Commonwealth Bank of Australia v Havana Downs Pty Ltd
[2014] VCC 173
•28 February 2014
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST
BANKING & FINANCE DIVISION
Case No. CI-13-03916
| COMMONWEALTH BANK OF AUSTRALIA | Plaintiff |
| v. | |
| HAVANA DOWNS PTY LTD & ORS | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 February 2014 | |
DATE OF JUDGMENT: | 28 February 2014 | |
CASE MAY BE CITED AS: | Commonwealth Bank of Australia v. Havana Downs Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 173 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Stay of execution on judgment for possession – Stay of 3 weeks sought to enable contract for the sale of the property to settle – Whether finance likely to be available to the vendors within the foreseeable future – Stay refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr I. Hvistovski | Gadens Lawyers |
| For the Defendants | Mr J. Evans | Snowton Saje |
HIS HONOUR:
1The defendants have made a second application to stay the execution of a warrant of possession in respect of a property at Forest Hill. Judgment in default of appearance was entered against the defendants on 6 September 2013:
a.against all defendants, for $614,808.77 and interest of $9,154.91;
b.against the first defendant, for possession of properties at Forest Hill comprising two offices and two accessory units.
2The judgment related to advances to the first defendant upon the security of mortgages over the properties. The second and third defendants guaranteed the advances. The second defendant is an accountant. He practices through a corporate entity, Peter Bailey and Associates Pty Ltd which leases one of the offices from the first defendant. It appears that nothing has been paid by the first defendant to the plaintiff in respect of the advances for about 12 months. Notices to pay served on 15 May 2013 were not met.
3On 27 November 2013, a Deputy Registrar of the Court refused an application to pay the judgment debt by instalments of $6,000 per month for a period of about seven years. On 25 February 2014, I dismissed the defendants’ first application for a stay of execution of the warrant of possession. As the execution of the warrant by the sheriff had been postponed until 28 February 2014, I recorded in the order I made on 25 February 2014, that “the defendants may make a further application to the Court for a stay of the execution of the warrant supported by appropriate material as to the enforceability and likelihood of completion of the contract of sale of the properties, including the timeframe during which this is likely to be achieved”, and I reserved liberty to apply.
4The basis of the first application and the second application are similar. On 25 February, the defendants referred to and relied upon the following matters:
a.a contract of sale entered into between the first defendant as vendor and Atrium Finance (Vic) Pty Ltd (”Atrium”) as purchaser on 7 February 2014 for the sale of the properties for the price of $1.1 million;
b.Atrium is the trustee of the Atrium Property Trust “purposefully established to acquire the properties from the first defendant”;
c.application had been made to the National Australia Bank on behalf of Atrium to finance the purchase and the mortgage broker acting for the company had advised on 20 February 2014 that “a lender is conceptually content and keen to pursue the application”;
d.the capital improved value of the properties on recent rate notices totalled $1,089,000.
5The defendants required “a further period of 3 weeks” to “satisfy any remaining requirements of its financier”, to obtain the loan, and so that “settlement of the sale could take place”.
6 From the plaintiff’s solicitor’s affidavit it was apparent that:
a.the second defendant had signed the contract of sale on behalf of the purchaser;
b.the third defendant had signed the contract of sale on behalf of the vendor;
c.the contract made no provision for the payment of a deposit, did not provide a time for settlement of the purchase and no reference was made to the purchaser being the trustee of a property trust.
d.an ASIC search of Atrium showed that from 29 May 2009, the directors were the second and third defendants. On 20 February, Archimedes Satorre and Robyn Eileen Satorre were appointed directors. The second and third defendants are the only shareholders of Atrium;
e.proceedings have been issued by the plaintiff in the Supreme Court to recover amounts owing in respect of personal loan facilities of the second and third defendants.
7The second application for a stay was foreshadowed on 25 February, and proceeded yesterday afternoon. The application was supported by an affidavit of Archimedes Satorre affirmed 26 February 2014. In the affidavit, Mr Satorre confirmed that:
a.Atrium was the trustee of the Atrium Property Trust;
b.there had been five applications for units in the trust for sums totalling $600,000;
c.$120,000 had been paid to the trust by subscribers;
d.Mr and Mrs Satorre “intend to pay or cause to be paid “$280,000 in respect of their unit holding;
e.application had been made to the National Australia Bank for a loan of $650,000 to complete the purchase pursuant to the contract of sale;
f.the loan application “is still being processed and no decision on that application has been made”.
8 Examination of the trust deed and associated documents disclosed that:
a.the trust deed was undated;
b.the “initial until holders” were listed for a total of 600,000 $1.00 units. All amounts were shown as “paid” and that nothing was “unpaid”;
c.Recital B recorded that, “The Trustee has received from the initial unit holders the sums of money in the proportions described in the first schedule (“the initial sum”) to establish the Trust Fund”;
d.each of the initial unit holders had executed the trust deed in the presence of the second defendant;
e.the applications for units by the initial unit holders generally refer to the date of the trust deed as 20 February 2014. The applications are dated 21 February 2014 in three cases, and 25 February 2014 in two cases.
9In opening the second application, defendants’ counsel Mr Evans stated that the defendants’ solicitors had been unable to obtain a copy of the application to the National Australia Bank. Upon querying this response, the Court was given an email chain including:
a.a request to the mortgage broker by the defendants’ solicitors for a “copy of the application made by Atrium”, particularly to ascertain the amount sought, the identity of the financier to whom the application was made and the date the application was lodged;
b.the response from the mortgage broker sent to the defendants’ solicitors on 26 February 2014 at 11:05am, read:
“I can confirm that on behalf of the Atrium Property Trust, I have approached NAB to provide the sum of $650K for the purchase of suites 1 and 16, 476 Canterbury Road, Forest Hill. Discussions have been ongoing since Feb 11, 2014 however NAB were only proided with all executed documentation from various unit holders on Feb 24, 2014. We now await formal assessment and will endeavour to advise outcome asap”.
10I ascertained that no further inquiry has been made by the solicitors of the mortgage broker. I stood the matter down to enable further enquiries to be made. Approximately one hour later, extensive further material was provided to the Court. This included:
a.a letter dated 14 February 2014 from the second defendant to the mortgage broker referring to “the application for finance from the NAB”;
b.a three page proposal to the National Australia Bank which included reference to the following matters:
i.the lease of one office to the second defendant’s accounting firm and one office to an “IT company”;
ii.the second defendant “will not be involved in any capacity (i.e. completely removed from the purchasing entity) to ensure the transaction is at ‘arms length’”;
iii.the property trust and its structure;
iv.$650,000, as the finance sought on an “interest only” basis for 3 years;
v.the borrowing expenses would be “more than” covered by “rental income under executed agreements” to the second defendant’s accountancy company and the IT company which each provided $40,000 annual rent;
vi.the unit holders would provide a limited guarantee and indemnity “that is reflective of their percentage unit holding”;
vii.each of the unit holders had consented to the application and had provided a “statement of position”;
viii.each of the unit holders’ financial position was summarised;
ix.Mr and Mrs Satorre (46% holders of the units) were described as, “Directors of the trustee with net assets (personal) of $1,145K”;
c.a copy of the lease dated 20 January 2011 with Evolve IT Australia Pty Ltd;
d.various bank forms completed and signed by individual unit holders. The “customer statement of position” form completed and signed by Mr and Mrs Satorre disclosed total assets of $1,145,000 and total liabilities of $638,000. The only “liquid asset” appeared to be $15,000 on account with National Australia Bank. No reference was made to the $280,000 for the units in the Atrium Property Trust which has apparently not been paid.
11Upon my consideration of the material and after hearing submissions by the parties, I expressed my concern to Mr Evans about the state of the material and the manner in which it had been produced to the Court. I suggested that, at most, I might be prepared to adjourn the application for perhaps one week to allow the defendants to file further material which might provide the Court with some degree of confidence that the National Australia Bank would approve the loan sought and advance the funds so that settlement of the sale could occur within the period of three weeks requested for the stay of execution.
12Mr Evans informed me that essentially the matters he would rely upon for a shorter stay were the matters he had advanced in relation to the application. He submitted that no prejudice would be suffered by the plaintiff if the stay were granted and that the stay would allow the first defendant as vendor and the trustee of the property trust as purchaser to settle the contract of sale and for the plaintiff to be paid in full.
13I consider that the application should be refused and no further time should be allowed for the defendants to supplement their material. I rely upon the following matters:
a.the contract of sale, whilst probably reflecting a genuine transaction, is illusory. It has no completion date and no provision for the payment of a deposit. It is difficult to see how it could be enforced by either party;
b.if the “real” agreement between the parties to the contract of sale were clarified, the purchaser would be purchasing as trustee for the property trust. However, one would assume that the purchase would be conditional upon the grant of finance by the bank, and if this were limited to the period of three weeks for a settlement to occur, that the contract would not be able to be enforced by the vendor at the expiration of that period;
c.presumably, the unit holders who have not made their contributions for the units, have not done so pending the approval of finance or them being in the position to actually pay, “or cause to be paid” their contribution;
d.a number of aspects of the “proposal” to the bank are questionable, for example, the reliance upon the cash flow from the tenancy agreement with the second defendant’s accountancy company, the financial details provided by Mr and Mrs Satorre and the expressed “distancing” of the second defendant from the application;
e.in the final analysis, there is no material, including the mortgage broker’s statement in the email to the second defendant on 20 February that “a lender is conceptually content and keen to pursue the application”, which would suggest that the plaintiff will be paid from the settlement of the contract for the sale of the properties within three weeks of 21 February 2014 when the defendants’ solicitor swore his affidavit.
14 The defendants’ further application for a stay of execution of the warrant of execution will be dismissed. The defendants must pay the plaintiff’s costs of the application including the hearings on 27 February 2014 and today, to be assessed by the Costs Court on an indemnity basis in default of agreement.
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Certificate
I certify that these 6 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 28 February 2014.
Dated: 28 February 2014
Philippa Gilkes
Associate to His Honour Judge Anderson
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