence of default and, as noted above (at [102]), no steps were taken to challenge the exercise of the plaintiff’s legal rights at or after the time at which its power of sale with respect to the Port Kembla property became exercisable. While Mr Murabito made some general assertions of “fraud” during his oral submissions (see, for example, at T18.10-35, 22 July 2021), they were unsupported by the evidence and did not relate to the validity of the mortgage itself or the existence of the default. Rather, his concerns related to the manner of sale of the Port Kembla property, particularly the treatment of Mrs Stojcevska, as referred to earlier, and the documents relating to the appointment of the Receiver.

106. The other matters raised in Ms Stojcevski’s supplementary submissions are, for the most part, assertions that are unsupported by any evidence or are matters that do not appear to support SMHPL’s claimed interest. For example, there is no evidence concerning the circumstances in which the loan agreement and mortgages were initially taken out by SMHPL or the entry into the Vasa Family Trust to support the assertions made that the mortgage contract may be “unjust” or “unsuitable”. Nor is there evidence that supports the assertion made that the mortgage was entered into by the borrower for business purposes, “which was not the case for the guarantors”, or that there is a “conflict of interest” between the borrower, the guarantors and the unit holders.  

107. Similarly, the assertion that notices of assignment were not sent to the guarantors was shown to be incorrect by the plaintiff’s evidence served in reply, as referred to at [36]. In any event, as the plaintiff submits, it is SMHPL as mortgagor and registered proprietor, not the individual guarantors, that asserts a caveatable interest in the Port Kembla property.

108. As to the sale to Ms Nordstrom being at an undervalue, mere inadequacy in the price obtained would not normally of itself be sufficient for the Court to intervene in a purported sale by the mortgagee or demonstrate a breach of the duty of good faith. There is no positive obligation on the mortgagee to do everything in its power to obtain the best possible price for the property, although if it can be demonstrated that the price obtained was substantially below the true value, this may be evidence that proper steps were not taken for its sale: Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646; [2004] NSWSC 114 at [40]; Fuge v Commonwealth Bank of Australia [2019] FCA 1621 at [249]; Stone v Farrow Mortgage Services Pty Ltd (in liq) [1999] NSWCA 435 at [4] (Hodgson CJ in Eq, Meagher JA agreeing).

109. The fact that the same price was offered by the plaintiff to Mrs Stojcevska and other purchasers also makes it hard to conclude that the plaintiff’s action in pulling the auction and the subsequent sale to Ms Nordstrom resulted in a breach of the plaintiff’s duty of good faith in relation to that Contract of Sale.

110. As to Mr Bellas’ evidence that he was prepared to pay $710,000 for the property, as the plaintiff submitted, his evidence does not demonstrate when his offer of $710,000 was made nor that it was communicated to the plaintiff any time before his affidavit was sworn and served on 29 July 2021, some 7 months after the power of sale was exercised. It may be that Mr Bellas’ offer reflects the increases in Sydney property prices referred to in Mr Murabito’s submission, rather than evidence of the true value of the Port Kembla property at the time of the auction in August 2020 or the sale to Ms Nordstrom.

111. Nevertheless, based on Mr Bellas’ evidence and the dispute on the evidence regarding the circumstances of the auction and the plaintiff’s post-auction attempts at sale, I proceeded to consider the plaintiff’s application on the basis that the defendants established a serious question to be tried. In doing so, I assumed that the plaintiff failed in its duty because the Port Kembla property should have been allowed to go to auction, the post auction attempts to sell were insufficient and it was sold at an undervalue by around $60,000. But even accepting that the plaintiff could establish that, there would still be a significant shortfall owing to the plaintiff of some $677,000, after the sale and paying out the first mortgagee. While assertions were made by Mr Murabito that the plaintiff was a “loan shark” and noting that he seemed to not accept that the full amount claimed by the plaintiff is owing under the second mortgage, neither he nor Ms Stojcevski adduced evidence to demonstrate what they claimed SMHPL owed to the plaintiff, apart from referring to the undervalue evidence of Mr Bellas.

112. When a power of sale has become exercisable and the sale of the mortgaged property will not yield sufficient funds to enable the mortgagee to be repaid in full, a delay in exercising the power of sale will prejudice the plaintiff and the first mortgagee by preventing them from regaining promptly such of its capital as it can: Bayblu at [40]. In that regard, while there were other properties that secured the second mortgage, there is no evidence that they are available to be sold and, if they are, whether their sale would enable payment of what is outstanding under the first and second mortgages to be made in full. Where, as here, the evidence demonstrates that there will be a deficit and SMHPL will receive no money from the maintenance of the SMHPL Caveat, I am not persuaded that the balance of convenience favours its maintenance: Bayblu at [42].

113. It is also significant and weighs heavily in favour of the plaintiff on the balance of convenience that there is a seemingly innocent third party in the form of a purchaser, Ms Nordstrom, who has now had settlement deferred on at least three occasions over a period of around six months by reason of the various caveats lodged by Mr Murabito, the second and third defendants, and Mrs Stojcevska.

114. Further, and as the plaintiff submits, even if the plaintiff has breached its obligation of good faith, SMHPL, as mortgagor, may not be entitled to seek to set aside the Sale Contract and would be unlikely to obtain specific performance of any alleged contract with Mrs Stojcevska. Assuming that the plaintiff is ultimately shown to have sold the Port Kembla property at an undervalue in breach of the plaintiff’s duty to the mortgagor, the limited gap in value suggests that the appropriate relief (if any) would be a set-off against the mortgage debt, equitable compensation or the taking of an account, all of which would remain available after the sale: CBA v Hadfield at [40].

115. I accept that a mortgagor may be entitled to injunctive relief to restrain completion of a voidable contract for sale made in bad faith. However, ordinarily, a mortgagee sale will only be stopped if payment or tender of the moneys secured by the mortgage is made when the power of sale is exercised or the amount claimed as due is brought into court: Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164 (Walsh J); [1972] HCA 74; Law of Mortgage at [20.38]. In this case, there has been no payment or tender by SMHPL of the outstanding amount under the mortgages. While not determinative, the failure to bring that money into court also weighs in favour of the plaintiff on the balance of convenience: Bayblu at [66].

116. SMHPL has been in receivership since 2019 and thus is not in a position to give a valuable undertaking as to damages. In any event, and as noted above, the evidence is that the Receiver supports the plaintiff’s application to have the SMHPL Caveat withdrawn. Mr Murabito did offer to provide an undertaking as to damages at the hearing on 30 July 2021. However, there was no evidence that he could make good on that undertaking, such that the Court, or the plaintiff, could have confidence that it was of any real substance.

117. There is another matter that is, in my view, of relevance to the discretionary considerations and balance of convenience in this case, which is the timing and nature of the interests claimed in the caveats lodged by SMHPL. As is apparent from the background facts, each of the caveats lodged by Mr Murabito were lodged around the time that completion of the Sale Contract was scheduled to take place. Relevantly, the two caveats lodged by Mr Murabito claimed the same or a very similar interest in the Port Kembla property and no steps were taken by Mr Murabito to protect SMHPL’s claimed interest during the period after his first caveat was rejected until the day following the Court orders for Mrs Stojcevska’s caveat to be withdrawn. In my view, these matters strongly suggest that the SMHPL Caveat was lodged for the purpose of stymying settlement of the Sale Contract with Ms Nordstrom and interfering with the plaintiff’s legal interest as a registered mortgagee exercising its power of sale.

118. Overall, even assuming a seriously arguable case that the plaintiff has improperly entered into the Sale Contract in the exercise of its power of sale, I consider that the risk of injustice to the plaintiff if the SMHPL Caveat remains so as to prevent the sale exceeds the risk of injustice to SHMPL as mortgagor if the caveat lodged by Mr Murabito is withdrawn and the sale may proceed.

Stojcevski Caveat

119. In relation to the Stojcevski Caveat, the plaintiff submitted, and I accept, that a serious question to be tried as to the existence of a proprietary interest of the nature claimed in that caveat has not been established.

120. Whether a caveatable interest in land is created by an agreement will depend on whether, construing the agreement as a whole, the parties have demonstrated a clear intention to create a caveatable interest: Perpetual Nominees Ltd v Springfield Retail Pty Ltd [2009] NSWSC 188 at [33]. In my view, the fundamental difficulty is that no evidence was adduced of an agreement dated 29 June 2017 between Ms Stojcevski, Mr Stojcevski and SMHPL that provided for a charge as referred to in the Stojcevski Caveat.

121. When this issue was raised with Ms Stojcevski, she submitted that the Vasa Family Trust Deed was the agreement referred to in the Caveat. She submitted that, as unit holders in the Vasa Family Trust, she and Mr Stojcevski have a proprietary interest in the Port Kembla property and were the “owners” of the property. It was submitted that, based on their proprietary interest as unit holders, Ms Stojcevski and Mr Stojcevski can claim an interest based on bad faith in respect of the Sale Contract, as well as for the whole of the period that the plaintiff has been a mortgagee in possession and a Receiver and Manager has been appointed to the property. In support of this submission, Ms Stojcevski placed emphasis on SMHPL, as the trustee company, not having paid any consideration for the Port Kembla property when it was transferred at the direction of the mortgagee in 2017, the trust being a fixed unit trust, and the mortgagee having taken away the opportunity to purchase from the unit holders who have equity in the property, allegedly in bad faith. She also submitted that there was bad faith because the lender did not obtain consent from the guarantors or unit holders at the time of the second mortgage.

122. I was not persuaded by these submissions. It is the interest that is actually claimed in the Stojcevski Caveat that the Court must consider on this application. That interest is in the nature of a charge arising under an agreement rather than by virtue of the caveators holding units in the Vasa Family Trust and having a proprietary interest amounting to ownership in the Port Kembla property as Ms Stojcevski submitted.

123. Simply put, the Vasa Family Trust Deed is not an agreement between Ms Stojcevski, Mr Stojcevski and SMHPL dated 29 June 2017 – it is a deed dated 17 June 2017 executed by SMHPL, Ms Stojcevski, Mr Stojcevski and Mrs Stojcevska. Given that Ms Stojcevski had previously lodged a caveat claiming an interest in the Port Kembla property by virtue of her unit holding in the Vasa Family Trust, it also seems more likely that the references in the Stojcevski Caveat to an “agreement” and a date different to that of the Vasa Family Trust Deed were intentional and should not be read as an oblique reference to the Deed itself.

124. Even if the Vasa Family Trust Deed could be construed as the relevant “agreement”, and leaving to one side that the evidence on this application did not identify the Port Kembla property as an asset of the Vasa Family Trust or that it was owned by SMHPL in its capacity as trustee of that trust, I was not referred to any provisions in the Deed that were said to give rise to a charge in favour of unit holders over any trust property. Nor did there appear to be any such provisions based on my review of the trust deed in evidence. Even if an equitable charge existed in favour of Ms Stojcevski and Mr Stojcevski as unit holders, such an interest would not operate to prevent the exercise of the mortgagee’s legal and indefeasible interest arising from its registered second mortgage.

125. Further, and consistent with Darke J’s view as expressed in the ex tempore reasons, in my opinion, it is doubtful that Ms Stojcevski and Mr Stojcevski would have a proprietary ownership interest in the Port Kembla property as unit holders of the Vasa Family Trust based on the terms of the Trust Deed as amended and, in particular, clause 4.3: Jonsue Investments Pty Ltd v Balweb Pty Ltd [2013] NSWSC 325 at [35]–[38], [46].

126. As to some of the other matters raised, the submission that SMHPL did not pay any consideration for the Port Kembla property when it was transferred to it at the direction of the mortgagee in 2017 was unsupported by the evidence on the application. It was also difficult to see how this could assist in establishing the interest claimed in the Stojcevski Caveat in circumstances where the second mortgage to H & H Mezz was given in February 2019.

127. The submission of bad faith by the mortgagee in relation to the Sale Contract and taking away from the unit holders the opportunity to purchase the Port Kembla property was also seemingly based on the allegation that the plaintiff engaged in bad faith in its dealings with Mrs Stojcevska, rather than with the caveators. There was no evidence that Ms Stojcevski or Mr Stojcevski had been seeking the opportunity to purchase the Port Kembla property for themselves.

128. Even if, contrary to my view, a seriously arguable case was established on the evidence, I consider that the balance of convenience is against the imposition of a restraint upon the completion of the Sale Contract from the lodgement of the Stojcevski Caveat. In addition to the balance of convenience factors referred to at [111]–[116], which also apply in the case of the Stojcevskis, the Stojcevski Caveat was not lodged until 22 July 2021, even though it is suggested that the charge arose on 29 June 2017. By the time the Stojcevski Caveat was lodged, six prior caveats had been lodged against the Port Kembla property, of which two had been lodged by Ms Stojcevski and Mr Stojcevski that had lapsed, and the property had been the subject of the contract for sale to an innocent third party purchaser for more than six months. While the Stojcevski Caveat may not yet be registered on title, its lodgement with the LRS means that clear title to Ms Nordstrom on completion is not possible.

Conclusion

129. It follows from the above that the defendants and Mr Murabito have failed to establish grounds for the grant of an interlocutory injunction to restrain completion of the Sale Contract on the basis of the interests claimed in the SMHPL and the Stojcevski Caveats. Accordingly, I will order, pursuant to s 74MA of the Real Property Act, that those caveats be withdrawn.

130. In the Amended Summons, the plaintiff also seeks orders under s 74MA(2)(b) of the Real Property Act restraining the defendants from lodging, whether by themselves or at their direction, any further caveats against the title to the Port Kembla property, and an order that they be restrained from taking any step by each of them, whether jointly or severally or at their direction, to interfere with or attempt to delay the plaintiff’s sale of the property.

131. Between them, the second and third defendants and Mr Murabito had lodged five caveats against the Port Kembla property by the time the hearing was completed on 30 July. One of those caveats had been rejected by the LRS, two had lapsed, and two are to be withdrawn by the orders that I make today so as to facilitate the sale of the property soon. Since reserving judgment, I have also become aware that a further caveat was lodged on the Port Kembla property by Ms Stojcevski and Mr Stojcevski on 2 August 2021, which is the subject of a fresh application by the plaintiff and will be dealt with by the Court in due course.

132. Given the history of the caveats placed on title by the parties to these proceedings, and the lodgement of the more recent caveat on 2 August 2021, it seems inevitable that one or more of the second and third defendants and Mr Murabito may lodge yet more caveats against the title to the Port Kembla property for the purpose of hindering the sale unless restrained by court order.

133. Accordingly, I am satisfied that the order under s 74MA(2)(b) of the Real Property Act should be made so as to restrain any further caveats being lodged on title without first obtaining leave of the Court.

134. I am not, however, persuaded that I should make the more general restraint against the defendants from taking any steps to interfere with or attempt to delay the Sale Contract. At this stage, the only evidence before the Court relates to the lodgement of caveats, which is dealt with by the restraint under s 74MA(2)(b). I do not consider there has been a sufficiently strong evidentiary foundation to warrant a broader restraint, noting the application was heard on an urgent basis. This is also in the context where I am aware that Mr Murabito, the second and third defendants and other parties may seek to file and pursue a cross-summons in these proceedings which, amongst other things, will seek declaratory relief regarding the Sale Contract. Accordingly, I decline to make orders sought in the Amended Summons that restrain the defendants from taking any steps to interfere with, or delay, the sale of the Port Kembla property

Orders and costs

135. The plaintiff’s Amended Summons also seeks orders for compensation under s 74P of the Real Property Act and indemnity costs. Those claims have not yet been heard. Prior to delivering these reasons, the parties agreed that the issue of costs could be dealt with on the papers and to a timetable for written submissions.

136. For these reasons, I make the following orders:

1. Pursuant to s 74MA(2)(a) of the Real Property Act 1900 (NSW), that the first defendant by its Receiver and Manager or by its director, Mr Steven Murabito, withdraw caveat AR256711 lodged in respect of land comprised in folio identifier 8/12/DP8146 and more particularly known as 15 O’Donnell Street Port Kembla NSW 2505 (the Property).

2. Pursuant to s 74MA(2)(a) of the Real Property Act 1900 (NSW), that the second and third defendants withdraw caveat AR265339 lodged in respect of the Property.

3. Pursuant to s 74MA(2)(b) of the Real Property Act 1900 (NSW), that:

1. the first defendant’s director, Mr Steven Murabito; and

2. the second and third defendants

be restrained from lodging, whether by each of them jointly or severally or at their joint or several direction, any further caveats on the Property without first obtaining leave of the Court.

4. These orders be entered forthwith.

5. Direct the plaintiff to file and serve its written submissions on costs (of no more than three pages) by 4 pm on Monday 9 August 2021.

6. Direct the second and third defendants and Mr Steven Murabito to file and serve their written submissions on costs in reply (of no more than three pages) by 4 pm on Friday 20 August 2021.

Addendum

137. On the day that this judgment was being handed down and prior to pronouncing the above orders, Mr Carbone, acting on instructions from Mr Stojcevski, made an oral application for me to defer handing down judgment until the issues in the cross-summons could be heard and determined. Mr Murabito also made an application to re-open the case to enable further evidence to be adduced in support of the SMHPL Caveat. Following some discussions, Mr Carbone did not press his application. I did, however, decline Mr Murabito’s application to re-open for the reasons referred to in the transcript.

138. In summary, I did not consider that it was in the interests of justice to grant Mr Murabito leave to re-open the hearing, noting that he did not articulate the nature or relevance of the proposed new evidence that he wished to adduce and the parties had been given leave to adduce additional evidence and file supplementary submissions on Monday 2 August 2021 which he did not seek to invoke. I also considered that there was a public interest, and it was in the interests of the parties, for there to be finality in relation to the plaintiff’s applications regarding the SMHPL and Stojcevski Caveats so as to avoid further delay and expense. This is particularly as the applications had been the subject of a hearing that had taken place over the course of three afternoons in a busy duty list, the plaintiff’s application in respect of the 2 August caveat had, I was informed, been set down for hearing before a different judge on 3 September 2021, and there was some doubt, in my view, as to the status of the proposed cross-summons and the orders that were to be sought.

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Endnote

Decision last updated: 09 August 2021