Despot v Registrar General of NSW (No 2)

[2014] NSWSC 1122

Supreme Court

New South Wales

Medium Neutral Citation:	Despot v Registrar General of NSW (No 2) [2014] NSWSC 1122
Hearing dates:	14 August 2014
Decision date:	20 August 2014
Before:	Ball J
Decision:	See paragraphs 25 to 27 of this judgment.
Catchwords:	PROCEDURE - civil - judgments and orders - UCPR r 36.16 - application to vary or set aside judgment - application to reopen on ground that court proceeded on misapprehension of fact - application to set aside judgment on ground that judgment debt not paid - application by defendants for order for stay pending appeal - where no grounds of appeal indicated by defendant - where bank undertook to advance funds to defendant to satisfy judgment - whether bank entitled to stay of enforcement of its undertaking pending appeal
Legislation Cited:	Home Building Act 1989 (NSW) Powers of Attorney Act 2003 (NSW), s 48 Uniform Civil Procedure Rules 2005 (NSW), r 36.16(3A)
Cases Cited:	Despot v Registrar General of NSW [2011] NSWSC 273 Despot v Registrar General of NSW [2013] NSWCA 313 Despot v Registrar General of NSW [2014] NSWSC 1002 Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103 TCN Channel 9 v Antoniadis (No 2) [1999] NSWCA 104; (1999) 48 NSWLR 381
Category:	Procedural and other rulings
Parties:	Ranko Despot (Plaintiff) Stelli Pty Ltd (Third Defendant) Westpac Banking Corporation (Fourth Defendant) Joyce Azzi (Sixth Defendant)
Representation:	Counsel: J Hewitt (Plaintiff) D Williams (Third and Sixth Defendants) A Leopold SC with P Dowdy (Fourth Defendant) Solicitors: Pamela J Enright (Plaintiff) Kheir & Associates (Third and Sixth Defendants) Henry Davis York (Fourth Defendant)
File Number(s):	2009/298869
Publication restriction:	Nil

Judgment

Introduction

1. By a notice of motion filed on 8 August 2014, the plaintiff, Mr Despot, pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 36.16(3A), seeks to reopen the judgment I delivered in this matter on 28 July 2014 (Despot v Registrar General of NSW [2014] NSWSC 1002) on the ground that that judgment proceeded on a misapprehension of the facts.

1. Mr Despot also seeks an order that the judgment be set aside on the ground that the third defendant, Stelli, has not made a payment that I said in my judgment ought to be made by it. In response, Stelli and the fourth defendant, Westpac, seek an order that any obligation to make the payment be stayed until the resolution of any appeal.

The application to reopen

1. In order to explain the misapprehension of facts on which Mr Despot relies, it is necessary to say something about the issues that were the subject of my judgment delivered on 28 July 2014.

1. Relevantly, that judgment concerned an application by Mr Despot for a declaration that he had validly terminated a contract for the sale of a strata unit he owned in Double Bay, which was the subject of an order for specific performance granted by Macready AsJ on 15 April 2011. Mr Despot also sought an order vacating the order for specific performance. Mr Despot purported to terminate the contract on the ground that Stelli had not paid the balance of the purchase price.

1. The contract for the sale of the unit had been entered into by Mr Maalouf purportedly pursuant to a power of attorney granted to him by Mr Despot. Sky Constructions Pty Ltd (Sky Constructions), a company associated with Mr Maalouf, had been engaged by Mr Despot to carry out building work on the unit, and Mr Maalouf purported to sell the unit in order to recover fees said to be owing to Sky Constructions in respect of that work.

1. Mr Despot had submitted in the hearing before Macready AsJ, among other things, that the power of attorney had been obtained fraudulently and that, for that reason, the sale should be set aside. Macready AsJ held that Mr Maalouf was not entitled to rely on the power of attorney because he was in breach of various provisions of the Home Building Act 1989 (NSW). However, he held that Mr Maalouf had ostensible authority to enter into the contract of sale and to execute the transfer of the property on behalf of Mr Despot: see Despot v Registrar General of NSW [2011] NSWSC 273 at [131], [173]. Consequently, his Honour ordered that, upon payment of the balance of the purchase price of $91,086, the contract be specifically performed and carried into execution by Mr Despot and Stelli so far as it remained to be performed. That order was not challenged on appeal. Nor were the findings on which the order for specific performance was based - namely, that Mr Maalouf had ostensible authority to enter into the contract of sale and execute the transfer.

1. In the judgment I delivered on 28 July 2014, I held that Mr Despot was not entitled to terminate the contract for non-payment of the $91,086 and that the order for specific performance should not be vacated. One of the reasons I gave for that conclusion was expressed in the following terms:

[64] First, even before the order for specific performance had been made, Mr Despot had done everything required of him by the contract. So far as the contract was concerned, the critical act of performance by Mr Despot was the provision of a signed transfer in registrable form and a signed discharge of Mr Despot's mortgage to Westpac. When the solicitor who had been retained to act for him handed over those documents, notwithstanding that Mr Despot had not been paid the full purchase price, the solicitor on his behalf performed the contract and, in place of obtaining payment of the full purchase price, put Mr Despot in the position where he was entitled to a vendor's lien in respect of the unpaid balance of the purchase price: see, eg, Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 at 477ff per Hope JA (with whom Glass and Mahoney JJA agreed). Termination at any subsequent time could not alter that fact.

1. Mr Despot submits that this paragraph proceeds on a misunderstanding of the facts. The signed transfer in registrable form and a signed discharge of mortgage were not handed over by the solicitor retained by Mr Despot. They were handed over by Mr Carbone, who had been retained by Mr Maalouf. Moreover, Mr Despot submits that I was mistaken when I said that there were no further acts of performance. In his submission, in order to give effect to the order for specific performance, it was necessary for Mr Despot to execute a new transfer since the one on which Stelli relied was ineffective.

1. I do not accept that I proceeded on a misunderstanding of the facts.

1. In para [16] of my judgment, I recorded that Mr Carbone "was the solicitor instructed by Mr Maalouf in relation to the sale of the unit". Although I did not specifically say so, I proceeded on the basis that Mr Carbone attended settlement and handed over the relevant documents. In para [64], I described Mr Carbone as the "solicitor who had been retained to act for him [meaning Mr Despot]". I used the passive to distinguish Mr Carbone from the solicitor who had been retained by Mr Despot. I described Mr Carbone as the solicitor who had been retained to act for Mr Despot because Mr Despot was the person selling the unit albeit through a person purporting to act as his agent (and who had ostensible authority to do so).

1. I did not deal in para [64] with the contention that the transfer executed by Mr Maalouf was void or ineffective because the power of attorney pursuant to which it was executed was void or ineffective. However, I do not think that my failure to deal with that argument affects the conclusion reached in that paragraph.

1. As I have said, Macready AsJ held that Mr Maalouf had ostensible authority to sign the transfer on Mr Despot's behalf. That conclusion was not challenged on appeal. The conclusion appears to have been based on the following reasoning in para [176] of his Honour's judgment:

There is no reason why Stelli should not have the benefit of s 48 of the Powers of Attorney Act . The use of the power of attorney has been suspended by operation of the provisions of the Home Building Act. However, there is no suggestion that Mr and Mrs Azzi [the directing minds of Stelli] had any knowledge of the lack of licence or insurance [that is, any knowledge of the matters that caused the power of attorney to be suspended under the Home Building Act].

1. Section 48 of the Powers of Attorney Act 2003 (NSW) provides:

Certain third parties entitled to rely on acts done under terminated or suspended powers of attorney

(1) If a power of attorney is terminated or suspended, a third party who deals or otherwise transacts in good faith with the attorney without knowing of the termination or suspension is entitled to rely on the power of attorney in relation to that dealing or transaction in the same manner and to the same extent as if the power had not been terminated or suspended.

(2) Subsection (1) does not entitle an attorney to rely on a power in support of an act within the scope of the power done by the attorney with notice of the termination or suspension of the power to the extent that it concerns authority to do that act.

Consequently, on the conclusions reached by Macready AsJ, Stelli was entitled to accept delivery of the transfer executed by Mr Maalouf as a discharge of Mr Despot's obligations under the contract for sale.

1. Macready AsJ had held (at [175]) that the power of attorney granted by Mr Despot was irrevocable. That finding was overturned by the Court of Appeal: see Despot v Registrar General of NSW [2013] NSWCA 313 at [64]. As I recorded in my judgment at [15], Mr Despot purported to revoke the power of attorney on 21 July 2008. As a result of the Court of Appeal's decision, that revocation was effective. However, that revocation did not affect what had occurred up until that date. The position was that, on 3 July 2008, Stelli had accepted the executed transfer and, on the findings made by Macready AsJ, paid the balance of the purchase price other than the sum of $91,086. As at that date, it was entitled to accept the transfer as a discharge of Mr Despot's obligations under the contract. The subsequent revocation of the power of attorney did not alter that position.

1. It follows that leave to reopen my judgment should be refused.

The payment of the balance of the purchase price

1. Mr Despot had purported to terminate the contract for sale for non-payment of the balance of the purchase price of $91,086.

1. One response Stelli made to Mr Despot's claim was that the amount claimed by Mr Despot was not owing because it was entitled to set-off the costs orders it had obtained in the proceedings brought by Mr Despot against the balance of the purchase price said to be owing by Mr Despot. As a fall back position, it and Westpac submitted that it was ready, willing and able to pay the balance of the purchase price, and, for that reason, it could not be said that it had repudiated the contract by failing to make the payment. To give substance to that submission, during the course of the hearing, Westpac gave evidence that it had entered into an agreement with Stelli to advance to Stelli the amount of $91,086 plus accrued interest (up until 9 July 2014) to enable Stelli to pay that amount to Mr Despot. Paragraph 6 of the agreement by which the advance is to be made provides:

The Borrower irrevocably directs the Bank to pay the proceeds of the increased loan amount as directed by the Court or, failing that, as directed by the Bank to satisfy the outstanding balance of purchase price, in respect of the Borrower's purchase of the Secured Property, of $91,086.00 plus accrued interest to date (such interest to be calculated on the basis as accepted by the Court of Appeal in its judgment of 10 October 2013).

1. Westpac also gave an undertaking to the Court that, if the Court concluded that a set-off was not available to Stelli and the money had to be paid, then it would be paid immediately either into court or as the Court directs or, failing that direction, in a way that gets it into the hands of Stelli so that Stelli could make the payment.

1. I refused Stelli's application to set-off its costs orders against the balance of the purchase price. Stelli has indicated that it does not propose to appeal that decision, but it says that, if Mr Despot appeals, it will cross-appeal in relation to the question of set-off. Westpac submits that, in those circumstances, it should not, pending the resolution of any appeal, be required to comply with the undertaking it gave. Westpac makes that submission on the basis that Mr Despot's financial position is such that, if the money is paid to him and Stelli is successful in its cross-appeal, there is little prospect that Stelli will be able to recover the amount it paid and, consequently, any cross-appeal by it will be rendered nugatory.

1. The question, then, is whether Westpac should be relieved, pending the outcome of any possible appeal, of the obligation to advance the balance of the purchase price to Stelli for the purpose of paying Mr Despot.

1. It seems to me appropriate to approach that question in the same way as the court would approach the question whether to grant a stay of a monetary judgment in favour of a plaintiff pending an appeal. One ground on which a stay may be granted is where money paid to a respondent to satisfy the judgment may be irrecoverable if the appeal is successful: TCN Channel 9 v Antoniadis (No 2) [1999] NSWCA 104; (1999) 48 NSWLR 381; Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103.

1. However, in the present case, Stelli has not indicated what grounds of appeal it might have. The question whether Stelli was entitled to set-off its costs orders against the balance of the purchase price depended on the exercise of a discretion. Stelli has offered no reason why the exercise of that discretion might have miscarried. At the time of settlement of the sale of the unit, Stelli was under an obligation to pay Mr Despot the balance of the purchase price. If it had complied with its obligation when it was meant to, it would have been in the position of having paid Mr Despot the sum of $91,086 and would now be left to enforce its costs orders against Mr Despot as best it could. Why, it might be asked, should Stelli be in a better position now because of its failure to pay the money that it owed? The answer, it seems to me, is that it should not.

1. It is true that the relevant undertaking was given by Westpac. However, it seems to me that Westpac has agreed to advance the money, and it is difficult to see why it should be relieved of that obligation because of the effect that it might have on Stelli. Westpac has not sought to establish that it will not be able to recover the amount of the additional advance from Stelli. In addition, if the money is not paid, the result may be to stifle any appeal by Mr Despot.

1. It follows that no stay should be granted.

Orders and costs

1. The plaintiff's application to reopen is refused and the third and fourth defendants' application for a stay is dismissed.

1. The parties should bring in short minutes of order to give effect to the undertaking given by the fourth defendant. If the parties, cannot agree on the precise method by which Mr Despot should be paid the $91,086 plus interest, the matter may be re-listed by contacting my Associate to hear further argument on that question.

1. Mr Despot was unsuccessful in his application to reopen my judgment. That application took up most of the hearing time. On the other hand, Westpac and Stelli were unsuccessful in relation to their application for a stay. Having regard to the time devoted to each application, I think that it is appropriate that Mr Despot pay 80 percent of Westpac and Stelli's costs of Mr Despot's motion and of the hearing before me on 14 August 2014.

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Decision last updated: 26 August 2014