Avahlon Pty Ltd v Kellas-Sharpe
[2012] NSWSC 800
•11 July 2012
Supreme Court
New South Wales
Medium Neutral Citation: Avahlon Pty Ltd v Kellas-Sharpe [2012] NSWSC 800 Hearing dates: 11 July 2012 Decision date: 11 July 2012 Jurisdiction: Common Law Before: Beech-Jones J Decision: 1. That the default judgment entered against the defendant dated 12 February 2012 be set aside.
2. That the writ of possession issued on 14 March 2012 be set aside.
3. The plaintiff have leave to file an amended statement of claim in the form of MFI 1.
4. Judgment for the plaintiff for possession of the property located at xxx xxxxxxxxx xxxx, Leeville NSW 2470, being the land contained in folio identifiers 1/113916, 30/755618, 31/755618, 51/755618, 56/755618, 9/755625, 10/755625, 11/755625, 12/755625 and 86/755625.
5. The plaintiff have leave to issue a writ of possession in respect of the property identified in order 4.
6. The writ be stayed for a period of 21 days.
7. The defendant file and serve any defence to the amended statement of claim within 35 days.
8. The matter be listed for further directions before the Registrar at 9am on 5 September 2012.
9. Each party pay their own costs.
Catchwords: PRACTICE AND PROCEDURE - application to set aside default judgment for writ of possession - statement of claim and judgment omitted relevant folio identifiers and registered mortgage numbers - whether judgment alternatively capable of amendment under slip rule - judgment set aside due to irregularity - summary judgment for possession on amended statement of claim before filing of defence - no legal defence - mortgagor in default - outstanding money claim - costs. Legislation Cited: Civil Procedure Act 2005 - s 56
Uniform Civil Procedure Rules 2005 - r 14.3, r 14.15, r 36.15Cases Cited: Horrobin v Australia and New Zealand Banking Group Ltd (1996) 40 NSWLR 89
Newmont Yandal Operations Pty Ltd v the J Aron Corp [2007] NSWCA 195; (2007) 70 NSWLR 411
Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446Category: Interlocutory applications Parties: Avahlon Pty Ltd (Plaintiff)
Wendy Kellas-Sharpe (Defendant)Representation: Counsel:
C.H. Cassimatis (Plaintiff)
Ms M.H. Allen (Sol) (Defendant)
Solicitors:
Morabito Legal (Plaintiff)
Bartier Perry (Defendant)
File Number(s): 2011/236979
EX TEMPORE Judgment
On 10 February 2012 this Court entered default judgment to the limited extent of giving possession to the plaintiff of land described as "land comprised in folio identifier 56/755618, being the land situated at and known as xxx xxxxxxxxx xxxx, Leeville" in New South Wales.
On 14 March 2012 a writ of possession was issued in respect of land bearing the same description. There is a difficulty with that description of the land in that the property in folio identifier 56/755618 is only one of ten property identifiers referable to the defendant's property at Leeville. The difficulty with that default judgment writ and the statement of claim upon which it is based is at the heart of the matter before me.
Recognising the difficulties with its writ, the plaintiff filed a notice of motion seeking to rectify the description of the land under the so-called "slip" rule in Uniform Civil Procedure Rules 2005 ("UCPR") 36.17. At the hearing of the motion, an amended notice of motion was filed by the plaintiff, which sought that relief. The amended motion also sought, in the alternative and on the assumption that the default judgment was set aside, leave to amend its statement of claim and the entry of a fresh judgment for possession of the property correctly described.
On 25 May 2012, the defendant filed an amended notice of motion which sought the setting aside of the default judgment, the striking out of the statement of claim and various costs orders. Both amended motions are before me today.
Background
In November 2009 the parties entered into a loan agreement pursuant to which the plaintiff agreed to advance $400,000.00 to the defendant for a period of six months commencing 30 November 2009. As part of that transaction, the defendant granted two mortgages in favour of the plaintiff. The mortgaged property comprised ten parcels of land, each bearing a different folio identifier. Together, those ten parcels of land make up the property at Leeville. Mortgage AF159750N was taken out over nine of the parcels of land and mortgage AF421150E was taken out over the remaining parcel of land. Both mortgages incorporated the same memorandum of mortgage.
Pursuant to the mortgages and the memorandum, the defendant was required, amongst other matters, to repay the principal on 30 May 2010 and pay various amounts of interest and enforcement costs and expenses. Subclause 144(b) of the memorandum of mortgage conferred on the plaintiff an entitlement in the event of default to "seize and take possession of the securities or withdraw and re-enter as many times as the lender desires". The definition of "securities" encompasses the two mortgages.
It is not disputed that on 30 May 2010 the defendant failed to repay the principal.
On 22 July 2011 a statement of claim was filed. Prayer for relief "A" sought "possession of the land comprised in folio identifier 56/755618, being the property known as xxx xxxxxxxxx xxxx, Leeville, New South Wales 2470". Prayer for relief J sought judgment for a money sum. Paragraphs 1, 2 and 10 of the statement of claim stated as follows:
"1. The defendant is and was at all material times the registered proprietor of the land comprised in Folio Identifier 56/755618 being the property known as xxx xxxxxxxxx xxxx, Leeville, New South Wales 2470 (the Property).
2. By memorandum of mortgage dated 30 November 2009 and registered number AF159750 ('the Mortgage') the defendant mortgaged the Property to the plaintiff upon the covenants, agreements and conditions contained therein.
...
10 Pursuant to the Mortgage, in the circumstances referred to above, the Plaintiff is entitled to take possession of the Property."
At this point I should note that there are two difficulties with the statement of claim. The first is the one that I adverted to at the beginning of this judgment; namely, that the property at Leeville comprises ten folio identifiers and not just the one listed in paragraph 1 of the statement of claim. Second, the mortgage referred to in paragraph 2, being registered number AF159750, is not a mortgage over the property in folio identifier 56/755618. Instead, it is a mortgage over the other nine parcels of land which together make up the property at Leeville.
Substituted service of the statement of claim was effected on the defendant in October 2011. Subsequently, the plaintiff applied for default judgment as no defence was filed. The application for default judgment not only sought possession of the one parcel of property that I have referred to above, but also a money judgment for $522,066.64. As I have said, on 10 February 2012 default judgment was entered. This was only a judgment for possession. For reasons that the parties are not aware of, no monetary default judgment was entered.
On 2 May 2012 the defendant obtained an order staying the execution of the writ. Subsequent to that, directions were made, which led to the filing of the two notices of motion and the listing of the matter before me.
Negotiation and dispute
On the motions, I have received affidavits from the defendant, her solicitor, and the plaintiff's solicitors. The defendant describes the commercial background to the taking out of the loan and the difficulty she has experienced in repaying. This appears in large part to be due to her being embroiled in commercial litigation in Queensland. The defendant also describes the steps that she has undertaken to negotiate a payout figure with the plaintiff's solicitors, commencing from late 2011 when she received notification of the statement of claim until May 2012, being the time that she instructed her present solicitors.
For present purposes, it is only necessary to note two matters about this material. First, a number of matters have been identified by the defendant which raise questions as to the asserted payout figure sought by the plaintiff. In broad terms, they are the charging of interest, which is said to be a penalty, as well as various costs and expenses. Without descending into the detail of those disputes, I am proceeding on the basis that arguable claims are raised in respect of those matters. For the sake of completeness, I should indicate that there does seem to be some substance in the defendant's submissions in that they raise arguable questions.
Second, nothing in the affidavit material raises any matter which would undermine the legal entitlement of the plaintiff to obtain possession of the entirety of the mortgaged property. Leaving aside all other matters, the defendant defaulted on repayment of the principal which was due after six months. There is nothing in the defendant's affidavits which attack the underlying transaction in any way which would remove or qualify either her obligation to repay the principal or the plaintiff's entitlement to obtain possession (cf Horrobin v Australia and New Zealand Banking Group Ltd (1996) 40 NSWLR 89 at 100D per Sheller JA).
Slip rule
I have already described the difficulties with the description of the property in the default judgment and the difficulties in paragraphs 1, 2 and 10 of the statement of claim upon which the default judgment was based. In logical order, the first matter for me to consider is the plaintiff's application to address the difficulties in the identification of the property in the default judgment pursuant to the slip rule, now found in UCPR r 36.17. It provides:
"If there is a clerical mistake, or an error arising from an accidental slip or omission, in a judgment or order, or in a certificate, the court, on the application of any party or of its own motion, may, at any time, correct the mistake or error."
Ms Allen for the defendant pointed to UCPR r 14.15 concerning the requirements for pleading a claim for possession. In particular, she adverted to the requirements to identify the proper instrument as well as the necessity to properly identify the property in question.
I was referred to a number of decisions concerning the scope of the slip rule. In Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446 at 453, McHugh JA stated:
"However, if a claim is made in respect of a matter which does not relate to an issue in the original proceedings, there is no power under the slip rule to vary the order: cf Brew v Whitlock (No 3). Notwithstanding the decision in Coppins or the dictum in L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) the cases to which I have referred indicate that amendments under the slip rule are not confined to subsidiary or consequential matters.
The requirement that the proposed amendment must relate to a matter which was in issue in the proceedings or what was incidental thereto merely serves to emphasise that it is only omissions or mistakes which are accidental which can be rectified. It would be contrary to the rationale of the slip rule to allow judgments and orders to be amended to deal with matters which were not in issue in the proceedings. Such matters must be dealt with by way of appeal and in accordance with the principles which govern the raising of new matters on appeal: cf Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438 and Piening v Wanless (1968) 117 CLR 498."
Since Storey & Keers, the Court of Appeal has considered the scope of the slip rule in light of a change in regime effected by the Civil Procedure Act in Newmont Yandal Operations Pty Ltd v the J Aron Corp [2007] NSWCA 195; (2007) 70 NSWLR 411. Although that decision perhaps adopted a wider operation of the slip rule than had previously been the case so as to give effect to the objectives set out in s 56 of the Civil Procedure Act 2005, I do not understand their Honours to have overruled the statement of principle enunciated by McHugh JA in Storey that I have extracted above. In particular, the need to differentiate between amendments of orders under the slip rule so as to reflect the issues in the original proceedings, compared with allowing parties to make substantive applications to raise new issues, needs to be respected.
In this case, it has to be remembered that there was no hearing that led to the default judgment. An ascertainment of what was in "issue" can only be undertaken by reference to the statement of claim. I do not consider that an ascertainment of what was in issue in the proceeding that led to the issue of the default judgment can be ascertained by looking to the wider commercial relationship between the parties to the statement of claim. In my view, bearing in mind the terms of paragraphs 1, 2 and 10 of the statement of claim which identify the "issues" that were resolved by the default judgment, it is not open the slip rule to amend the default judgment that was issued to seek possession of parcels of land that were not the subject of the proceeding defined by the statement of claim.
Accordingly, I decline the plaintiff's application to amend the default judgment under the slip rule. The necessary consequence of me doing so is that I accede to the defendant's application to set aside the default judgment as well as the writ. Uncorrected, the default judgment is clearly an irregularity which must be set aside pursuant to UCPR r 36.15.
Statement of claim
The next issue that arises concerns the form of the statement of claim. The defendant sought to strike it out by reason of the two defects that I have identified above. To meet this, the plaintiff sought to amend the statement of claim to correct the description of the mortgages as well as the property the subject of the claim for possession. Quite rightly, the defendant did not seek to argue that that amendment should not be allowed. The proposed form of the statement of claim is that set out in MFI 1 before me and I will make an order granting the plaintiff leave to file an amended statement of claim in that form.
Further judgment for possession
There remains the claim in prayer 4 of the plaintiff's notice of motion, which seeks judgment for possession of the subject property, this time properly described by reference to all of the portfolios of land. In substance, this aspect of its motion is a claim for summary judgment on so much of the amended statement of claim as seeks an order for possession. It is a claim that is sought to be done in anticipation of the usual time for the filing of an amended defence. Although I queried this aspect with the parties, it seems to me that UCPR r 14.3(2) clearly contemplates that such an application can be made prior to the filing of any defence.
During argument, I raised a concern that to grant possession at this point would nevertheless have the effect of upsetting the usual court timetable and deny the defendant the opportunity and time that is usually proffered by the rules to consider her defence and, in the case of defendants to possession proceedings, to negotiate a payout figure. However, in this case that question of time does not in my view warrant the refusal of the application. It is to be remembered that it is now over two years since the defendant went into default under her mortgage and the plaintiff's right to possession arose. It is to be further remembered that in that time the defendant, even with the assistance of competent legal representation, has not been able to identify any legal defence to the claim for possession. In my view, the objectives set out in s 56 of the Civil Procedure Act require that I grant the relief sought in prayer 4. In circumstances where the delay has been that long and there is no legal defence, there is no justification for denying the plaintiff its legal rights.
At this point I note two matters. First, Ms Allen, who put everything that could be said on behalf of the defendant, pointed to what she submitted was the unjustness that would be occasioned by the making of a further order for possession, particularly having regard to what she submitted was the plaintiff's failure to accept a reasonable offer of a payout figure made by the defendant. The difficulty with that is that it is no legal answer to the plaintiff's entitlement to possession, which, leaving aside all other matters, flows from the failure to repay the principal two years ago.
The second matter raised by Ms Allen concerned the issues that I have referred to above in relation to interest and costs that the plaintiff seeks to recover from the defendant and which she disputes. Ms Allen submitted that the issue of the quantification of the amount to which the plaintiff is entitled to be paid out is inextricably linked to its right to possession. I do not agree. In fact, they are quite separate. As I have said, the right to possession flows from the simple default on the part of the defendant in failing to repay the principal: a default she does not deny. A default judgment for a monetary amount was not granted.
I am proposing to grant the plaintiff judgment on so much of its claim as seeks possession. There will still be remaining in the proceedings a substantial dispute as to how much is necessary to pay out the mortgage, that being the dispute raised by the claim of the plaintiff for a monetary amount. Although the parties, and perhaps the Court, have been acting on the basis that the proceedings simply come to an end when an order for possession is made, in this case that is not correct because there are still outstanding issues raised by the pleadings.
Finally, I note that I will shortly hear the parties on the appropriate costs order. I also note that the defendant points out the provision in the memorandum of mortgage which on its face could have the effect that, irrespective of the order made by the Court as to costs, all of the plaintiff's costs, no matter how they conduct themselves in the proceedings, are loaded onto the mortgage. That is not a matter in respect of which I can make any order on an interlocutory application. It is a matter that might be raised in a defence insofar as a monetary judgment is sought, and it will be open to the defendant to plead that matter if she sees fit.
On the question of costs, the plaintiff contends that it has succeeded in that it has obtained a judgment for possession. That has considerable force. However, it would not be in this position if there had not been a mistake both in the original statement of claim and in the default judgment. Before me, it was in the position of seeking an indulgence.
Further, there was nothing unreasonable in the defendant's behaviour at least so far as it brought its own motion. It has had some measure of success in that at least one practical outcome of there being a further writ issued is that there will be a period in which she will have an opportunity to negotiate either a payout figure or a payout regime with the plaintiff. Bearing that in mind and the events which precipitated the motions, in my view the appropriate order is that each party pay their own costs. I will so order.
Accordingly, I make the following orders:
1. That the default judgment entered against the defendant dated 12 February 2012 be set aside.
2. That the writ of possession issued on 14 March 2012 be set aside.
3. The plaintiff have leave to file an amended statement of claim in the form of MFI 1.
4. Judgment for the plaintiff for possession of the property located at xxx xxxxxxxxx xxxx, Leeville NSW 2470, being the land contained in folio identifiers 1/113916, 30/755618, 31/755618, 51/755618, 56/755618, 9/755625, 10/755625, 11/755625, 12/755625 and 86/755625.
5. The plaintiff have leave to issue a writ of possession in respect of the property identified in order 4.
6. The writ be stayed for a period of 21 days.
7. The defendant file and serve any defence to the amended statement of claim within 35 days.
8. The matter be listed for further directions before the Registrar at 9am on 5 September 2012.
9. Each party pay their own costs.
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Decision last updated: 16 July 2012
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