Capital Assist Pty Ltd v Lakewood Stud (SA) Pty Ltd - [2006] SASC 375

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
CAPITAL ASSIST PTY LTD v LAKEWOOD STUD (SA) PTY LTD
[2006] SASC 375
Reasons of Judge Lunn a Master of the Supreme Court
8 December 2006
MORTGAGES
Order made for possession of land in favour of mortgagee against mortgagor - application under R 88.09 by tenant at will of mortgagor for stay of warrant of possession to enable orderly vacation of land - consideration of the interests of justice - right of tenant at will to remain on land after termination of licence - stay refused.

CAPITAL ASSIST PTY LTD v LAKEWOOD STUD (SA) PTY LTD
[2006] SASC 375
Reasons on application for stay of warrant of possession.

JUDGE LUNN: On 1 March 2006 the plaintiff issued a summons under Part XVII of the Real Property Act 1886 against the defendant seeking an order for possession of a property situated at Karpany Road, Wellington (“the Land”). In October 2005 the plaintiff had lent $294,400 to the defendant which was repayable on 18 November 2005 at an interest rate of 20% per month. The loan was secured by a fourth mortgage on the land. An ASIC extract for the defendant as at 10 January 2006 showed Malcolm Pettingill was its sole director and shareholder. A notice of demand issued by the plaintiff on 10 January 2006 claimed that $433,560 was then owing by the defendant to the plaintiff for unpaid principal, interest and costs.
The summons was served on 21 March 2006 by posting it to the registered office of the defendant. On 9 March 2006 a licensed process server, employed by the plaintiff, had attended at the Land and placed a “Notice to Occupier” in the letterbox on the Land. That notice is required by R 65.04(b) to inform the occupier of the proceedings and that it could be evicted pursuant to a judgment given if it did not apply to the Court for an order that it be added as a defendant.
The summons came on for hearing before me on 12 April 2006. Neither the defendant nor any occupier attended. An order was made that the defendant give the plaintiff possession of the Land within 14 days of the service of the order upon it. On 19 April a sealed copy of that order was served by post on the defendant at its registered office.
On 3 November 2006 the plaintiff requested the Registrar to issue a warrant for possession. The warrant was issued on 6 November 2006 and delivered to the Sheriff for execution. The Sheriff advised the parties that he intended to execute the warrant on 28 November at 11 am. On 22 November the solicitors for Lipmans (see below) wrote to the plaintiff’s then solicitor requesting that Lipmans be given until 28 February 2007 to vacate the Land. At about 5.20 pm on Friday 24 November the plaintiff’s new solicitor advised that no extension would be given.
On 27 November Lipmans Bloodstock Pty Ltd (“Lipmans”) issued an application that the warrant of possession be stayed. It filed an affidavit of Vilia Mazelis, one of its directors, in support of its application but no other affidavit.
The application came on for hearing before me at 4 pm on 27 November. Counsel attended for each of the plaintiffs and Lipmans, but not for the defendant. I asked counsel for the plaintiff whether he wished to have an adjournment to file any answering affidavits. He replied that there was not time to do so before the warrant was due to be executed and he wished the application to be dealt with on the evidence which was then before the Court. I indicated that I would hear the application, but if the plaintiff was unsuccessful I did not intend to adjourn the hearing for the plaintiff to file answering affidavits and then to have the matter re-argued. Objection was taken to any evidence from the Bar Table and I ruled that I would deal with the matter only on the admissible affidavit evidence which was then before me. At the conclusion of the argument I reserved my decision and stayed the warrant until delivery of my decision.
The notice for address for service filed by Lipmans stated that it was in possession of the Land. By virtue of R 65.03(2) and (3) this made Lipmans an additional defendant to the proceedings. (It was not suggested that the making of the final order for possession on 12 April 2006 prevented R 65.03 from operating.)
The relevant parts of the affidavit of Vilia Mazelis are as follows:
5I am aware from my discussions with the former director of Lakewood Stud (SA) Pty Ltd, Mr Malcolm Pettingill (“Pettingill”), that on or about 12 April 2006, an order was made granting possession of the land to the fourth mortgagee, Capital Assist Pty Ltd …..
6That order was not ever served on the corporation, Lipmans Bloodstock.
7I am also aware from my discussions with Pettingill, that after the order was made, he was granted the right by Capital Assist to operate as the manager of the Land, and that was why he did not take steps to require Lipmans Bloodstock to vacate the Land. Now produced and shown to me and marked “VLM 2” is a copy of a letter from Capital Assist to Pettingill dated 12 April 2006.\
8Since the date of the agreement, and the date of the order, Pettingill has been appointed an employee of Lipmans Bloodstock.
…..
10….. Lipmans Bloodstock operates an agistment and breeding business on the Land, known as Lakewood Stud.
11That business currently agists and carries on breeding (and all associated functions) for approximately 290 horses.
12With the exception of only 2 of those 290 horses, those horses are thoroughbreds and are not owned by Lipmans Bloodstock. The horses are either owned by companies, individuals or syndicates, with no connection to Lipmans Bloodstock (other than the relevant agistment and breeding agreements).
…..
14As Lipmans Bloodstock was not served with the order for possession, the owners of those horses have not been advised that the horses need to be moved to alternative agistment by 11 am on Tuesday 28 November 2006.
15Further, as this is the peak breeding season for horses, there are approximately 20 mares to foal (with the final mare due to foal in January 2007), and 60 mares with foals at foot.
16Lipmans Bloodstock employs one contract veterinary surgeon, an Assistant Manager, one dedicated stable hand, Pettingill, a part-time stable hand/secretary, an office manager, and myself.
17Of those employees, four of those live on the land.
18I have been involved in the agistment and breeding of horses for over 4 years.
19It is both my opinion and that of the veterinary surgeon that:
19.1mares in foal should not be moved any significant distance until they have foaled;
19.2mares with foals at foot should not be moved any significant distance until they are at lease 3 weeks old.
20Further, all of those mares will require constant management and veterinary supervision.
21The horses are worth well in excess of $5,000,000.00. At least one of the horses (Paru Paru) on the Land was purchased for over $1,000,000.00.
22If the horses are moved without the owners’ consent, and any damage is caused to those horses, there will be potential for significant claims against Lipmans Bloodstock and the mortgagees.
…..
An ASIC extract for Lipmans exhibited to that affidavit shows that the registered office of that company has been at the Land since 13 December 2005. That indicates that Lipmans has been in occupation of the Land since before these proceedings began.
The affidavit of Vilia Mazelis is significant for a number of matters with which it does not deal. These are:
It does not depose to any contract or arrangement between the defendant and Lipmans whereby Lipmans is in possession of the Land and has any continuing legal right to occupy it.
It does not depose that it is paying any rent, or giving any other financial benefit to the defendant, for its occupation of the Land, although the clear inference is that it is carrying on a major profit making business on the Land.
It does not say when Malcolm Pettingill became an employee of Lipmans or what he told Lipmans in the course of his employment about any dealings, which he had with the plaintiff in his capacity as an officer of the defendant or otherwise, about the Land. (The affidavit refers to Pettingill as a former director of the defendant, but that is not admissible evidence that he has ceased to be a director of the defendant).
Nothing is said about whether Lipmans received, or otherwise became aware of, the Notice to Occupiers served on 9 March 2006, at which time Lipmans was in occupation of the Land.
Counsel for Lipmans relied principally upon a letter of 12 April 2006 which was the exhibit referred to in paragraph 7 of the affidavit of Vilia Mazelis quoted above. The relevant parts of that letter are as follows:
Capital Assist Pty Ltd
12 April 2006
Director
Lakewood Stud (SA) Pty Ltd
Karpany Road
WELLINGTON. SA
Attention: Malcolm Pettingill
As foreshadowed, we have now been granted, by the Supreme Court of South Australia, an Order for Possession of the property known as Lakewood Stud.
As a consequence of that Order it is our intention to offer the property for sale.
You have expressed to us your desire to re-finance the existing mortgages and, by that means, regain control of the property.
We understand that the property at this stage is agisting approximately 240 horses and that returning them to their owners or seeking alternative agisting facilities would place a huge and onerous burden upon you.
We believe that it would be in our interests and ultimately yours, for you to be appointed as our property manager of Lakewood Stud.
If you are agreeable to that appointment we would demand that you took all steps to at least maintain the property in its present condition and to present it as a going concern to prospective purchasers as it would be in everybody’s interest to have the property properly presented.
A condition of this proposed appointment is that all property that is not vested in us and is not included in the sale be removed 30 days prior to any new owner taking possession.
We understand that your present position does not allow for a rental payment to be made for the property. We would be prepared to treat your input as described above, in lieu of the rent of 5% on valuation we would be in a mind to charge.
If you are agreeable to this course please indicate your agreement below.
Sincerely
(signed) Joe Czerwinski
I assent to being appointed as manager of Lakewood Stud for Capital Assist Pty Ltd on the terms as herein expressed.
(signed) Malcolm Pettingill
Dated: 12 April 2006
I accept the submission of the plaintiff’s counsel that this letter is not evidence of a concluded agreement between the plaintiff and the defendant because there is no evidence that the acceptance of the offer by Pettingill was ever communicated to the plaintiff. Furthermore, there is no evidence as to when Pettingill produced that letter to Lipmans or that Lipmans in any way acted to its detriment by relying upon the contents of that letter. There is no suggestion in the affidavit that Lipmans did not vacate the Land, or refrained from making other arrangements for the agistment of the horses, in reliance upon the contents of that letter.
Counsel for Lipmans conceded in the course of argument that the evidence established no more than that Lipmans had a licence at will to occupy the Land and it was not a trespasser.
Lipmans brought its application under R 88.09 which reads:
88.09(1) Any interested person may apply to the Court either by application under rule 67 or orally during the hearing of other matters in the proceedings in which the judgment was obtained for a stay of a warrant.
(2)Either before or after the issue of a warrant the Court may either absolutely or subject to conditions make such order for the stay of the warrant as the justice of the case requires.
I am not aware of any judicial exposition of what “as the justice of the case requires” means in this context.
Lipmans right to remain in occupation of the Land through any stay of the warrant cannot be greater than any legal right which it has as against the defendant to remain in occupation. Under a licence terminable at will the licencee can only remain in possession for an additional period after the termination of the licence to enable it to effect an orderly vacation and relocation to other premises where there is an implied term in the licence to that effect or Equity would grant it a “period of grace” for that purpose: Australian Blue Metal Ltd v Hughes [1963] AC 74 at 101-2. The onus is on Lipmans to show that there is such a term of the licence, but on the evidence before me it has not discharged that onus: Cornish v Stubbs (1870) LR 5 CP 334. An equitable period of grace can only be granted where the applicant qualifies for the assistance of Equity: McPhail v Persons Unknown [1973] Ch D 447, (but here Lipmans is not a trespasser as the defendant was in that case). The general maxim of Equity is that Equity will not assist a volunteer: Parkinson The Principles of Equity 2^nd Edition [113]. Lipmans is a volunteer in that it is not conferring any financial benefit on either the defendant or the plaintiff through its occupation of the land. The effect of the stay which is sought is likely to be to the significant financial disadvantage of the plaintiff in that it will be delayed in the recovery of its substantial loan and interest. Lipmans has made no offer to pay anything which would compensate the plaintiff for its loss in the period of a stay. Accordingly, on the evidence before me, I do not consider that Equity would have granted Lipmans any significant period of grace by reason of the hardship to it in having to relocate the horses to other premises at short notice with possible adverse consequences for the foals and the mares in foal. The reality is that Lipmans is principally the cause of its own misfortune in having placed the horses on the Land without having ensured that it was entitled to some additional period of occupation after a termination of its licence to enable an orderly relocation of the animals to other premises.
The phrase “in the interests of justice” does not have a precise meaning, and ultimately depends upon considerations of justice and fairness: see Civil Procedure South Australia Vol 1 para [6R 117.10]. In Midland Montague Australia Ltd v O’Connor (No 2) (1992) 110 FLR 119 the operation of a warrant of possession was deferred for an extended period because the defendant had recently been seriously injured in an accident. That was a misfortune outside of the defendant’s control, but here, as already stated, Lipmans is the author of its own misfortune. It is likely that the “Notice to Occupier” of 9 March 2006 did come to its attention, but it did not then seek to protect its position in the event of the plaintiff seeking to enforce a possession order. A huge amount of interest has accrued on the plaintiff’s loan at the rate of 20% per month. As Lipmans has not shown that it would have been entitled to remain in occupation of the Land if the defendant had terminated its licence for any period to enable it to effect an orderly relocation of the horses, the hardship to it in now having to do this does not outweigh the plaintiff’s right to enforce its security by being given immediate possession of the Land.
Although it was not argued I have also considered whether Lipmans could obtain a stay under s 17 of the Enforcement of Judgments Act 1991 which provides:
A party against whom a judgment has been given may apply to the court for a stay of execution, and the court may, if satisfied that there is a proper reason for granting the stay, grant the stay on such terms as it considers appropriate.
By virtue of R 65.03 Lipmans is probably a party against whom the judgment has been given. S 17 imports a broad discretion to grant a stay, but such stays are not to be granted lightly: Central Credit Union v Hasda, Duggan J, 17 August 1994, Judgment No S 4730, unreported. On the evidence before me the exercise of any discretion under s 17 would be no different from that under R 88.09.
In his submissions counsel for Lipmans submitted that one relevant consideration would be that the plaintiff would become responsible for any agisted horses left on the Land when the Sheriff executed the warrant for possession. I do not agree. S 11 of the Enforcement of Judgments Act provides:
(1)The court may, on application by a person in whose favour a judgment for recovery or delivery up of possession of property has been given, issue a warrant of possession authorising the sheriff to take possession of the property and deliver it into the applicant’s possession.
(2)Where a warrant is issued under this section, the sheriff may –
(a)if the warrant relates to land – eject from the land any person who is not lawfully entitled to be on the land; …..
The warrant of possession here has been issued under that section. The Common Law position was that when executing a writ of possession the Sheriff was required to remove all of the goods and chattels which were on the land and to give vacant possession of it to the plaintiff: Norwich Union Life Insurance Society v Preston [1957] 2 All ER 428. I consider that s 11(2)(a) is to be read in conjunction with the Common Law on the topic and the Sheriff is to execute the warrant by removing from the Land everything which is not a fixture so that the plaintiff is given vacant possession of it. If there are still any horses on the Land at the time that the Sheriff executes the warrant, he is required by the warrant to remove them from the Land and deposit them on nearest convenient public land or arrange for them to be suitably impounded at an appropriate place.
The application of Lipmans for a stay of the warrant is refused. Stay imposed pending delivery of this judgment is lifted. I will hear the parties on what other orders are to be made.