Cliffshaw Pty Ltd v Old Kiama Wharf Company Pty Ltd

[2007] NSWSC 276

CITATION:	Cliffshaw Pty Ltd v Old Kiama Wharf Company Pty Ltd [2007] NSWSC 276
HEARING DATE(S):	8 March 2007
JUDGMENT DATE :	8 March 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Windeyer J at 1
EX TEMPORE JUDGMENT DATE:	8 March 2007
DECISION:	Order for plaintiff mortgagee for possession of leasehold premises and right to exercise powers under mortgage.
CATCHWORDS:	CROWN LANDS – Lease of crown land – Ministerial consent required for mortgage over lease of crown land – Notice of intention to exercise power of sale under mortgage served before ministerial consent to mortgage obtained and before registration of mortgage – Enforcement proceedings commenced before ministerial consent obtained and before registration of mortgage – Ministerial consent to mortgage obtained and mortgage registered subsequent to service of notice of intention to exercise power of sale – Ministerial consent terms required mortgagee to notify minister of intention to take enforcement action – Notice not a nullity although it was served prior to registration of mortgage – Notice not a nullity although it was served prior to ministerial consent to mortgage – Mortgagor not entitled to rely on ministerial consent term for the benefit of the minister
LEGISLATION CITED:	Conveyancing Act 1900 Crown Lands Act 1989 Real Property Act 1900, s57, s58, s60, s68
CASES CITED:	King Investments Solutions Pty Limited v Hussain (2005) 64 NSWLR 441 Midland Montagu Australia Limited v Cuthbertson (1989) 17 NSWLR 309
PARTIES:	Cliffshaw Pty Limited (Plaintiff) Old Kiama Wharf Company Pty Ltd (Defendant)
FILE NUMBER(S):	SC 4900 of 2006
COUNSEL:	Mr N Kidd (Plaintiff) Mr W Colbron (Solicitor) (Defendant)
SOLICITORS:	Dibbs Abbott Stillman (Plaintiff) Colbron Associate (Defendant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

THURSDAY 8 MARCH 2007

4900/06 CLIFFSHAW PTY LTD v OLD KIAMA WHARF COMPANY PTY LTD

JUDGMENT

1 HIS HONOUR: The issue in this case concerns the rights of the plaintiff as mortgagee of two separate leases of parts of the Old Kiama Wharf at Kiama. These leases are now lands in Folio Identifiers 276/72809 and 277/728098.

2 At an earlier stage the plaintiff was lessee from the Crown under those leases. It transferred the leases to the defendant and took a mortgage back of those leases. The transfers were subject to the requirement to obtain the consent of the Minister. That was obtained. The mortgage was in respect of both leases.

3 The mortgage of the lease of the land in Folio Identifier 277/728098 required the consent of the Minister. That consent was not obtained when consent for the transfers was obtained, and in fact was not obtained until three years later, namely in February 2007. The mortgage for both leases was registered on 15 February 2007. The defendant went into default under the lease, owing an amount of over $1 million. There is no contest about that, nor I think any contest about the exact amount due under the mortgage.

4 The plaintiff served notice under s57(2)(b) of the Real Property Act 1900 of its intention to exercise its power of sale under the mortgage. It did that prior to the mortgage being registered. It could not have exercised that power unless and until the mortgage was registered. When the Minister gave consent to the mortgage he did so by letter of 6 February 2007, which in addition to giving consent, stated that the consent was subject to the provisions of the Crown Lands Act 1989 and further:

That in the event that the lessee default under the terms of the mortgage and the mortgagee elects to take enforcement action under the mortgage, the mortgagee agrees that it will:

1. Notify the lessor of its intention to take enforcement action under the mortgage. (S 57 of the Real Property Act 1900 sets out what the mortgagee is required to do if there is a default by the mortgagor of the mortgage. S 57 requires the mortgagee to give the mortgagor one month’s notice if there is a default). The Minister requires as part of this consent, that he be given a copy of any notice given to the mortgagee . . . . (It is an accepted fact this last word should read mortgagor).

2. Where the mortgagee enters into possession of the property the subject of the lease, be bound by the terms and conditions of the lease until such time as the lease is assigned or otherwise transferred with the consent of the Minister, or the mortgagee seeks to have possession, and

3. Obtain the consent of the Minister in relation to any proposed assignee or other transfer of the lease.

5 Those conditions, on their face, would appear to be given in accordance with what are described as altered clauses – to lease 1989/2, which is the lease in question, namely the one that I have called 1977. Clause 37 of the altered clauses relating to the stated lease provides:

(a) The holder will not assign, transfer, demise, sub-lease, mortgage, charge or otherwise deal with the whole of the interest in this lease, or demise, sub-lease or part with possession of the land or by any actual deed secure any of the foregoing except with the consent in writing of the lessor.

(b) In the case of an application for the consent of the lessor to a proposed mortgage charge or encumber, the lessor may require that the proposed mortgagee or chargee enter into a covenant with the lessor in the form required by the lessor, that the mortgagee or chargee will notify the lessor if the holder is in default under the terms of the mortgage or sale and that should the mortgagee or chargee enter into possession of the premises for the purpose of realising its security or otherwise, then the said mortgagee or chargee will duly perform the covenants and agreement on the holder’s part herein contained.

6 When terms of that covenant 37 are read with the conditions imposed by the letter of 6 February 2007, it is clear that they address the same requirements. I think it is accepted now that when the proceedings commenced, the plaintiff should not have succeeded because the mortgage was not registered. In my view that must be the position because, as I understand the position, an unregistered mortgagee cannot exercise the rights pursuant to the Real Property Act, and particularly under ss58 and 60. However, it seems to me at the present moment that does not matter as the lease has now been registered.

7 The parties have agreed issues that fall to be decided. What the plaintiff really seeks is an order for possession of the mortgaged leasehold premises and a declaration that it is entitled to exercise the power of sale under s68 of the Real Property Act or its equivalent under the Conveyancing Act 1900.

8 The question is whether the s57(2)(b) notice is a nullity by reason of the fact that the plaintiff was not a registered mortgagee at that time. The answer to this is given in the case of Midland Montagu Australia Limited v Cuthbertson (1989) 17 NSWLR 309. In that case, Powell J decided that it was not necessary for a mortgage to be registered at the time of service of a s57(2)(b) notice although enforcement proceedings could only take place after registration. I do not accept that any doubt has been cast upon that decision by a case referred to by Mr Colbron, namely, King Investments Solutions Pty Limited v Hussain (2005) 64 NSWLR 441.

9 The second question does not need to be answered because the first question has been answered, no.

10 Question three is: If the first question has been answered, no, do the Minister's consent terms require that a new s57(2)(b) notice be served? This is, perhaps, the most difficult question. Mr Colbron for the defendant states that the apparent wording of the condition applies to future action, in other words, what he argues is that the Minister must be notified of intention to take enforcement action and that he must be given a copy of any notice given to the mortgagee.

11 I should add, as I did not say it before, that on 7 February 2007, the solicitors for the plaintiff advised the representative of the Minister that enforcement action was intended and enclosed a copy of the s57(2)(b) notice dated 25 July 2006, to which I have referred, and a copy of the statement of claim filed on 19 September 2006 which at that stage had not been amended so as to state the facts of registration of the mortgage. The Minister was advised of today's listing for hearing.

12 While it is clear that there is a requirement for the lessee of the Crown land to notify the Minister of the intention to take enforcement action, I have come to the conclusion that this does not mean that the mortgagee in this matter cannot rely on a s57(2)(b) notice which was served prior to the consent of the mortgagee being obtained which, of course, was not served upon the Minister until, it seems, the day after the consent was obtained. That condition would appear to me to be clearly for the benefit of the Minister and I do not understand that the mortgagor is in a position to rely upon failure of the mortgagee to comply with that condition if the mortgagor is in default under the mortgage, which it is. I think that the purpose of the condition is to keep the Minister aware of what is happening, as he is entitled to be kept aware under clause 37(b) of the lease conditions.

13 Thus I do not consider that before enforcement action can be taken a new notice need be served. In addition to that I do not consider that the notice is necessary in any event so far as a claim for possession is a concerned. Claims for possession in these matters are made under s60 of the Real Property Act and the requirement of s57, as it applies to enforcement by way of power of sale under s58 of that Act is irrelevant. That, I should say, appears to be the view of the Minister as well in light of the requirements of clause 37(b) of the lease and condition two.

14 The answer to the question then is, no. Those answers mean that there is no requirement to answer any further questions, so that the plaintiff's claim for possession and for a declaration as to a right to exercise powers under the mortgage should be made.

15 The plaintiff has calculated the interest on the principal sum owing up to today. The total interest is $210,257.53. There is no argument by the defendant with that figure. It follows that when added to the principal sum of $1,060,000 the amount due under the mortgage for which judgment ought to be entered for the plaintiff against the defendant is $1,270,257.53. I will enter judgment accordingly.

16 I make the following orders:

1. I make the declaration sought in paragraph 1(a) of the amended statement of claim.

2. I make the order in 1(b).

3. I make the declaration in 1(c).

4. I make the order in l (d).

5. I enter judgment for the plaintiff against the defendant in the sum of $1,270,257.53.

6. I order the defendant to pay ninety per cent of the plaintiff's costs of the proceedings.

7. I order that the exhibits can be returned.

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