Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd
[2001] FCA 1494
•23 AUGUST 2001
FEDERAL COURT OF AUSTRALIA
Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2001] FCA 1494Four-Maids Ltd v Dudley Marshall (Properties) Ltd (1957) 1 Ch 317 referred to
CORDELIA HOLDINGS PTY LTD, VENDOMATIC PTY LTD, GETUM PTY LTD,
ABRAHAM GILBERT SAFFRON, ABRAHAM GILBERT SAFFRON AS THE EXECUTOR OF THE ESTATE OF DOREEN SAFFRON v NEWKEY INVESTMENTS PTY LTD, KPG AUSTRALIA PTY LTD, KEYWEST CONSTRUCTIONS PTY LTD and COLLIERS JARDINE (WA) PTY LTD
W106 of 2000
CARR J
23 AUGUST 2001
PERTH
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
W106 of 2000
BETWEEN:
CORDELIA HOLDINGS PTY LTD
First ApplicantVENDOMATIC PTY LTD
Second ApplicantGETUM PTY LTD
Third ApplicantABRAHAM GILBERT SAFFRON
Fourth ApplicantABRAHAM GILBERT SAFFRON AS THE EXECUTOR OF THE ESTATE OF DOREEN SAFFRON
Fifth ApplicantAND:
AND BETWEEN:
NEWKEY INVESTMENTS PTY LTD (ACN 060 259 930)
First RespondentKPG AUSTRALIA PTY LTD
Second RespondentKEYWEST CONSTRUCTIONS PTY LTD (ACN 009 413 978)
Third RespondentCOLLIERS JARDINE (WA) PTY LTD (ACN 009 319 911)
Fourth RespondentKPG AUSTRALIA PTY LTD (ACN 052 101 381) and
KEYWEST CONSTRUCTIONS PTY LTD (ACN 009 413 978)
Cross ClaimantsABRAHAM GILBERT SAFFRON
First Cross RespondentABRAHAM GILBERT SAFFRON AS THE EXECUTOR OF THE ESTATE OF DOREEN SAFFRON
Second Cross RespondentCORDELIA HOLDINGS PTY LTD (ACN 002 320 256)
Third Cross RespondentVENDOMATIC PTY LTD (ACN 001 693 536)
Fourth Cross RespondentGETUM PTY LTD (ACN 058 740 695)
Fifth Cross RespondentJUDGE:
CARR J
DATE OF ORDER:
23 AUGUST 2001
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1. The motion be dismissed.
2. The cross-respondents pay the cross-claimants’ costs of the motion.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
W 106 of 2000
BETWEEN:
CORDELIA HOLDINGS PTY LTD
First ApplicantVENDOMATIC PTY LTD
Second ApplicantGETUM PTY LTD
Third ApplicantABRAHAM GILBERT SAFFRON
Fourth ApplicantABRAHAM GILBERT SAFFRON AS THE EXECUTOR OF THE ESTATE OF DOREEN SAFFRON
Fifth ApplicantAND:
AND BETWEEN:
NEWKEY INVESTMENTS PTY LTD (ACN 060 259 930)
First RespondentKPG AUSTRALIA PTY LTD
Second RespondentKEYWEST CONSTRUCTIONS PTY LTD (ACN 009 413 978)
Third RespondentCOLLIERS JARDINE (WA) PTY LTD (ACN 009 319 911)
Fourth RespondentKPG AUSTRALIA PTY LTD (ACN 052 101 381) and
KEYWEST CONSTRUCTIONS PTY LTD (ACN 009 413 978)
Cross ClaimantsABRAHAM GILBERT SAFFRON
First Cross RespondentABRAHAM GILBERT SAFFRON AS THE EXECUTOR OF THE ESTATE OF DOREEN SAFFRON
Second Cross RespondentCORDELIA HOLDINGS PTY LTD (ACN 002 320 256)
Third Cross RespondentVENDOMATIC PTY LTD (ACN 001 693 536)
Fourth Cross RespondentGETUM PTY LTD (ACN 058 740 695)
Fifth Cross Respondent
JUDGE:
CARR J
DATE:
23 AUGUST 2001
PLACE:
PERTH
REASONS FOR JUDGMENT
The Court has before it a motion on notice whereby the five above-mentioned applicants (in their capacity as cross-respondents) seek orders that the second and third respondent’s amended cross-claim be struck out. I shall refer to the moving party in the motion as “the cross respondents” and the respondents to the motion as “the cross claimants”.
For the purposes of determining this motion it is not necessary to give a detailed account of the pleadings.
I think that it is sufficient to say that the originating application is concerned, among other matters, with claims of misleading or deceptive conduct and negligence relating to the entry by the third cross-respondent into two contracts. The first of those contracts was a building contract made with the second-named cross-claimant for the construction of a hotel on certain land in Perth (“the Building Contract”). The second contract was made by the third cross-respondent with the first cross-claimant for the purchase of the land on which that hotel was to be constructed (“the Land Contract”). The Building Contract was entered into on 9 November 1998 and the Land Contract was entered into on 10 November 1998.
In about July or August 1999 disputes arose between the parties to those contracts. The cross-respondents claim in their statement of claim that the disputes were settled on terms whereby the third cross-respondent acknowledged its indebtedness in the sum of $11,425,000 and agreed to pay that amount to the first and second cross-claimants, together with interest by 30 June 2000. There are other terms of settlement pleaded, but it is not necessary to refer to all of them.
The cross-respondents say that the terms of settlement were embodied in what has been described as the “Facility Agreement”.
It was a term of the Facility Agreement that the third cross-respondent would procure a grant of security over real property in New South Wales and Adelaide (“the Security Properties”) to secure compliance by the third cross-respondent with its obligations under the terms of the facility. There was subsequent documentation which, for present purposes I do not need to describe here save to say that the cross–respondents are seeking rectification of the document which formally recorded the terms of settlement. One of the terms of settlement of the disputes was that if the third cross-respondent did not sell the Land by 31 May 2000 then the cross-claimants could exercise their rights under the Securities, take possession of the Security Properties and lease one of them (the one in Adelaide) to the third cross-respondent at a rent of 10% of its value per annum. There was also a term that if the third cross-respondent breached the terms of the Land Contract and Building Contract, that was to be an event of default under the Securities.
As a major part of their defence the cross-claimants say (in the amended defence) that the relevant parties on 30 November 1999 executed a deed (“the Deed”) and what is termed the Further Facility Agreement. The cross-claimants plead that the Deed and Further Facility Agreement had the effect amongst other things that:
· the Land Contract and the Building Contract remained on foot and of full force and effect;
· the second and third cross-respondents would provide security for, among other things, a guarantee of the performance by the third cross-respondent of its obligations under those two contracts;
· such security would be by way of registered mortgages over two pieces of land; and
· a breach of any obligation imposed on the third cross-respondent under the Land Contract and the Building Contract would constitute a breach of the terms of the Further facility Agreement and the terms of the Securities granted by way of registered mortgages over the pieces of land.
The cross-respondents (i.e. the moving parties to this motion) granted mortgages over real properties in New South Wales and Adelaide respectively to secure the payment of the debt and compliance by the third cross-respondent with the terms of the Further Facility Agreement. I now turn to the amended cross-claim.
In the amended cross-claim the cross-claimants as mortgagees seek possession of the land mortgaged to them by the cross-respondents. I should note that it has been made clear by the cross-claimants that they are not seeking possession of the mortgaged properties before trial.
The cross-respondents say that the amended cross-claim should be struck out, for the following reasons. They say that the amended cross-claim is, in essence, a mortgagee action for possession. In such an action, so it is put, it is necessary for the mortgagee to plead the sum secured and the state of the account between the mortgagor and the mortgagee. The cross-respondents point to paragraph 10(2) of the amended cross-claim where the sum secured is said to be “all monies and damages that now or in the future were owing”. The cross-respondents complain that the amended cross-claim ought to include particulars of the amount of the monies secured, the quantum of the damages asserted and/or the amount of the monies said to be owing. The cross-respondents say that the amended cross-claim does not disclose those material facts and that in the absence of there being an assertion of the sum secured there is the likelihood that the question of what is the sum secured (in relation to the quantum of damages) “will remain at issue after any adverse judgment”. They say that they should not be taken by surprise and are entitled to know every material fact upon which the cross-claimants rely. The cross-respondents refer to the procedural requirements in the Supreme Court of Western Australia under the Supreme Court Rules where a mortgagee claims possession either by originating summons or by writ. In either case those procedures are said to require an affidavit which includes particulars of the amount of the advance, the amount of the repayments, the amount of any interest or instalments in arrear at the date of issue of the proceedings and at the date of the affidavit and the amount remaining due under the mortgage.
The cross-respondents argue that as a matter of practicality the remedy of possession and sale can only be of real assistance to a mortgagee for the recovery of money which is due and payable under the terms of the mortgage.
The cross-respondents further say that they are entitled, in lieu of surrendering possession, to pay to the cross-claimants the money due under the mortgage. To do that they are entitled to know, so it is put, by way of particulars, how much money is said to be owing and on what basis. Finally, they say that it is impossible for them to ascertain the sum secured on the basis of the amended cross-claim as pleaded. If the cross-claimants are successful at trial (and the cross-respondents wish to tender payment in lieu of possession) it will be necessary, so the cross-respondents say, for them to institute an action seeking injunctive relief and the taking of an account.
The cross-claimants’ response to those submissions is as follows. First, the cross-claimants say that in the absence of any contractual or statutory constraints they would be entitled to possession of the mortgage property simply as mortgagees. In answer to that proposition, in oral submissions this morning, Mr P D R Robinson, counsel for the cross-respondents, drew a distinction between that principle as applied to general law land where the mortgagee becomes entitled to a fee simple in the estate mortgaged, and the situation under registered land where the mortgagee obtains a statutory charge and usually a leasehold estate. However, the authorities seem to suggest that the entitlement to possession is no different under the two systems. I do not need to decide that today. In my view, if that were the point which was basic to the disposition of the strike-out motion or to the decision after trial, it is not a point which should be decided in the context of a strike-out motion. In fairness to Mr Robinson, I did not understand him to be putting it on that basis, but he was just drawing my attention to, on his submissions, the importance of pleading, where there is registered title, the default and the quantum of the amount claimed as secured by the mortgage when the mortgagee seeks possession. The only case which counsel have been able to refer me to on the point is Four-Maids Ltd v Dudley Marshall (Properties) Ltd (1957) 1 Ch 317. At p 320 of the report Harman J made the following observation:
“The mortgagee may go into possession before the ink is dry on the mortgage unless there is something in the contract, express or by implication, whereby he has contracted himself out of that right”.
It is apparent that in that case the land was indeed registered land, so perhaps the distinction drawn does not have any validity, but, as I say, it is not a point that should be decided on a strike-out motion in my view.
The cross-claimants say that their claim for possession in the amended cross-claim is not based on the state of any account between them and the cross-respondents; it is based on the terms of the contracts of mortgage as set out in the amended cross-claim. The cross-claimants also say that, in summary:
· the third cross-respondent has breached certain specified terms of both the Land Contract and the Building Contract whereby the cross-claimants have suffered loss and damage;
· by a contract of guarantee the cross-respondents guaranteed the performance by the third cross-respondent of all its obligations under those contracts and the payment of all damages suffered by the cross-claimants arising from any breach or termination of either of those contracts;
· various breaches and defaults on the third cross-respondent’s part have, in accordance with terms incorporated into the relevant securities, occurred which in turn amount to defaults under those securities; and
· they are entitled to immediate possession of the two properties by reason of such defaults.
The cross-claimants say that they have pleaded all necessary and relevant material facts in support of their claim for possession.
The cross-claimants also say that as a matter of law there is no basis for the cross-respondents’ submission that a mortgagee is only entitled to possession of land if the Court is satisfied that there is money which is presently due and owing under the mortgage.
The test on a strike-out motion is well-known and is not in issue between the parties today. The authorities show that an application will not be struck out if it has some chance of success when regard is had only to the allegations in the pleadings relied upon, relevantly in this matter, by the cross-claimants. The power to strike-out is only to be exercised in plain and obvious cases.
In my view, it has not been demonstrated to the requisite degree of satisfaction that the cross-claim has no chance of success in the sense that it does not disclose a reasonable cause of action or that such cause of action is not properly pleaded.
If the cross-claimants are successful in establishing that not only is there a debt owing by the third cross-respondent and secured by the Securities but also recover damages for breach of either or both of the two contracts, which damages are also secured by the security, there will be a judgment debt comprising the sum of those two amounts plus perhaps some interest.
As part of the adjudication, the judge hearing the application is likely, on the assumption that all of the matters pleaded in the cross-claim are established, to make an order for possession in favour of the cross-claimants, that is, subject to the relief which the applicants claim in their application. Subject to that, there would then at that stage, be no difficulties in the applicants, should they so wish, redeeming the mortgages by payment of the full amount of the judgment debt.
I was not cited any authority for the proposition that where unliquidated amounts, such as the damages here, are the subject of a security by way of mortgage, then the mortgagee is obliged to plead a quantification of the amount of the damages which it says is secured, when seeking an order from the Court that it be given possession of the mortgaged property. I might add that, assuming (without deciding) that the Supreme Court Rules of Western Australia are relevant to this matter, O62 Rule 3(4) is so drafted as to accommodate a mortgagee’s claim for possession based on circumstances other than the state of the account with the mortgagor.
In my view, it is clearly arguable that a mortgagee may approach the Court for relief of the type sought by the cross-claimants in this case.
In terms of being aware of the case to be met, the cross-respondents, in my view, well know the basis upon which the cross-claimants seek to enforce the securities and the nature of the underlying secured rights which they claim i.e. the debt and the unliquidated damages. The cross-claimants have pleaded:
· the parties to each contract of mortgage
· the terms of each contract of mortgage and, in particular, the terms which describe the events which constitute default of each contract;
· the right and entitlement which they claim to seek possession of the properties upon the happening of an event of default;
· the happening of an event of default, that is, breach of the contract of mortgage; and
· entitlement to possession by virtue of breach of each of the contracts of mortgage.
To the extent that the cross-respondents complain that they have not been made aware by the cross-claimants of the precise or even an approximate amount secured, that in my view is due to the very nature of unliquidated damages. The precise amount will not be known until the Court has made an assessment of damages after a trial. Again in fairness to Mr Robinson, in reply, when Mr Gabrielson had drawn my attention to the fact that in the cross-claim, paragraph 5 under the heading Particulars, there is “The statement of particulars will be provided prior to trial”, indicated that the furnishing of such particulars would, as I understood his observation, alleviate to a very considerable extent the cross-respondents’ concerns. For the reasons that I have just given the motion will be dismissed with costs.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of Justice Carr. A/g Associate:
Dated:
Counsel for the Applicants (Cross-Respondents): Mr P D R Robinson Solicitor for the Applicants (Cross-Respondents): Messrs Williams & Hughes Counsel for the 2nd & 3rd Respondents (Cross-Claimants): Mr A J Gabrielson Solicitors for the 2nd & 3rd Respondents (Cross-Claimants): Messrs Deacons Date of Hearing: 23 August 2001 Date of Judgment: 23 August 2001
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