Capital Securities XVI Pty Ltd v Kozina

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
MORTGAGE RECOVERY LIST

S CI 2017 01519

BETWEEN:

CAPITAL SECURITIES XVI PTY LTD (ACN 601 867 654)	Plaintiff
v
NIKO KOZINA & ANA KOZINA	Defendant

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JUDGE:	Derham AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	24 March 2023
DATE OF JUDGMENT:	6 April 2023
CASE MAY BE CITED AS:	Capital Securities XVI Pty Ltd v Kozina & Anor
MEDIUM NEUTRAL CITATION:	[2023] VSC 178

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PROPERTY LAW – Judgment for possession entered – Enforcement by execution of Warrant of possession – Occupants of property including persons other than the defendants in the proceeding for possession, including alleged tenants from month to month – Whether presence of those other persons any barrier to execution of the Warrant by the Sheriff – Whether open and appropriate for the Court to direct the Sheriff to execute the Warrant – The difficulties faced by the Sheriff in the execution of Warrants of Possession – Availability to the parties to come to the Court for directions and other relief – Sheriff Act 2009 (Vic) – Grayridge Pty Ltd v The Sheriff of the State of Victoria [2000] VSC 446 followed.

PROPERTY LAW – Whether tenancy agreement entered into after first attempt to execute a Warrant of Possession is a sham – Whether Residential Tenancies Act 1997 (Vic) s 91ZZK applicable and required plaintiff mortgagee to give notice to vacate.

PRACTICE AND PROCEDURE – Scope of r 66.15 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Court’s inherent jurisdiction to protect its processes – Whether r 66.15 may be invoked by the mortgagee plaintiff in whose favour the Warrant is issued – Australia and New Zealand Banking Group Ltd v Elias (2017) 53 VR 251 followed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms L L Barrett	SLF Lawyers
For the Defendants	Mr I G Hone, solicitor	Byron & Thomas
For the Sheriff’s Office Victoria	Mr N Abrams, solicitor	Moray & Agnew

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Background......................................................................................................................................... 3

Evidence – plaintiff............................................................................................................................ 4

Evidence – respondents to the summons.................................................................................... 12

Submissions...................................................................................................................................... 13

Plaintiff/applicant...................................................................................................................... 13
Defendants’ submissions........................................................................................................... 14
Sheriff’s submissions.................................................................................................................. 16

Consideration.................................................................................................................................... 18

Rule 66.15 of the Rules................................................................................................................ 18
The Warrant................................................................................................................................. 19
Residential Tenancies Act.......................................................................................................... 20

Tenancy Agreement – is it a sham?.............................................................................................. 30

Relief under r 66.15.......................................................................................................................... 31

Conclusion......................................................................................................................................... 33

HIS HONOUR:

Introduction

The plaintiff applies by summons filed on 22 March 2023, pursuant to r 66.15 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’), for the following orders:[1]
[1]By order of Lyons J made on 23 March 2023, the summons was referred to an Associate Judge for hearing and determination pursuant r 77.05 of the Rules, and if required, also pursuant to r 16.1(3) of the Supreme Court (Corporations) Rules 2013 (Vic).

(a) a declaration that the periodic tenancy agreement dated 1 March 2023 (the ‘Tenancy Agreement’) purportedly entered into between the second defendant and Maria Alimic and Klementina Alimic in respect of the property at 3 Stapledon Court, Corio, in the State of Victoria and described in Certificate of Title Volume 09039 Folio 620 (the ‘Property’) is a sham and/or is not binding upon the plaintiff;

(b) further or alternatively, a declaration that the Agreement does not prevent the Sheriff from executing the warrant of possession forthwith;

(c) further, an order directing the Sheriff to execute the warrant of possession forthwith;

(d) an order that the defendants, Maria Alimic and Klementina Alimic, vacate or otherwise be removed from the Property forthwith;

(e) an order restraining the defendants and/or any other persons (including Maria Alimic and Klementina Alimic) from preventing, hindering or interfering with the Sheriff executing the warrant of possession forthwith, and/or the plaintiff taking possession (including by way of the Sheriff’s execution of the warrant of possession) and/or exercising its power of sale in respect of the Property;

(f) an order otherwise restraining the defendants, Maria Alimic and Klementina Alimic from making any attempt to remain on or to re-enter the Property; and

(g) costs and further orders the Court deems appropriate.

The summons is directed to, and was served on, the defendants, Maria Alimic (‘Maria’), Klementina Alimic (‘Klementina’) and the Sheriff’s Office of Victoria. It is common ground that Maria is the daughter of the defendants and Klementina is Maria’s daughter.

The application is supported by the affidavits of Jason Kean Quah, solicitor, made on 21 March 2023 (‘Quah first March affidavit’), which refers back to two earlier affidavits he made on 1 February 2023 (‘Quah first February affidavit’ and ‘Quah second February affidavit’) and a further affidavit made by him early on the day of hearing, 24 March 2023 (‘Quah second March affidavit’). The Quah February affidavits were made in opposition to an application made by the second defendant, Ana Kozina, to restrain the plaintiff and the Sheriff from enforcing a warrant of possession (numbered W22012572708) dated 26 October 2022 (‘Warrant’) in respect of the Property pending the determination of an application by the defendants to set aside a judgment for possession of the Property entered by consent on 8 September 2017.

That application by the second defendant was dismissed by Gardiner AsJ on 2 February 2023 and his reasons appear in Capital Securities XVI Pty Ltd v Kozina & Anor.[2] Those reasons give a more complete background to the application before me, and I shall not repeat that background except as necessary to an understanding of the matter before me.
[2][2023] VSC 73.

The defendants were represented at the hearing by Mr Ian Hone, solicitor advocate. As I understand it, he did not appear for Maria or Klementina. At the time of the hearing, no evidence had been filed on behalf of the defendants. At the conclusion of the hearing, I gave leave to the plaintiff to file any submissions in response to the submissions made orally by Mr Hone at the hearing, given that his submission introduced a new argument based on changes to the Residential Tenancies Act 1997 (Vic) (‘RTA’). The plaintiff chose not to file further submissions. Mr Hone filed submissions, as ordered, by Monday 27 March 2023. But with the submissions he also filed, without leave, an affidavit made by him that day which contested some of the evidence given by Mr Quah (‘Hone affidavit’).

On 28 March 2023, my Chambers received a further affidavit of Mr Quah made that day and an application for leave to file it (‘Quah third March affidavit’). The affidavit gives evidence relevant to the knowledge of Klementina of the enforcement process by the Sheriff, in answer to material introduced in the Hone affidavit. I gave that leave because the Hone affidavit was filed without leave of the Court. The plaintiff contended, and I agree, that the Hone affidavit raised an issue that was not the subject of any evidence from, or submissions made by, the defendants or Maria or Klementina, at the hearing on 24 March 2023. That was the question of Klementina’s knowledge of the mortgagee’s entitlement to possession and/or more broadly, the Sheriff’s enforcement process. Had the matters in Mr Hone’s affidavit been raised prior to, or even at, the hearing on 24 March 2023, the plaintiff would have been given an opportunity to respond to those issues at that time.

At the hearing, I raised with Mr Hone the capacity of the first defendant to be represented without a litigation guardian. I did so because the application that came before Gardiner AsJ in February was brought by the second defendant alone and, in the course of his reasons for judgment, His Honour commented that the first defendant has dementia.[3] Mr Hone stated that he had spoken to the first defendant, through a member of the family interpreting, and was satisfied that he was able to understand the nature of the proceeding and to give him instructions.
[3]Ibid [18].

Background

The plaintiff obtained the judgment for possession of the Property on 8 September 2017 by consent. The order is in the correct form and provides that “[t]he plaintiff have possession of the land described in certificate of title volume 09039 folio 620 and more commonly known as 3 Stapleton (sic) Court, Corio.” (‘Possession Order’)

The consent to the Possession Order was the product of a settlement agreement entered into as a result of a mediation of the proceedings in 2017 (‘Settlement Agreement’). The Settlement Agreement entitled the plaintiff to file and obtain that judgment, but in that Agreement (although not in the Possession Order) the plaintiff agreed not to enforce the judgment, including the obtaining of a Warrant of Possession, until the expiry of five years from 30 August 2017, i.e., 30 August 2022.

The plaintiff obtained the Warrant on 26 October 2022.[4] As I have said, the second defendant made an urgent application to restrain the plaintiff and the Sheriff from enforcing the Warrant, which Gardiner AsJ refused.
[4]Given the number W22012572708 by the Sheriff.

Evidence – plaintiff

The Possession Order arose from a mortgage registered on the title to the Property to secure a loan to the defendants, Maria Alimic Pty Ltd and Maria, although it seems the loan moneys were advanced to Maria Alimic Pty Ltd alone.[5] The relevant loan and mortgage documents were entered into by the defendants, Maria Alimic Pty Ltd and Maria in 2016. All of the documents signed by the defendants and Maria were witnessed by their (then) solicitor, Antony Chung. Various certificates were also provided by him.[6] Maria also guaranteed the loan.[7]
[5]Quah second February affidavit, [4], exhibit JKQ-2, 5-12; Writ and Statement of Claim, [3].
[6]Ibid.
[7]Quah first February affidavit, [10(a)], exhibit JKQ-1, 39.

The plaintiff commenced these proceedings against the defendants in April 2017. The defendants defended the proceedings. A judicial mediation occurred on 30 April 2017. The defendants were in attendance, together with their legal representatives (Murray Pegg, solicitor) and either Klementina or Stefani.[8] Klementina or Stefani purportedly acted as the defendants’ translator at the mediation.[9] Klementina had acted as their translator from time to time, and more generally in the proceeding.[10] As a result of the mediation, the defendants entered into the Settlement Agreement referred to earlier.[11] Pursuant to that Agreement, the plaintiff withhold the enforcement of the Possession Order for a period of 5 years.
[8]The plaintiff’s lawyers understood the person to be Klementina. Mr Hone gives evidence that he is informed by the defendants that it was Stefani, Klementina’s sister.
[9]Quah second February Affidavit [6], exhibit JKQ-2, 31. The Hone affidavit at [3] gives evidence that Stefani attended only to give moral support.
[10]Affidavit of Ana Kozina made 30 January 2023, [11] (‘Kozina affidavit’).
[11]Ibid, exhibit AK-2.

On 19 June 2022, Maria emailed the plaintiff seeking an extension of time for the defendants to pay the debt, and subsequently, a written authority was provided which indicated that Maria was authorised to act for the defendants.[12] Whilst that email makes reference to fact that defendants reside at the Property, there was no indication or suggestion that either Maria or Klementina resided there as well.
[12]Quah first February affidavit, [18], exhibit JKQ-1, 186-187.

On 27 January 2023, the second defendant issued the application, dealt with by Gardiner AsJ, seeking to restrain the Sheriff from executing the Warrant or stay its execution. There is no mention in the supporting material that either Maria or Klementina also resided at the Property; nor was there any suggestion that there was any kind of arrangement (such as a lease or otherwise) in place for either of those persons to reside at the Property. Moreover, in a note to Wighton & McDonald, solicitors, handwritten by Maria and exhibited to the affidavit of Ana Kozina made on 31 January 2023 in support of the application, Maria wrote that she is ‘willing to do anything to ensure [her parents] do not loose (sic) their property’.[13]
[13]Kozina affidavit, exhibit AK-1.

On 16 February 2023, Mr Prospero Franzese of Byron & Thomas, solicitors acting for the defendants, sent an email to Mr Quah (at 4:11 pm) stating that the Sheriff is booked to effect an eviction at the Property the next day, 17 February 2023. He enclosed a letter from his client’s medical practitioner. He said that Mr Quah will be aware that the registered proprietors who occupy the Property are elderly and have a number of chronic medical conditions. He went on to say that the advice of his client’s medical practitioner is that they are not fit to vacate and any attempt to vacate will aggravate existing medical conditions, in particular Ms Ana Kozina has recently fractured her distal spine and needs to recover with rest at home. He requested that the eviction be postponed for a period of four weeks, as recommended by the medical practitioner. The email was copied to the Possessions Office of the Sheriff.[14]
[14]Quah first March affidavit, [4], exhibit JKQ-3, 11.

On 16 February 2023 (at 4:43 pm), Mr Quah responded to that email stating that he had forwarded the email to the plaintiff, who had instructed him to respond that the fact that the mortgagors are elderly and in poor health was specifically raised before the Court at the hearing on 2 February 2023, that the Court acknowledged the mortgagors’ age and the inconvenience of them being displaced, but nonetheless still refused the application for a stay of execution of the Warrant and accordingly the plaintiff does not agree to any delay in the execution of the Warrant.[15]
[15]Ibid 10–11.

Also, on 16 February 2023 (at 4:54 pm), Mr Quah sent an email to the Sheriff’s Office, referring to the email exchange just referred to, and noted that the mortgagors’ previous lawyers had already applied to the Court for a stay of execution of the Warrant, which was rejected on 2 February 2023. He attached a copy of the application and the orders made on that day. He went on, that if the mortgagors wanted to stay the execution of the Warrant, the appropriate course was for them to make another application to the court on an urgent basis, but that it is likely that any such further application for a stay will be rejected. He concluded by saying that, at the very least, the plaintiff presses for the Sheriff to attend the Property as scheduled the next day to execute the Warrant and to make their own assessment as to whether the medical reports are genuine or whether they are exaggerated.[16]
[16]Ibid 9–10.

He is informed by Rob Winfer of the Sheriff’s Office, that the Sheriff attempted to execute the Warrant on 17 February 2023. The Sheriff determined, however, that as a result of the alleged medical condition of the second defendant, the execution of the Warrant would be deferred until after the next available set date in respect of the Property, being 17 March 2023. The Sheriff informed the second defendant and Klementina, or perhaps Stefani,[17] that the Property had to be vacated by the rescheduled execution date of the Warrant. According to the Sheriff’s officers, the second defendant and Klementina or Stefani acknowledged this and agreed that all occupants of the Property would vacate in about a month’s time.[18]
[17]In the Hone affidavit at [4], it is said that it was not Klementina but Stefani who had the conversation with the Sheriff’s officers.
[18]Quah first March affidavit, [5].

On 17 February 2023, Mr Quah received an email from Martin Ha of the Sheriff’s Office stating that execution of the Warrant had been deferred due to the second defendant's medical condition and confirming that a revised set date of 17 March 2023 had been allocated to the Warrant.[19]
[19]Ibid [6], exhibit JKQ-3, 8–9.

On 15 March 2023, he received an email from Byron & Thomas (copied to the Sheriff’s Office Victoria) informing him that on 1 March 2023, the defendants had appointed an agent to sell the Property by way of auction to be held on 1 April 2023. Attached to the email was the Exclusive Sale Authority which purports to be signed by the defendants. The Authority makes no mention that the Sale was subject to any tenancy. The email went on to say that in order to ensure that the Property is appealing to a broad range of buyers, the defendants ‘agreed to enter into a periodic rental agreement with their daughters (sic) (Maria and Klementina) at the rate of $500 per week’ (the ‘Tenancy Agreement’).[20] The email went on to inform him that the defendants are in the process of setting a reserve price and have welcomed the mortgagee’s input in this regard. It would appear, however, that the appropriate reserve which will be determined by the selling agent will be in the range of approximately $540,000.00, subject to final instructions from the defendants. The email dealt with other matters and concluded:

Whilst the rental agreement was created for the purpose of improving the saleability of the property you will no doubt be aware that a by-product of the tenancy agreement is that the eviction by the Sheriffs (sic) Office can no longer proceed.
We look forward to your confirmation that the eviction scheduled for 17 March 2023 is stayed and to your clients (sic) input, if any, to ensure a successful sale by auction.[21]

[20]Ibid, exhibit JKQ-3, 13.

[21]Ibid [7], exhibit JKQ-3, 13.

A receipt for rent paid in the sum of $500.00 was attached to the email. However, the receipt for the alleged rental payment indicates that such payment was only processed on 15 March 2023 (with the payment only being for the period 15–22 March 2023).[22]
[22]Quah first March Affidavit, exhibit JKQ-3, 36.

On 17 March 2023, Mr Quah spoke with Mr Ha of the Sheriff’s Office by telephone. Mr Ha told him that as a result of the Tenancy Agreement (as I have called it) the Sheriff would not proceed to execute the Warrant without a court order.

Mr Quah notes that the defendants had previously (on 29 June 2022) authorised Maria and Klementina to speak on their behalf in regard to their Property ‘as we do not speak English properly’.[23] The authority was given so as Maria could represent her parents in seeking an extension of six months to repay the debt to the plaintiff. The request for an extension was refused as ‘Niko Kozina and Ana Kozina have had five years to arrange funds, and there have been no payments.’[24]
[23]Quah first February affidavit, exhibit JKQ-1, 186.
[24]Ibid 184.

The purported Tenancy Agreement was entered into on 1 March 2023, well after the orders for possession granted in favour of the plaintiff in 2017, after the decision of Gardiner AsJ on 2 February 2023 and after the first attempt by the Sheriff to execute the Warrant on 17 February 2023. The rental agreement purports to grant to Maria the private use of bedroom 1, and shared usage of all other areas of the residence, and to Klementina, the private use of bedroom 2 and shared usage of all other areas of the residence. The plaintiff has never consented to any such rental agreement. Moreover, there is no logic to the proposition that the rental agreement would increase the appeal of the Property to a broader range of buyers. The exclusive sales authority given to the agent to sell the Property provides that it is to be sold with vacant position.[25]
[25]Quah first March affidavit, [7], exhibit JKQ-3, 18.

The anticipated selling price of the Property has varied considerably. On 1 February 2023, the defendants’ agent assessed the value of the Property at between $520,000.00 and $570,000.00. On 3 March 2023, however, the Property was advertised by the agent with a price guide, as at 1 March 2023, of between $590,000.00 to $630,000.00. On 17 March 2023, the Property was advertised by the agent, as at 10 March 2023, at a price between $540,000.00 and $590,000.00. On 7 March 2023, the plaintiff obtained an appraisal of the value of the Property from LJ Hooker putting a price of between $480,000.00 to $525,000.00. The debt owing by the defendants to the plaintiff was, on 6 February 2023, $490,839.22, which is more than the lower end of the LJ Hooker appraisal.

On 17 March 2023, Mr Quah sent a letter to Byron & Thomas foreshadowing an urgent application by the plaintiff for orders against the defendants, Maria and Klementina pursuant to r 66.15 of the Rules. In that letter the following appears:

The plaintiff does not accept the validity of the month-to-month residential rental agreement… which we note is dated 1 March 2013 (sic) [2023] and therefore well after when the sheriff previously attempted to execute the warrant on 17 February 2013 (sic) [2023] and it was made clear to the defendants that the property had to be fully vacated at the rescheduled execution. In any event, the rental agreement does not bind the plaintiff.
Your assertion that the rental agreement was entered into ‘for the purpose of improving the saleability of the property’ is nonsensical, given that the property is being sold with vacant possession. Rather, it is apparent that the rental agreement was entered into in an attempt to thwart the sheriff executing the warrant. We also note that the defendants, Maria Alimic and Klementina Alimic were all well aware of the plaintiffs right to possession of the property at the time the rental agreement was signed. As a result, it seems that they may be in contempt of court…
Please confirm by close of business today that the defendants will ensure that they, and Maria Alimic and Klementina Alimic, will fully vacate the property by noon on Monday 20 March 2023, failing which the plaintiff will proceed with its foreshadowed application and it will seek orders for indemnity costs.[26]

[26]Ibid [21], exhibit JKQ-3, 75–6.

Mr Quah received no response to that letter.

On 18 March 2023, Mr Adam Cominie, a private investigator engaged by the plaintiff, attended an ‘open for inspection’ at the Property. Mr Cominie informed Mr Quah, and he believes, that he saw a male and female aged about 70 to 80 years old leaving the Property, unaided, in the company of a woman aged about 40 to 50 years old and another woman aged approximately 35 to 45 years old. He believes the latter two women to be Maria and Klementina as a result of Facebook searches he undertook. He spoke with a representative of the agent (Mr Cedie Jimenez of Barry Plant) at the Property. Mr Jimenez said that the Property was not rented, and the Property is ‘owner occupied by a family [who] just walked down the road as you came’.[27]
[27]Ibid [23].

Mr Quah asked on behalf of the plaintiff that the Court grant orders as a matter of urgency as otherwise the Warrant will not be executed in the window associated with the current set date of 17 March 2023, which may in turn result in the Warrant falling into a subsequent set date, which may be a month or more down the track. He notes that the plaintiff is being prejudiced by the delay in the execution of the Warrant in light of the fact that there may no longer be any equity in the Property [having regard to] the continuing interest and costs being incurred.[28]
[28]Ibid [25].

Shortly after the commencement of the hearing on 24 March 2023, Counsel sought to introduce the Quah second March affidavit, a further affidavit made on that day. In that affidavit, he gives evidence that on 24 March 2023 he received an email from Byron & Thomas, the solicitors for the defendants. In the email (at 9:28 am), Mr George Petselis of that firm wrote to Mr Quah (omitting formal and irrelevant parts):

We attach copy of contract of sale signed by the purchaser which our clients propose to execute subject to the Mortgagees (sic) consent.
We are further instructed by the selling agent that the purchaser is an investor and has made its offer subject to an understanding that a rental agreement will be entered into by Maria & Kementina (sic) Alimic for a 30 month term at $500.00 per week.
The eviction of our clients and tenants would endanger this contract which we note is near the upper end of the range of anticipated sales prices provided to you by clients (sic) own independent agents.
We note that reference has been made to the caveat on title. From our discussions with the caveator we are satisfied that they will be unable to maintain their caveat but in any event should that not be the case the option would be for your client to adopt the contract and use its position as mortgagee to effect transfer without consent of the caveator.
Please contact Mr Ian Hone, solicitor, on 0431 583 870 who will be appearing this morning to urgently canvass possible consent orders.

Then at 9:37 am, Mr Petselis sent a second email to Mr Quah attaching a copy of the rent receipt and Rental Agreement provided to him on 15 March 2023 by the agent, and noted that only the second defendant is the rental provider.

The Quah third March affidavit filed after the hearing, on 28 March 2023, in response to the Hone affidavit referred to below, introduced the following further evidence:

(a) Klementina is known as Tina.[29]
[29]Kozina affidavit, [11].

(b) on 3 February 2023, the day after Gardiner AsJ dismissed the defendants’ application to stay execution of the Warrant, he received a telephone call from a woman identifying herself as Tina and stating that she is the granddaughter of the defendants. She asked the plaintiff to urgently provide the payout figure to enable the defendants to refinance the debt owed to the plaintiff. She gave her email address as [email protected].;

(c) later on 3 February 2023, Mr Quah telephoned the solicitor then acting for the defendants, Mr Stuart Wilson of Nevett Ford Lawyers, and told him of the call from Tina. Mr Wilson confirmed that Tina is Klementina Alimic;

(d) Mr Quah then exchanged emails with Klementina, the last being on 9 and 10 February 2023, in which Klementina said that –

… we are currently trying to refinance the current loan on my grandparents (sic) property through a broker. The broker would like to know if we can provide a (sic) unconditional approval by Friday and extend the Notice to Vacate just for 2 weeks as my grandparents will require an interpreter to attend the solicitors office when my grandparents sign the loan documents. Being that we received the Final Notice to Vacate and we must be out by Wednesday next week the latest is NO way to meet this deadline due to requiring an interpreter.

(e) Mr Quah responded that the plaintiff would not agree to any extension and that the defendants were required to vacate the Property as soon as possible and as directed by the Sheriff. He exhibits the emails; and

(f) on 14 February 2023, Maria sent an email to Mr Quah’s principal solicitors, QBM Lawyers, offering, amongst other things, to pay $25,000.00 to the plaintiff in exchange for a stay of execution of the Warrant and to make monthly payments of $2,800.00 for 6-12 months only until they speak to a financial broker urgently. Mr Quah responded to that email (it having been passed on to him) rejecting the offer and stating that execution of the Warrant would not be stayed or delayed unless full payment of the debt was made. Maria responded stating that the plaintiff would have ‘blood on their hands if [her] parents commit suicide!?! Shame on them!!!!’.

Evidence – respondents to the summons

In the Hone affidavit, evidence is given that:

(a) it was Stefani and not Klementina who was present at the Property on 17 February 2023 and who had the conversations with the Sheriff’s officers. Klementina informs Mr Hone that it was only after she signed the Tenancy Agreement that she became aware of the Sheriff having attended the Property.

(b) on 18 March 2023, Mr Jimenez did say to Mr Cominie that the Property was not rented, and the Property is ‘owner occupied by a family [who] just walked down the road as you came’. However, Mr Jimenez was not aware at the time that the Tenancy Agreement had been entered into because he was not involved in that aspect of the matter. Mr Jimenez also said that the family was hoping to enter into a lease to remain in occupation of the Property after the sale, but that it was on the market with both options of an owner occupier or an investor to purchase the Property.[30]

(c) whilst it is true that the online advertisement referred to in the plaintiff’s written submissions does not refer to the property as being rented, the online advertisement exhibited to the Quah first March affidavit shows only part of the agent’s spiel ending midsentence with the words “ … perfect home for families or a strong…”. The full text refers to the option to acquire the property for investment purposes.[31]

[30]Hone affidavit, [6].

[31]Hone affidavit, exhibit IH-1, 1–9.

Submissions
Plaintiff/applicant

The plaintiff filed written submissions neatly summarising the contents of Mr Quah’s affidavits. Reliance was placed on r 66.15 of the Rules and the decision of the Court in Australia and New Zealand Banking Group Ltd v Elias[32] as a source of power.
[32](2017) 53 VR 251 (‘ANZ v Elias’).

It was submitted that the alleged monthly tenancy was not entered into with the consent of the plaintiff. Accordingly, it is not binding upon the plaintiff,[33] nor do the provisions of the RTA have application.[34] Maria and Klementina are and were well aware of the plaintiff’s entitlement to possession, including the Sheriff’s intention to execute the Warrant. It follows that the purported rental agreement was entered into by them with the first defendant solely for the purpose of delaying the enforcement process. So much is clear from the solicitor’s statement in the email of 15 March 2023, i.e. ‘Whilst the rental agreement was created for the purpose of improving the saleability of the property you will no doubt be aware that a by-product of the tenancy agreement is that the eviction by the Sherrifs (sic) Office can no longer proceed.’[35]
[33]Galloway v National Australia Bank Limited [2016] VSCA 330 (‘Galloway’); Tajon Pty Ltd v Arvanitis [2017] VSC 130; MA 46 Pty Ltd & Anor v Paglia Properties Pty Ltd (2020) 64 VR 88 (‘MA 46’); see also s 87C of the Transfer of Land Act 1958 (Vic).
[34]MA 46 (n 32), [90].
[35]Quah first March affidavit, exhibit JKQ-3, 13.

The events described in Mr Quah’s affidavits give rise to a reasonable apprehension that, unless otherwise restrained, the second defendants, Maria and Klementina, will continue to take steps for the sole purpose of frustrating or otherwise delaying the execution of the Warrant. If the orders are not made, there is likely to be prejudice suffered by the plaintiff. In part, this is because there will invariably be a further delay in the execution of the Warrant (on top of the already 5-year indulgence), but also because there is a significant risk that the underlying debt amount will soon exceed any potential value of the property (if it has not already done so). As at 6 February 2023, the debt amount totalled $490,839.22. There have been a variety of valuations obtained, which range as low $480,000.00.

In those circumstances, the Court is justified in making the orders sought against Maria and Klementina.

Defendants’ submissions

Mr Hone, representing the defendants, submitted that –

(a) there is no proper evidence of Klementina being aware of the Sheriff’s intentions and indeed evidence to the contrary, as on 17 February 2023 it was Stefani that had the conversation with the Sheriff’s officers not Klementina;

(b) far from supporting the proposition that the intent of entering the lease was to thwart the enforcement process, instead the intent was to maximise the sale price potential – a tactic which in light of the contract achieved has in fact clearly succeeded – with any effect on the enforcement process a mere by-product. In fact, the effect on the enforcement process is not to thwart the enforcement but simply to require the process under the RTA to be engaged;

(c) in so far as the plaintiff expresses concern about the prospect of the equity in the property being eroded, at its risk, it was submitted that to thwart a sale at near the top end of the range of estimated sale price, which sale is ready to settle – before the plaintiffs could complete an eviction and marketing campaign – is in fact entirely antithetical to any proper effort to effect a sale on terms that properly consider the interests of both mortgagee and mortgagor and indeed risks harm to both;

(d) the plaintiff’s submissions predated the Quah second March affidavit and accordingly did not address the Contract of Sale entered into by the defendants which is near the top end of the sales range. Further, Special Condition 3 in that Contract makes it conditional on a 30-month lease at $500.00 per week, being the proposal advanced by the defendants, their daughter and granddaughter. Mr Quah notes that the purchaser company is newly incorporated. So what? That is a not an uncommon situation with an investor and nothing to base any adverse inference upon. In oral submissions, the plaintiff’s counsel noted the director’s guarantees were unsigned but that is a matter that has now been addressed.[36] This gives no basis to cast doubt upon the genuineness of the contract nor its benefit to all parties. For this reason alone, the Court should decline to grant the relief sought by the plaintiff;
[36]Hone affidavit, exhibit IH-1, 10–11.

(e) since the decisions in Galloway v National Australia Bank Limited (‘Galloway’),[37] Tajon Pty Ltd v Arvanitis (‘Tajon’)[38] and MA 46 Pty Ltd v Paglia Properties Pty Ltd (‘MA 46’),[39] the provisions of the RTA that were under consideration in those decisions have been substantially changed, with effect on and from 29 March 2021, and now s 91ZZK (an expanded version of s 268) of the RTA had the effect of requiring a mortgagee in the plaintiff’s position to give a 60-day notice to vacate to the tenants. Section 91ZZK makes it clear the notice regime is not available if the mortgagee has expressly or impliedly consented to the mortgagor entering into a residential rental agreement. Logically therefore the only scope for that regime is in respect of circumstances where the consent has not been given – yet the legislature has chosen to assert the existence of such a regime and indeed (by subsequent amendment) strengthen the benefit to tenants by increasing the minimum notice period from 28 days under s 268 to 60 days under s 91ZZK. There now can be no doubt the RTA notice regime applies to circumstances where the mortgagee has not given consent to the tenancy, and as the more recent piece of legislation it is to prevail over s 87C of the Transfer of Land Act 1958 (Vic) (‘TLA’);
[37][2016] VSCA 330.
[38][2017] VSC 130.
[39]MA 46 (n 32), [90].

(f) it is accepted that the use of the word ‘may’ in s 91ZZK indicates a permissive rather than mandatory provision. But that is simply to say that the mortgagee is not obliged to give the tenant a notice to vacate, merely empowered to do so if they wish. It does not mean the mortgagee is free to ignore the RTA regime and take action based on s 87C of the TLA without giving the tenant 60 days’ minimum notice. The consequence is that the residential rental agreement only terminates upon the vacation of the premises by the tenant after notice or the making of an eviction order under s 334 of the RTA (now s 91I RTA);

(g) moreover, issues under the RTA are exclusively within the jurisdiction of the Victorian Civil and Administrative Tribunal and ought not be entertained by this Court at first instance; and

(h) in the circumstances it was submitted that the plaintiff’s summons should be dismissed.

Sheriff’s submissions

Mr Norman Abrams, solicitor, appeared to represent the Sheriff’s Office Victoria, who had been served with the summons. The Sheriff’s particular concern was to make clear to the Court the difficulties faced by her when confronted with conflicting contentions as to the rights of occupants of property subject to a warrant of possession, or indeed other warrants. Mr Abrams submitted that when the Sheriff is faced with claims that an occupant is a tenant or ‘renter’, with rights arising under the RTA, she is not in a position to judge the merit of the contention or to adjudicate between conflicting accounts or stories.

Mr Abrams referred me to the decision of Beach J in Grayridge Pty Ltd v The Sheriff of the State of Victoria (‘Grayridge’),[40] to illustrate the difficulty the Sheriff faced and to show the appropriate way to remedy the unenviable positions she faces, perhaps daily. In that case, the plaintiff had a judgment for possession of land and had caused a warrant of possession based on that judgment to be issued and forwarded to the Sheriff. The proprietor of the land had unsuccessfully appealed the judgment to the Court of Appeal. That Court had informed the proprietor’s legal advisers that if she intended to make an application to the High Court for special leave to appeal against its decision, it would be prepared to re-convene the following week for the purpose of hearing any application for a stay of the order for possession. The proprietor instead made application for a stay pending application for leave to appeal to the High Court to the judge in the Practice Court (Beach J) who dismissed the application.
[40][2000] VSC 446.

The proprietor applied for leave to appeal to the High Court and filed an application in that Court for a stay. The Sheriff informed the solicitors for the plaintiff that he (as he was at that time) did not intend to execute the warrant of possession until such time as the proprietor’s applications to the High Court had been heard and determined. The plaintiff filed an originating motion against the Sheriff seeking an order in the nature of mandamus directing the Sheriff to execute the warrant of possession. Beach J considered the then legislation applicable to the Sheriff’s duty to execute warrants (s 115 of the Supreme Court Act 1958 (Vic)), the form of the warrant, and concluded:

And so the Supreme Court Act contains a mandatory requirement that the sheriff execute a warrant for possession issued out of the court and the warrant itself commands him to do so.[41]

[41]Ibid [15].

His Honour then referred to Halsbury’s Laws of England where it was said that:

The writ is the sheriff's justification for the acts done under it, and he is not bound to execute it unless it is in proper form and properly endorsed; but if the writ is regular he is bound to execute it without question, and it gives him an absolute justification for all acts done under it, even though the judgment is afterwards set aside.[42]

[42]Ibid [16], referring to LexisNexis, Halsbury’s Law of England (4^th ed), vol 17, [428].

Beach J concluded that the fact that the proprietor had filed an application in the High Court is no justification for the Sheriff refusing to execute the warrant or, for that matter, delaying its execution. In the circumstances, His Honour directed that the Sheriff now execute the warrant of possession.

Consideration
Rule 66.15 of the Rules

Rule 66.15 of the Rules provides:

66.15   Order in aid of enforcement
(1)The Court may make such order as it thinks fit in aid of the enforcement of a warrant of execution and for that purpose may make an order that any person, whether or not a party—
(a)       attend before the Court to be examined;
(b)       do or abstain from doing any act.
(2)An application for an order under paragraph (1) may be made by the sheriff or other person to whom a warrant of execution is directed.

In Australia and New Zealand Banking Group Ltd v Elias,[43] Mukhtar AsJ considered the operation of this rule in a different context. He observed:

The expression in subrule (1) ‘do or abstain from doing any act’ is in the language of a prohibitive injunction, and the language in subrule (1) that the order can be made against ‘any person, whether or not a party’ means that an order doing an act or abstaining from doing an act can be made against someone other than the defendant.
At first I was inclined to the view that an order under r 66.15(1) was available only on the application of the Sheriff or other person to whom a warrant of execution is directed. That is, it did not appear to be available to the judgment creditor. But I think the better construction is that subrule (2) is purely permissive, not exclusive. It is not saying that only the Sheriff can seek the order. I think it is enabling the Sheriff, who is not a party to the proceeding but is performing the operative function of execution, to make the application. So understood, the rule does not deprive the judgment creditor from applying.[44]

[43]ANZ v Elias (n 31).

[44]Ibid [12]–[13].

I respectfully agree with this interpretation of the Rule. The use of the expression ‘may be made by the sheriff or other person to whom a warrant of execution is directed’ are words of permission, giving authority to the Sheriff, who is not a party to the proceeding, to seek the Court’s assistance without becoming a party. Similarly, the ‘other person to whom a warrant of execution is directed’ may or may not be a party to the proceeding out of which there came a judgment or order that gives rise to a warrant of execution, which of course embraces warrants other than warrants for possession. Thus, both the language and the authority given makes sense only if the language is seen as permissive and not restricting such applications to those persons identified. Were it otherwise, the very parties interested in the execution of the warrant in question, the parties to the proceeding giving rise to the warrant, might have no right under the Rule to seek the assistance of the Court. It is also important to recognise that the orders that may be made under the Rule are ‘such order as it thinks fit in aid of the enforcement of a warrant of execution’ and that is not limited by the types of order identified in paragraphs (a) and (b) of sub-rule (1).

The Warrant

A judgment that the plaintiff ‘recover possession’ is authority for the Sheriff to turn out anyone on the land whether the defendant or not. The Warrant directs the Sheriff to enter the land ‘and cause the plaintiff to have possession of it’, as prescribed by Form 68B pursuant to r 68.08 of the Rules.[45] As Lord Denning MR explained in McPhail v Persons, Names Unknown:[46]

By the Supreme Court of Judicature Act 1875 … the old action of ejectment was replaced by an action for the recovery of land: but the practice remained the same, although the machinery was different … [t]he judgement was, as before, that the plaintiff ‘do recover possession’. No time was mentioned. No date was given. The plaintiff could at once issue a writ of possession which was executed against the premises themselves. The sheriff's officers turned out everyone who was there. If there was some one else there, in addition to the defendant, he too would be turned out unless he applied to come in and defend.[47]

[45]Geen v Herring [1905] 1 KB 152, 156; Plowman v Palmer (1914) 18 CLR 339, 346; Re Wykeham Terrace [1971] 1 Ch 204, 209.

[46][1973] Ch 447, 458.

[47]Citations omitted.

To similar effect are judgments in the High Court of Australia in Plowman v Palmer,[48] where a writ of habere facias was in issue.[49] Griffiths CJ observed at that:

The writ commanded the sheriff to deliver possession of the land, and he was bound to obey that writ and enforce it against anyone who might be in possession of the land. Everyone was bound to submit to the authority of the law.[50]

[48](1914) 18 CLR 339.

[49]Habere facias possessionem, is the name of a writ of execution in an action of ejectment. The warrant of possession is the modern equivalent under the Rules.

[50](1914) 18 CLR 339, 344.

Barton J said of the writ:

… but the writ if good-and it is good until set aside-is a writ to give possession against all and sundry, and that necessarily includes authority to remove persons who constitute themselves obstacles to possession. The appellant was such an obstacle, and was removable without unnecessary force.[51]

[51]Ibid 346.

Isaacs J noted:

The sheriff’s duty, however, under the writ is to execute it so as to give the plaintiff complete and peaceable possession even to turning out third persons…[52]

[52]Ibid 347.

The order for possession in this case uses the words ‘the plaintiff have possession of the land’. That is in no way different in substance to the oft used expression that the plaintiff ‘do recover possession’. Nor are the words of the Warrant in this case different in substance where they command the Sheriff to ‘recover possession of the land’. The absence of the time-honoured word ‘do’ makes no difference to the substance of the requirement.

It follows that as a matter of law the presence on the Property of tenants is no barrier to the enforcement of the Warrant by the Sheriff, unless there is some legislative impediment, and in this, and other cases, reliance has been placed on the RTA.

Residential Tenancies Act

As noted in the defendants’ submissions, since the judgments in Galloway, Tajon and MA 46, the RTA has been amended. The amendments relevant to the present matter were made by the Residential Tenancies Amendment Act 2018 (Vic) (No 45 of 2018) (the ‘Amendment Act’). They are as follows:

(a) the first changes are terminological. The word ‘landlord’ is replaced with ‘residential rental provider’. A ‘tenant’ is now a ‘renter’ and a ‘tenancy agreement’ is now a ‘residential rental agreement’;

(b) the provisions for termination of a ‘residential tenancy agreement’ previously in Division 1 of Part 6 are now included in Division 9 of Part 2 of the RTA. Section 216 as in force at the time of Tajon and MA 46 is now s 91B and provides that:

Despite any Act or law to the contrary, a residential rental agreement does not terminate and must not be terminated except in accordance with this Division or Part 7 or 8.

(c) section 91I (previously s 223) of the RTA provides for termination of a residential rental agreement where a mortgagee gives a notice to vacate under s 91ZZK (previously s 268) and the renter vacates the rented premises on or after the termination date specified in the notice or the residential rental agreement terminates in accordance with s 334;

(d) section 91ZZK provides:

91ZZK Notice by mortgagee
(1)Subject to subsection (4), if a mortgagee in respect of rented premises under a mortgage entered into before the residential rental agreement was entered into becomes entitled to possession of, or to exercise a power of sale in respect of, the premises under a mortgage, the mortgagee may give the renter a notice to vacate the premises.
(2)The notice must specify a termination date that is not less than 60 days after the date on which the notice is given.
(3)If the mortgagee exercises a right conferred by subsection (1) in relation to a residential rental agreement, this Division, Part 5 and Part 7 have effect as if a reference to a residential rental provider under a residential rental agreement included a reference to the mortgagee.
(4)A notice to vacate must not be given by a mortgagee if the mortgagee has expressly or impliedly consented to the mortgagor entering into a residential rental agreement in relation to the rented premises, regardless of when the residential rental agreement was entered into.

(e) section 325 of the RTA continues to enable a mortgagee to apply to the Tribunal for a possession order if the mortgagee has given a notice to vacate and the renter has not delivered up vacant possession;[53]

(f) section 334 continues to provide, so far as relevant, that if a possession order is made under ‘this Division’ (Division 1 of Part 7) in respect of rented premises, the residential rental agreement terminates at the end of the day before the day on which possession of the rented premises is delivered up to the residential rental provider or mortgagee; and

(g) section 448 continues to exclude the jurisdiction of courts other than the Supreme Court where proceedings are before the Tribunal, as long as the Tribunal proceedings came first. Sections 509 and 510 continue to provide, so far as relevant, that the Supreme Court has jurisdiction to hear and determine applications in relation to a residential rental agreement of premises situated in Victoria and has the same powers as the Tribunal would have had if the application had been heard and determined by it.

[53]There is, of course, a change in terminology.

Section 87C of the TLA provides for the consequences which flow from a failure to obtain the consent of the mortgagee to a purported lease of mortgaged land:

Mortgagee or annuitant consent required for lease, easement or restrictive covenant
The creation, variation or surrender of a lease or the creation or variation of an easement or restrictive covenant, in respect of land subject to a mortgage or charge, is not valid or binding against a mortgagee or annuitant unless the mortgagee or annuitant has consented in writing to (as the case requires) –
(a) the creation, variation or surrender of the lease; or
(b) the creation or variation of the easement or restrictive covenant.

The Court of Appeal in Galloway considered the operation of this provision in relation to the provisions of the RTA in force at that time. In that case, there was a residential tenancy agreement in place between the registered proprietor, Galloway, and a tenant. Prior to that residential tenancy agreement being entered into, the Bank had obtained an order for possession, as a result of obtaining judgement in default of defence. Following entry of judgment in default and, a time when it appears there were negotiations taking place between the Bank and Galloway, the tenancy agreement was entered into, without the consent of the Bank.

After the Bank had taken possession of the land, the proprietor had unsuccessfully applied to the County Court to restrain a sale of the property. The day before the Bank’s public auction of the property as mortgagee in possession, the proprietor made application for leave to appeal the decision of the County Court and an urgent application in the Court of Appeal to stay the sale of the property.[54] It was not disputed that Galloway remained substantially in debt to the Bank, nor was it disputed that the Bank held a valid order for possession of the property. The application for a stay is founded on an argument which is put by reference to the RTA.
[54]Galloway (n 32), [1]–[7].

Both before the County Court Judge and the Court of Appeal, Galloway, the proprietor and mortgagor, relied upon evidence from the tenant that he had not been given a notice in accordance with the provisions of the RTA. It was further submitted that, unless such a notice was given, the tenancy agreement remained on foot and the Bank was not entitled to sell the land with vacant possession.

Osborn JJA (with whom Santamaria JJA agreed) considered the same provisions of the RTA as are considered here (save that s 91ZZK has an additional sub-section) and the same argument as is put to me, and said:

17.The provision provides in substance that a lease is not valid or binding against the mortgagee unless the mortgagee has consented in writing to the creating of the lease. It is in deliberately broader terms than the former s 66(2) of the Transfer of Land Act 1958.[55] Because it is common ground that the mortgagee did not consent to the creation of the lease, it follows that the purported lease is not valid or binding against the Bank.
18.The solicitor for the applicant submitted that the provisions of the Residential Tenancies Act 1997 overlay the provisions of the Transfer of Land Act 1958. I do not see that this can be so. If the lease is not valid against the mortgagee, then there is no lease upon which the notice provisions can operate. Similar reasoning applies to the arguments to which I first referred relating to the capacity of the applicant to grant a lease when the land was subject to an order for possession made by the County Court, and subject to a mortgage containing the limitations upon which the Bank relies.
19.It follows that I am not persuaded that the fundamental point of law on which the applicant relies is seriously arguable or has any real prospects of success...[56]

[55]As to which, see Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589, 598–9 (Hayne J) (citation as in original).

[56][2016] VSCA 330, [17]–[19].

The reference in the second half of paragraph 18 quoted above is a reference back to an argument put on behalf of the Bank that there was an existing order for possession. The defendant had argued:

…that the touchstone of a tenancy is the provision by the landlord of exclusive possession of the premises. At the date of the purported tenancy agreement, the Court had ordered the applicant to provide possession of the premises to the Bank. As a matter of basic principle, it follows that, although the applicant remained in bare possession of the Henry Street property, he was not able to grant a right of exclusive possession to the tenant as he purported to do for a term of three years.[57]

[57]See Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] 2 VR 505, 510–11; Balanced Securities Ltd v Bianco (2010) 27 VR 599.

In addition, the Court noted that the point taken was one which did not go to the interest of Galloway as proprietor, but to the interest of the tenant. The tenant was not before the Court, nor did he seek to restrain the sale or challenge the Bank taking possession of the property. He had not been in possession of the property for an extended period of time and his whereabouts were uncertain.

In MA 46, Delany J had before him, amongst other things, an application for summary judgment pursuant to s 63 of the Civil Procedure Act 2010 (Vic) by a mortgagee claiming under s 78 of the TLA an order for possession of land and the ejectment of a purported tenant of the registered proprietor and any other occupier of the land. The mortgagees contended that the effect of s 87C of the TLA is that the RTA tenancy of the Property to the tenant, without the mortgagees’ consent, was not valid or binding against the mortgagees.[58] The mortgagees also said that, as mortgagees, they were entitled to enter into possession of the Property and bring an action for ejectment against the tenant, as occupier of the property, under s 78 of the TLA.
[58]Galloway (n 32), [16]–[17] (Osborn JA and Santamaria JA agreeing).

The tenant contended that the operation of s 87C of the TLA did not remove the rights and due process upon which the tenant is entitled to rely governing how and when he may be removed from the Property pursuant to the RTA. In particular, ss 216 and 268 (see now ss 91B and 91ZZK) of the RTA have application where the mortgagees wish to obtain vacant possession of the Property.[59]
[59]MA 46 (n 32), [66]–[67].

His Honour considered the decision in Galloway and noted that there was no dispute that in the case before him, the RTA lease was not entered into with the prior consent of the mortgagee, so that the passage from Galloway, upon which the mortgagee relied has direct application.[60] His Honour then considered my decision in Tajon at some length and referred to my conclusion that because any tenancy agreement arose after the creation of the mortgages, no protection was conferred on the tenants by the provisions of the RTA.[61]
[60]Ibid [72].
[61]Ibid [75].

He then considered the submission by the tenant that there is an inconsistency between s 87C of the TLA and ss 216 and 268 of the RTA, and that the RTA, being later in time, prevailed; alternatively, applying the approach of Ormiston J in Horvath v Commonwealth Bank of Australia, the inconsistency of the two provisions is resolved by sequential assessment such that each operates in its own sphere to the extent that neither impinges on the other.[62] If this approach is adopted, it was submitted, the rights of a tenant as against a non-consenting mortgagee would be defeated but the mortgagee would have to terminate the residential tenancy (now a rental) agreement and obtain vacant possession through the process and mechanism of the RTA. As the asserted legislative inconsistency was not considered by the Court of Appeal, and the Court did not rule on that question, the submission advanced was not precluded by binding authority.
[62][1999] 1 VR 643, [34].

Delany J considered whether there was an inconsistency between the two legislative provisions. That required a comparison of the actual language of each statute to see whether they stand together or whether the later statute has abrogated the earlier statute.[63] When comparing two intersecting statutory provisions it is to be assumed that Parliament normally intends both statutes to work harmoniously together so that each operates within its respective field of application; this position is only displaced by clear and unmistakeable implication.[64] His Honour said it is with these principles in mind that the question of the asserted inconsistency between s 87C of the TLA and s 216 (now s 91B) of the RTA should be approached.
[63]Cobiac v Liddy (1969) 119 CLR 257, 268 (Windeyer J); Ferdinands v Commissioner for Public Employment (2006) 225 CLR 130, 137–138 [18] (Gummow and Hayne JJ), approved in Commissioner of Police (NSW) v Eaton (2013) 252 CLR 1, 19 [47]–[48] (Crennan, Kiefel and Bell JJ).
[64]South Australia v Tanner (1989) 166 CLR 161, 171 (Wilson, Dawson, Toohey and Gaudron JJ) citing Butler v Attorney-General (Victoria) (1961) 106 CLR 268, 275–276; Sherhold v Tanner (2002) 209 CLR 126, 136 [34] (Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ); Re Maritime Union; Ex Parte CSL Pacific (2003) 214 CLR 397, 411 [28] (Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ); Commissioner of Police (NSW) v Eaton (2013) 252 CLR 1, 19 [48] (Crennan, Kiefel and Bell JJ), [98] (Gaegler J); South–Eastern Drainage Board (SA) v The Savings Bank of South Australia (1939) 62 CLR 603, 626.

His Honour considered s 216, and the broad language with which it commences, being ‘despite any Act or law to the contrary…’, and noted it was in Part 6 of the RTA which was only concerned with termination of tenancy agreements under the RTA:

… and for that reason, pre-suppose the existence of a tenancy agreement to which the RTA has application. Part 6 says nothing about and is not directed to the question of what constitutes ‘a tenancy agreement’ to which the RTA has application.[65]

[65]MA 46 (n 32), [83].

Delany J then applied the reasoning in Galloway to conclude that there was no valid residential tenancy agreement and so the provisions of the RTA had no application:

… Section 216 of the RTA and Part 6 of that Act are not relevant to the enquiry as to what constitutes a valid residential tenancy agreement when the Court is called upon to determine a contest between a mortgagee who has not consented to a residential tenancy, relying upon s 87C of the TLA, and a tenant, a party to such an agreement. There is no inconsistency.[66]
…
The general requirements for tenancy agreements, including the requirement that, when created, tenancy agreements are required to be in standard form, and to be in writing are found in Part 2 of the RTA.[67] Part 2 does not contain a section the equivalent of s 216. There is nothing in either Part 2 of the RTA, or in the definition of ‘tenancy agreement’ in the RTA, that seeks to give priority either to a tenancy agreement, or to the rights of a tenant under a tenancy agreement, over the interests of a mortgagee to whom s 87C of the TLA has application.[68]
Section 87C of the TLA, expressly provides that a lease is ‘not valid or binding against a mortgagee … unless the mortgagee … has consented in writing to … (a) the creation … of the lease’. Where those circumstances occur, as held in Galloway, there is no residential tenancy to which the Act applies. The express language of s 87C covers the field. Any lease to which s 87C applies, including a residential tenancy agreement to which the RTA might otherwise apply, is not valid or binding against a mortgagee for any purpose.[69]

[66]Ibid [84].

[67]RTA, s 26.

[68]MA 46 (n 32), [86].

[69]Ibid [87].

The fact that the inconsistency argument advanced on behalf of the tenant in the MA 46 decision was not expressly considered by the Court of Appeal in Galloway did not affect its binding authority because no inconsistency arose between the two Acts. The two Acts can be read so as to operate harmoniously with one another, each within its own sphere of operation. Section 87C has priority and operates where there has been no prior mortgagee consent to a residential tenancy. The RTA, including s 216 and Part 6, applies where the residential tenancy agreement has been entered into with the prior consent of the mortgagee.

In MA 46, Delany J also considered whether the RTA provisions were in fact later in time that s 87C of the TLA and concluded that s 87C was introduced in 2014 whereas ss 216 and 268 of the RTA have been in the same form since 1997.

The amendments made by the Amendment Act moved the termination provisions out of Part 6 and included them in Part 2, Division 9, headed ‘Termination of residential rental agreements’.[70] This change does not affect the analysis that Delany J made of the provisions in existence before the Amendment Act. It is still the case that termination provisions pre-suppose the existence of a tenancy agreement to which the RTA has application and the provisions of the TLA and RTA work harmoniously with each other.
[70]See Residential Tenancies Amendment Act 2018 (Vic) (No 45 of 2018), s 236.

There is, however, a dichotomy to be understood in the operation of the RTA between a residential rental agreement that is validly entered in accordance with the RTA and which binds the residential rental provider and the renter, and one that although validly entered into is not binding on a mortgagee of the land in question. The rental agreement may be valid as between the provider and the renter and not as between the renter and the mortgagee. That is the effect of the operation of s 87C of the TLA and the decision of the Court of Appeal in Galloway.

Section 91ZZK may seem to create an exception to this concept that a residential rental agreement entered into without the mortgagee’s consent does not bind the mortgagee. That is because it is expressly made applicable to the situation where a mortgage is entered into before the residential rental agreement and the mortgagee has not consented to it being entered into and s-s 91ZZK(4), which is new, removes the ability of the mortgagee to give notice to vacate if the mortgagee has consented to the residential rental agreement.

The contention by Mr Hone that s 91ZZK requires a mortgagee in the plaintiff’s position to give a 60-day notice to vacate to the tenants, would mean that the section prescribes a mandatory requirement applicable to mortgagees where they find at any time a ‘renter’ in occupation of the mortgaged premises under a ‘residential rental agreement’. This is not, in my view, the correct construction of the section. The section is clearly permissive. It applies only to a particular kind of mortgagee; that is a mortgagee –

(a) whose mortgage was entered into before the residential rental agreement was entered into;

(b) who did not consent to the mortgagor entering into the residential rental agreement; and

(c) who becomes entitled to possession of, or to exercise a power of sale in respect of, the premises.

Then, if those conditions are satisfied, the mortgagee ‘may’ (not must) give the renter a notice to vacate the premises. This enables a mortgagee to engage the jurisdiction of the Victorian Civil and Administrative Tribunal in limited circumstances to remove a ‘renter’. That Tribunal is primarily a no cost jurisdiction that is, at least theoretically, easier and cheaper to access.

In my view, therefore, the amendments to the RTA effected by the Amendment Act do not change the approach to the construction of the RTA adopted by Delany J in MA 46 and my approach to the interpretation in Tajon. As a result, the plaintiff in this case is not bound by the Tenancy Agreement and need not give notice in accordance with s 91ZZK of the RTA.

Moreover, the facts of this case are materially different from the facts in MA 46 and Tajon, which were both claims for an order for possession of the property in question. In this case, there is already an order for possession (that I have defined as the Possession Order) and a Warrant of Possession was issued by the Court before the Tenancy Agreement was purportedly entered into. The Possession Order pre-dates the so-called Tenancy Agreement by over 5 years. The Tenancy Agreement, to the extent it purports to give exclusive possession of any part of the Property, is thus incapable of doing so. It does not rise to the level of a residential rental agreement as defined in s 3 of the RTA.

Lastly, although Maria and Klementina were named as respondents to the summons and were served with it, neither were expressly represented by Mr Hone before me. Thus, the supposed renters were not before the Court, nor did they challenge the plaintiff taking possession of the property. Further, it was not disputed that the defendants remained substantially indebted to the plaintiff, nor was it disputed that the plaintiff held a valid order for possession of the Property.

Tenancy Agreement – is it a sham?

Lord Diplock, in Snook v London and West Riding Investments Ltd,[71] addressed the meaning of that “popular and pejorative word” in these terms:

I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co v Maclure and Stoneleigh Finance Ltd v Phillips), that for acts or documents to be a ‘sham’, with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.

[71][1967] 2 QB 786, 802 (footnotes omitted); see also ASIC v Managed Investments Ltd & Ors (No 9) [2016] QSC 109, [738].

The term ‘sham’, when correctly employed, denotes an objective of deliberate deception of third parties.[72] That is alleged to be the case here and I consider the allegation to be well founded, and that the Tenancy Agreement is a sham, for the following reasons:
[72]Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation (2008) 238 CLR 516, 531–532 [35] (Gleeson CJ, Gummow and Crennan JJ).

(a) the Possession Order has been in place for over 5 years. No steps were taken by the defendants to have the Possession Order set aside until the attempt before Gardiner AsJ to restrain, or stay, execution of the Warrant on 2 February 2023, and even then there had been only the statement of an intent to apply to set it aside;

(b) when the Sheriff attempted to execute the Warrant in February 2023, the defendants pleaded (as it were) that the second defendant’s medical condition required her to stay. The Sheriff relented and deferred execution, much to the chagrin of the plaintiff;

(c) after the four week’s rest prescribed by the medical practitioner had expired, the monthly Tenancy Agreement emerged, commencing on 1 March 2023;

(d) the letter from the defendants’ solicitor makes it patently clear that it was a ruse de guerre, a stratagem of the fight to retain possession of the Property as long as possible;

(e) as Maria has said, she is willing to do anything to ensure her parents do not lose their property; and

(f) the notion that the very recent entry into the contract of sale somehow makes the Tenancy Agreement genuine as offering the prospective purchaser a return at a rental of $500.00 per week is a very frail proposition. At the sale price of $540,000.00, a current mortgage interest rate of about 7% would require a rental income from the Property of $37,800.00. At a rent of $500.00 per week, it will produce $26,000.00. Even at an interest rate of 5% there is a deficit. It is very difficult to see that this contract is a genuine business proposition.

Relief under r 66.15

The relief claimed by the plaintiff is very extensive, and in my view, more than is necessary to enable the Sheriff properly to execute the Warrant. The first relief sought includes a claim that the Tenancy Agreement to Maria and Klementina is a sham. Although my conclusion is that it is a sham, having regard to the law to which I have referred regarding the execution of the Warrant and the inapplicability of the RTA to that Agreement, it is unnecessary to go so far as to declare that the Agreement is a sham. It is enough to declare (as sought in the second declaration) that:

The periodic tenancy agreement dated 1 March 2023 purportedly entered into between the defendants and Maria Alimic and Klementina Alimic in respect of the property at 3 Stapledon Court, Corio, in the State of Victoria and described in Certificate of Title Volume 09039 Folio 620 (the ‘Property’) does not prevent or stand in the way of the Sheriff executing the Warrant of Possession.

The next order sought is one directing the Sheriff to execute the Warrant forthwith. The Sheriff is bound by the Sheriff Act 2009 (Vic). By s 13 of that Act, it is provided:

(1)Subject to subsection (1A), the sheriff must execute and return every warrant or other process directed to the sheriff as soon as practicable after receiving the warrant or other process.
(1A)Subsection (1) does not apply to the return of a warrant under the Magistrates’ Court Act 1989.
(2)When executing a warrant or other process, the sheriff may only perform or exercise enforcement functions and powers that are reasonably necessary to execute the warrant or other process.

The definitions in s 3 of the Sheriff Act include that a ‘warrant’ means a criminal warrant or a civil warrant and that a ‘civil warrant’ means, amongst other warrants, a warrant of possession.

Mr Abrams made clear that the Sheriff faces real difficulty when confronted with difficult issues that may involve her actions in enforcing a warrant interfering with legitimate rights of occupation, and thus exposing her to liability. The Sheriff is not in a position to determine who is in the right and, having regard to the decision of Beach J in Grayridge, it is appropriate to ‘clear the air’ and make an order directing the Sheriff to execute the Warrant forthwith.

The next order sought is an order that the defendants, Maria Alimic and Klementina Alimic, vacate or otherwise be removed from the Property forthwith. That is neither necessary nor appropriate at this stage. There is already the Possession Order made in 2017. That is good against all occupiers except those that are present by some overriding proprietary right. Pursuant to that order, the plaintiff has caused to be issued the Warrant. That is sufficient, for the reasons I have already given, to enable the Sheriff to put the plaintiff in possession of the Property.

The plaintiff also claims orders restraining:

(a) the defendants and/or any other persons (including Maria and Klementina) from preventing, hindering or interfering with the Sheriff executing the Warrant and/or the plaintiff taking possession (including by way of the Sheriff’s execution of the Warrant) and/or exercising its power of sale in respect of the Property;

(b) the defendants, Maria Alimic and Klementina Alimic from making any attempt to remain on or to re-enter the Property.

These are very extensive forms of injunctive relief. In my view, orders of the kind I have just considered will be sufficient to enable the Sheriff to execute the Warrant and any further orders are unnecessary. I will, however, reserve liberty to apply to the plaintiff in case Maria and Klementina devise any further steps to prevent, hinder or interfere with the Sheriff executing the Warrant notwithstanding my direction to do so.

Conclusion

For these reasons, I am satisfied that it is appropriate to make the following declarations, and orders:

(a) a declaration that the periodic tenancy agreement dated 1 March 2023 purportedly entered into between the defendants and Maria Alimic and Klementina Alimic in respect of the property at 3 Stapledon Court, Corio, in the State of Victoria and described in Certificate of Title Volume 09039 Folio 620 (the ‘Property’) does not prevent or stand in the way of the Sheriff of Victoria executing the Warrant of Possession numbered W22012572708 and dated 26 October 2022.

(b) an order that the Sheriff of the State of Victoria shall forthwith execute the Warrant of Possession numbered W22012572708 and dated 26 October 2022.

(c) subject to any further submissions, the defendants pay the plaintiff’s costs of the summons filed on 22 March 2023; and

(d) reserve liberty to apply.

[2023] VSC 178

6 April 2023