C and F Nominees Mortgage Securities Ltd v Karbotli (No 2)

[2020] VCC 1514

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMON LAW DIVISION

Revised
Not Restricted
Suitable for Publication

BANKING AND FINANCE LIST

Case No. CI-17-05902

C & F NOMINEES MORTGAGE SECURITIES LIMITED (ACN 089 819 803)	Plaintiff
V
HEND KARBOTLI (also known as HIND ISSA) & ORS	Defendants

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JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF JUDGMENT:	25 September 2020
CASE MAY BE CITED AS:	C & F Nominees Mortgage Securities Ltd v Karbotli & Ors (No 2)
MEDIUM NEUTRAL CITATION:	[2020] VCC 1514

REASONS FOR JUDGMENT
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Subject:  Application for stay of judgment pending appeal
Catchwords:            Application for stay of judgment pending appeal – relevant principles
Legislation Cited:     Transfer of Land Act 1958

Cases Cited:Civil & Allied Technical Constructions Pty Ltd v A1 Concrete Tanks Pty Ltd [2018] VSCA 12

Judgment:                Stay of judgment granted pending determination of appeal or further order

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Moore	Wotten + Kearney
For the Defendant Hend Karbotli For the Defendant The Registrar of Titles	Mr J A F Twigg QC with Ms E R Tadros Mr J McKay	Marino Law Land Use Victoria Legal

HIS HONOUR:

Background

1       Following a six day trial, I published reasons on 22 July 2020 (C & F Nominees Mortgage Securities Ltd v Karbotli & Ors [2020] VCC 987). The plaintiff, C & F Nominees Mortgage Securities Limited (“C&F”), had sought to enforce a mortgage purportedly granted by the first defendant, Ms Issa, over her residential property in Bulleen, Victoria.

2       Her case was that the document purporting to be a mortgage over her property registered as an encumbrance on that property under the Transfer of Land Act 1958 was a forgery. She said that, despite the indefeasibility principle embodied in s42 of that Act, she was entitled to an order under s87A of the Act, discharging the mortgage and determining that it was void.

3       The Registrar of Titles, appointed under the Transfer of Land Act, was also a party to the proceeding, and Ms Issa sought indemnity against the Registrar for losses she might suffer.  In particular, in case the mortgage were determined to be valid and enforceable in the circumstances.

4       I accepted that Ms Issa had not, in fact, executed the mortgage, and determined further that the plaintiff had not taken reasonable steps to identify the person executing the mortgage as being Ms Issa, the registered proprietor of an estate in fee simple in the relevant property.  Consequently, the mortgage should be discharged.

5       C&F has now filed an application for leave to appeal against my determinations against it.  This Court’s judgment was authenticated on 28 August 2020 and included a 28 day stay.  Whilst C&F has now lodged its application for leave to appeal with the Court of Appeal, that court has not granted a further stay of the judgment against it and in favour of Ms Issa.  The Court will not be in a position to hear an application for a further stay this week.

6 Consequently, the solicitors for C&F have sought a further stay of orders 1 to 5 of the judgment, which entail declarations of invalidity with respect to the mortgage and failure by C&F to comply with the requirements of s87A of the Transfer of Land Act.  More pertinently, the Registrar of Titles is directed to discharge and remove the mortgage from the register, and it is ordered that control of the duplicate Certificate of Title be transferred from C&F to Ms Issa.

Applicable principles

7       The parties are agreed that the principles which should guide this Court in granting or refusing a stay of judgment were stated in a joint judgment by Tate and McDonald JJA in Civil & Allied Technical Constructions Pty Ltd v A1 Concrete Tanks Pty Ltd [2018] VSCA 12 [5].

8       Those principles were:

“(a)   Prima facie, a successful party is entitled to the benefit of the judgment obtained below and the presumption that the judgment is correct.  The applicant for a stay therefore bears the onus of demonstrating that a stay is justified.

(b)    Accordingly, an applicant for a stay is required to demonstrate special or exceptional circumstances to remove the case from the general rule that an appeal does not operate as a stay in itself.

(c)    In particular, special circumstances exist where the applicant is able to demonstrate that, for whatever reason, there is a real risk that it will not be possible to restore the applicant substantially to his or her former position if the judgment against the applicant is executed before the conclusion of the appeal.  However, the prospect that the appeal may be rendered nugatory must be balanced against the principle that the successful party is entitled to the fruits of the judgment.

(d)    A stay should not be granted unless there is at least an arguable ground of appeal, although otherwise speculation as to the ultimate prospects of success is usually inappropriate.”

C&F’s contentions

9       According to Mr Senthirajah and Mr Moore, if the Court’s orders are left to operate, C&F’s mortgage “may in effect have been discharged”, and Ms Issa would be able to deal with her property – presumably realise it by sale and spend the money.  In those circumstances, C&F could not be restored to its former position.

Submissions on behalf of Ms Issa

10 Mr Twigg QC and Ms Tadros, on behalf of Ms Issa, said that there were no special circumstances such as would justify the grant of a stay in the present circumstances. They said that were C&F to be successful in reversing the outcome in this Court, whilst it would be in a position to enforce its mortgage against Ms Issa, she would be entitled to indemnity from the Registrar of Titles pursuant to s110 of the Transfer of Land Act.  They said they held instructions from Ms Issa that, in the event of C&F’s success in the Court of Appeal, she would hold any amounts received from the Registrar by way of indemnity against her loss to meet the liability which she would on this premise have to C&F. Accordingly, failure to grant a stay would entail no risk that C&F would suffer an irredeemable loss should its appeal ultimately succeed.

11 Further, they said, it remained within the power of the Registrar of Titles to render C&F’s appeal nugatory. They referred to the observations which I made in my principal judgment to the effect that the power to expunge a mortgage under s87A of the Transfer of Land Act was vested in the Registrar solely and not solely in the Court nor severally in the Court and the Registrar.

12      They said that grant of a stay would inflict prejudice on Ms Issa.  They referred to her age (81 years), her ill-health, including depression and other psychological illnesses.  They noted that she had been deprived of her Queensland residence as a result of a mortgagee’s exercise of power of sale.  Therefore, they said, it was “important for Ms Issa to retain her Bulleen property … and she does not have any immediate plans to sell her Bulleen property”. 

13      They said that her age and ill-health might require her to “access … funds for her essential future living expenses”.  They said she was indebted for the costs of the proceeding of $109,464.78, “which she intends to pay from any settlement or judgment of the Mermaid property [Queensland], property litigation or by dealing with the Bulleen property”. 

14      They said that were the appeal unsuccessful, whilst interest might continue to accrue on C&F’s debt, she would receive no compensation “for effectively being locked out of dealing with her property at all for an indeterminate period of time”. 

15      They were also critical of C&F’s delay in moving to file its application for leave to appeal, given that it received the Court’s reasons as long ago as 22 July 2020. 

16 The present application, they complained, had been brought on without proper material and at short notice, in violation of the overarching obligation “under s25 of the Civil Procedure Act 2010”.

Further submissions by C&F

17      Messrs Senthirajah and Moore, on behalf of C&F, said that if the present judgment is enforced and subsequently reversed by the Court of Appeal,:

There is a very real risk that the mortgage in question will be rendered void, removed from the Register of Land and its entry will be expunged; in effect the mortgage may be treated as being discharged.  On that basis, Ms Issa will have no liability to the Plaintiff (as her liability including the covenant to repay the loan) as that arises only from the mortgage.  Accordingly, there would then be no liability for the Registrar to indemnify Ms Issa in respect of.”

Further submissions on behalf of Ms Issa

18 Ms Issa’s solicitors said that were C&F to succeed, “it is likely it would succeed in its claim on s110 against the Registrar”. They said that it was speculative to contend that, even in the absence of a stay, the Registrar might proceed to discharge the C&F mortgage.

Registrar of Titles

19      The Registrar neither opposed nor supported a grant of stay.

Conclusions

20      In my view, failure to stay the Court’s judgment carries with it a risk that C&F might suffer irredeemable loss and damage despite success in the Court of Appeal.

21      Ms Issa seeks to reserve her right to sell the Bulleen property freed from the C&F mortgage and expend the money for a variety of purposes, having regard to her age and ill-health, and her liability for costs.  There is no guarantee that were such a thing to occur, following a successful appeal by C&F, that these expenditures could be recovered. 

22 Ms Issa’s counsel seek to blunt the effect of this clear danger by proffering an undertaking on behalf of their client to hold the proceeds of her claim against the Registrar of Titles under s110 of the Transfer of Land Act for the benefit of C&F in the event that C&F succeeds in its appeal against her victory. 

23      Whilst I accept that a victory for C&F might be thought likely to result, ultimately, in a victory for Ms Issa against the Registrar, such an outcome is by no means inevitable.  The  claim against the Registrar might fail, for reasons not immediately apparent, or it may be complicated by a decision of the Court of Appeal to remit the proceeding to this Court for further consideration of the situation relative to the Registrar, despite the Court having conclusively determined matters as between C&F and Ms Issa.

24      These circumstances constitute sufficient grounds to take the present situation outside the rule that a successful party is entitled to the fruits of his/her or its favourable judgment, despite the pendency of an application for leave to appeal. 

25      Orders 1-5 of the Court’s orders made on 28 August 2020 are stayed until the hearing and determination of the plaintiff’s application for leave to appeal, and any appeal launched pursuant to such leave or further order.

Costs

26      Given the provisional nature of a stay, the normal order for costs relative to it being granted, would be that the costs are reserved.  The manner in which this application has come on is somewhat unsatisfactory.  Given that C&F has had the benefit of the reasons for judgment since 22 July 2020, it might have been expected to have filed its application for leave to appeal well-within the primary stay period of 28 days.  The circumstances in which the further stay has been sought, however, are not, in my view, so unusual or so open to criticism as to justify any costs order at this stage against C&F.