Barclay Finance Pty Ltd v Manning

[2017] NSWSC 1050

Supreme Court

New South Wales

Medium Neutral Citation:	Barclay Finance Pty Ltd v Manning [2017] NSWSC 1050
Hearing dates:	26 July 2017
Date of orders:	26 July 2017
Decision date:	26 July 2017
Jurisdiction:	Common Law
Before:	Lonergan J
Decision:	See paragraph [31]
Catchwords:	CIVIL PROCEDURE – mortgages and securities – possession – application for stay of writ of possession – hardship
Legislation Cited:	Civil Procedure Act 2005 (NSW) s 135
Cases Cited:	GE Personal Finance Ltd v Smith [2006] NSWSC 889 Westpac Banking Corporation v Diagne [2014] NSWSC 1623
Category:	Procedural and other rulings
Parties:	Barclay Finance Pty Ltd (Plaintiff) Robert Manning (First Defendant) Claire Louise Manning (Second Defendant)
Representation:	Counsel: L R Young (Plaintiff) H Mann (First Defendant)   Solicitors: Elliott May Lawyers (Plaintiff) Swaab Attorneys (First Defendant)
File Number(s):	2016/371580
Publication restriction:	Nil

Judgment

1. On the afternoon of 26 July 2017, the first defendant requested an urgent hearing of a notice of motion seeking a stay of writ of possession. In support of the application, he relied upon his affidavit sworn 26 July 2017, a letter from his solicitors to a real estate agent, Robert Todarello at Northside Realtors dated 26 July 2017, and a proposed contract for sale of the a property in Naremburn (“the Property”), which is the subject of the writ of possession.

2. The Property is the home of the defendants and their son who, relevant to this application, is in year 12 and was about to start his trial exams on 31 July 2017.

3. The background to this application is that a notice to vacate the property had been served on 19 June 2017 pursuant to the processes of this court, and that was to be enforced at 10:30 am on 27 July 2017; that is the morning following this application being brought before me as Duty Judge.

4. Ms Young of counsel was able to appear at short notice on behalf of the plaintiff and assisted with the background to the application and made helpful oral submissions.

5. I formed the view, given the material in the affidavit and the apparent arrangements made for the sale of the property together with discussion and cooperation between counsel for the parties, that the writ should be stayed on certain conditions. I made various orders which were entered with written reasons to follow given the obvious urgency of the application.

Facts

6. The defendants have been living at the property for over 18 years and own the property as joint tenants. They live there with their son who is currently aged 17.

7. The property is subject to a mortgage to the National Australia Bank which has a current debt of $676,983.10.

8. In July 2015, the defendants entered into a mortgage with the plaintiff for the sum of $232,342.00 with an interest rate of 2% per week. The mortgage was for a short term of 26 weeks. The borrowers were recorded to be both of the defendants as well as a company associated with them, BRZX Pty Ltd.

9. Given the obligations pursuant to that mortgage and the limited payments that have been made, there is currently due to the plaintiff a sum of over $880,000.

10. The company, BRZX Pty Ltd, was a company of which the first defendant was the sole director. In October 2016, that company was put into liquidation.

11. As part of the explanation offered by the first defendant as to the delay in repaying the loan and obtaining legal representation, he states that he expected to sell 40% of the shares in BRZX Pty Ltd for $10 million to a company OzPacific Australia Pty Ltd associated with a Mr Segaran. The Share Sale Agreement is dated 5 March 2016. The first defendant deposed to his belief that the transfer of this money would happen “shortly”. There was evidence of correspondence with Mr Segaran that made vague references to “unexpected delays in transfer of investment funds”, and expressing a commitment to “finalising the investment”, but it is apparent that no money has been paid to the defendants pursuant to that agreement.

12. Given the sale had still not been completed by 25 July 2017, the first defendant commenced arrangements to sell the property and to obtain legal advice to defend the proceedings.

13. On 25 July 2017 the first defendant spoke to a real estate agent, Mr Todarello, and an exclusive agency agreement to sell the property was prepared as well as the proposed contract for sale. The first defendant deposed to the fact that his son was undertaking HSC trial exams beginning on 31 July 2017 and that moving house would disrupt his son’s preparations for these exams.

14. Documents tendered by the plaintiff showed that the Statement of Claim for possession had been filed on 12 December 2016.

15. Multiple attempts were made to serve the Statement of Claim at the property. Affidavit material tendered in support of an application for substituted service granted on 28 March 2017 indicated that on multiple service attempts lights were on and cars parked in the driveway of the property, but no response was received to attempts to contact the occupants via the security intercom. The substituted service order made on 28 March 2017 allowed service by post on both defendants. This was accomplished shortly after.

16. It is apparent that by 13 April 2017, if not earlier, the first defendant was aware of the proceedings. An email dated 18 April 2017 to James Hickey and Annabelle Clarke stating the following:

James, we intend settling this matter immediately funds are released to us as per my last email to Annabelle on 13 April 2017. We acknowledge your client’s claim. We have searched the New South Wales court lists and cannot find the case 2016/371580, yet is showing “no results”.

17. The email subject line is “Filing Defence”, but it is common ground that no Defence to the proceeding has yet been filed. Counsel appearing on this application for the first defendant advised that as she had been only very recently instructed, she had not yet had opportunity to obtain instructions regarding the full extent of any available defences.

18. On 28 April 2017, the solicitors for the plaintiff informed the first defendant that notwithstanding matters raised in his various emails, they had been instructed to take steps to enforce the mortgage, including to seek an order for recovery of possession of the property.

19. Further emails between the first defendant and the solicitor for the plaintiff copying in the “Sydney Sheriff” requested details of the full amount outstanding and the bank account for payment with an expressed intention to repay the full loan plus costs prior to 27 July 2017. On 14 July 2017 the plaintiff’s solicitor advised the indicative payout figure was $880,409.26. The banking details for repayment were also provided to the first defendant on 18 July 2017. No payment was forthcoming. It was common ground that no payment has been made on the mortgage since May 2016.

Legal principles

20. The principles relevant to determining whether a stay of the execution of a writ of possession are summarised by Johnson J, the former Possessions List Judge in GE Personal Finance Ltd v Smith [2006] NSWSC 889. As observed by McCallum J in Westpac Banking Corporation v Diagne [2014] NSWSC 1623 at [3], the Smith decision has been applied on many occasions since and the principles are now set out, in effect, in the Practice Note applicable to Possessions List matters. The three bases that need to be advanced in support of a stay application are:

1. That there is a defence available; or

2. That there is a proposal for refinance; or

3. Where the defendant has indicated that the subject property is to be sold.

21. As observed by his Johnson J in Smith at [20],

…It might be thought that the orderly preparation and presentation of the property for sale, with the Plaintiff and Defendant co-operating in this regard, would maximise the prospect of a favourable sale price. This would serve the interests of the Plaintiff and the Defendant. A Defendant may encounter difficulties on a stay application if the decision to sell the property, and to make necessary arrangements for this to be done, is left until the last minute when the Writ of Possession is about to be executed.

22. In Smith, Johnson J also made reference to a potential further ground, namely hardship:

[21] A stay may be sought on hardship grounds. The Defendant may contend that there will be hardship to him or her and other family members if the writ is executed and they are removed from the property. It must be kept in mind that the Defendant and other occupiers of the property (Part 6.8 Uniform Civil Procedure Rules) will have been served with originating process so that the consequences which may flow from the proceedings would have been notified to them. Of course, it may be that, in the absence of legal advice, the precise consequences may not be clear to a Defendant and other occupiers. It may also be that the Defendant and his or her family may have not confronted the reality of the situation at an earlier time.

Determination

23. It is apparent from the first defendant’s affidavit that he had not faced the reality of his situation until 25 July 2017. He delayed evaluating his options until the very last minute. It is evident that from at least mid-April 2017, he was fully aware of the Plaintiff’s proceedings and the orders sought. Service of the Notice from the Sheriff in mid-June 2017 had provided at least four weeks to see the harsh realities, but it is clear that he did not confront them until three days before the Sheriff was to arrive.

24. The question of orderly sale is an important one in this case because the current debt to the Plaintiff combined with the debt owed to the National Australia Bank is close to $1.6 million, which is approaching the estimated likely selling price of $1.8 million identified in the Agency Agreement. The agent’s commission is estimated at an additional $37,800 to $41,580. There will also be advertising costs of over $4,600.

25. It was observed by counsel for the plaintiff that the conditions of the mortgage entail interest accruing at a rate of approximately $17,600 per week.

26. The need to maximise the sale price is critical if the mortgage debts and sale expenses are to be repaid.

27. I do not have any evidence as to the current earnings of the Defendants.

28. There is evidence of a very recent arrangement to sell the property which appears to be the only option for the Defendants. A contract for sale has been prepared and the first defendant has deposed to an intention to put the property on the market if a stay of the writ is granted.

29. There are hardship grounds, in particular, the disruption that would be caused to the defendants’ 17-year-old son who is living in the house about to commence his HSC trial exams.

30. For these reasons, I granted a stay of the Writ of Possession up to and including 5:00 pm on 11 August 2017 upon strict conditions, with the matter to be listed before me on 10 August 2017 to review the progress of the various steps taken towards the sale of the property.

31. The orders made and taken out on 26 July 2017 were as follows:

1. On condition that the First defendant pays on or before 5:00 pm on 31 July 2017 the sum of $10,000 in clear funds to the plaintiff’s solicitor, I order:

1. the writ of possession of the Property be stayed up to and including 5:00 pm on 11 August 2017;

2. I order under s 135(2)(b) of the Civil Procedure Act 2005 that the Sheriff take no further action to enforce the writ up to and including 5:00 pm on 11 August 2017;

2. The first defendant is to take all steps as could reasonably be taken for the orderly sale of the Property including:

1. Paying the advertising amount referred to on page 3 of the exclusive agency agreement dated 25 July 2017 or any other amount agreed between the agent and the owners.

2. Listing the property for sale on appropriate advertising portals.

3. Ensuring the property is properly prepared for inspections including arranging for and/or taking the appropriate photographs as part of the preparation for sale

3. The first defendant is to keep the plaintiff updated via information provided to the plaintiff’s solicitor of these steps.

4. A verified defence, if any, is to be served upon the plaintiff’s solicitor by 5:00 pm 8 August 2017.

5. The matter is to be listed on 10 August 2017 at 10:00 am before me.

6. By 9:00 am on 10 August 2017, the first defendant is to provide an affidavit setting out compliance with the orders and the steps taken toward sale of the subject property. A copy of that affidavit is to be served upon the plaintiff’s solicitor and provided to my associate by email.

7. Liberty to restore the matter on 48 hours’ notice.

8. The Supreme Court Registry is to notify the Sheriff’s Office by email of the orders made this afternoon.

9. Orders to be entered forthwith.

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Decision last updated: 30 August 2017