Devon v Thirteenth Kaysan Pty Ltd

[2016] VSC 291

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2015 06324

HUGH JOHN DEVON	Plaintiff
v
THIRTEENTH KAYSAN PTY LTD AND OUTPLASS PTY LTD & ORS	Defendants

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JUDGE:	ELLIOTT J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	20 MAY 2016
DATE OF JUDGMENT:	20 MAY 2016
CASE MAY BE CITED AS:	DEVON v THIRTEENTH KAYSAN PTY LTD
MEDIUM NEUTRAL CITATION:	[2016] VSC 291

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PRACTICE AND PROCEDURE – Application to strike out – claims ventilated in other jurisdiction – claims disclose no cause of action – stay granted – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 23.01(1).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	I Hone (Solicitor)
For the 1st and 2nd defendants	Mr J D Mattin	Ajzensztat, Jeruzalski & Co
For the 3rd to 11th defendants	Mr M Ravech	Spigler & Schwarcz Solicitors

HIS HONOUR:

A.       Introduction

1. By summons on originating motion filed on 15 December 2015, the plaintiff, Hugh John Devon (“Devon”), seeks various forms of relief, all of which relate to the property located at 11 Cromwell Road, South Yarra (“the Property”).  Devon seeks this relief as against the defendants, who hold mortgages over the Property.

1. In essence, Devon seeks to “validate” an alleged agreement for the sale of the Property by public auction, which he alleges is being impeded by certain of the defendants.  Devon seeks removal of all encumbrances from the title of the Property, a stay to prevent the first defendant from taking possession of the Property and damages.  He seeks further relief pursuant to the National Credit Code.[1]

   [1]National Consumer Credit Protection Act 2009 (Cth), Schedule 1.

1. By a summons filed on 6 May 2016, the first and second defendants (“the First Mortgagees”) seek an order that the originating motion be struck out as it does not disclose a cause of action, it is scandalous, frivolous and vexatious, or it constitutes an abuse of process.  On 9 May 2016, the third to eleventh defendants (“the Second Mortgagees”) filed a summons seeking that the originating motion be struck out on the same grounds as those articulated in the First Mortgagees’ summons.

B.       Background

1. It is necessary to set out a brief summary of this and related proceedings.[2]  In an earlier proceeding,[3] default judgment was entered against Devon in default of appearance (“the Default Judgment”).  The Default Judgment granted the First Mortgagees the right to recover possession of the Property.  The Default Judgment has never been set aside.  As a result, on 25 September 2014, a warrant of possession was issued with respect to the Property.  Attempts have been made by Devon to stay the execution of the warrant.  Those attempts, including an application heard by Lansdowne AsJ yesterday, 19 May 2016, have been unsuccessful.

   [2]A detailed summary of the history of this and related proceedings is annexed to this judgment as annexure “A”.

   [3]Supreme Court of Victoria proceeding 03596 of 2014.

1. The issues raised in this proceeding concerning the National Credit Code have also been ventilated on an interlocutory basis in another proceeding in the Federal Court of Australia (“the Federal Court Proceeding”).[4]  In the Federal Court Proceeding, the plaintiff filed an application seeking relief under various statutes, including the National Consumer Credit Protection Act 2009 (Cth), concerning a loan for $1.5 million advanced by the First Mortgagees to Southco Enterprises Pty Limited (“Southco Enterprises”). At the time of the loan, Devon was the sole director of Southco Enterprises.

   [4]Federal Court of Australia proceeding VID 496 of 2015.

1. On 13 April 2016, Davies J delivered judgment in the Federal Court Proceeding in favour of, amongst others, the First Mortgagees on the grounds that the claim had no reasonable prospects of success.[5]  Devon has sought leave to appeal from this decision.  That application is yet to be heard.  For the purpose of the applications in this proceeding, there is no need for me to express any view as to whether her Honour was correct.  It is enough to say that I have considered the decision and, in my opinion, it is not plainly wrong.[6]  In any event, the parties made no submissions to suggest otherwise.

   [5]Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 357, [28] and [33].

   [6]Re Brashs Pty Ltd (1994) 15 ACSR 477, 483.6 (Hayne J), applying Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485, 492.7 (Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ).

C.       The issues

1. During argument, Devon’s solicitor accepted that any issues concerning the National Credit Code should only be ventilated in a single jurisdiction.  On this basis, and given that the Federal Court Proceeding is already on foot, Devon conceded that the Federal Court was the appropriate jurisdiction for such issues to be determined.  Accordingly, and quite properly, there was no opposition to a stay of this proceeding insofar as it concerned those issues.

1. That leaves Devon’s claims regarding the validation of the contract of sale of the Property.  Devon contends that a binding contract was entered into between him and the purchaser as a result of the public auction of the Property.  He further submitted that, by being in attendance at the auction, knowing of the sale and remaining silent while Devon entered into the contract of sale, the First Mortgagees effectively represented that the sale, whilst itself not a mortgagee sale,[7] would, upon settlement, “become” a mortgagee sale for the purposes of s 77 of the Transfer of Land Act 1958 (Vic).

   [7]That argument has already been run and lost in another proceeding.

1. Devon contends that, as a result of their conduct, the First Mortgagees were compelled to complete the sale.  As was put to Devon’s solicitor during argument, even if this were correct as between Devon and the First Mortgagees, in circumstances where the Second Mortgagees refuse to consent to the sale, completion cannot occur.  In response, Devon contended that the Second Mortgagees and any subsequent mortgagees were also bound by the First Mortgagees’ conduct and were therefore similarly compelled to consent to the sale, notwithstanding the fact that there were insufficient funds from the proceeds of the sale to pay out the Second Mortgagees.

1. Devon's solicitor could produce no authority in support of this contention.  Further, as a matter of principle, the submission is hopeless.  For example, in relation to any case based on estoppel, there was no representation[8] or course of conduct[9] that could give rise to a reasonable assumption that the First Mortgagees were acting on behalf of the other mortgagees or that the other mortgagees would be bound.  As a matter of contract, there is no evidence that the First Mortgagees had actual or ostensible agency to act on behalf of any other mortgagee.[10]  Further, it could not be said that any contract between the First Mortgagees and Devon was for the benefit of any other mortgagee.[11]  Simply, there is no proper basis at law or equity which could give rise to a cause of action granting relief to Devon in these circumstances.

   [8]The Commonwealth v Verwayen (1990) 170 CLR 394, 422.2 (Brennan J).

   [9]Ibid, at 444.4 (Deane J).

   [10]Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72, 78.3-79.8 (Gibbs, Mason and Jacobs JJ); Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 421, 427.8-428.2 (Griffith CJ).

   [11]See, for example, Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, 123.7-124.4 (Mason CJ and Wilson J).

D.       Conclusion

1. For completeness, I note that if the Federal Court Proceeding were not on foot, I would have considered dismissing this proceeding in its entirety on the grounds that no cause of action had been disclosed, or it was an abuse of process.  However, in circumstances where the validity of the same loan is the subject of both this proceeding and the Federal Court Proceeding, I propose to make the following orders:

(1)Subject to paragraph 2 of these orders, the proceeding is stayed, with liberty to apply in the event that the application presently made by Hugh John Devon (the plaintiff in this proceeding) (“the Application”), for leave to appeal from the judgment of the Honourable Justice Davies of the Federal Court of Australia in proceeding VID 496 of 2015 delivered on 13 April 2016 with the medium neutral citation [2016] FCA 357, is granted and the appeal is allowed.

(2)The proceeding shall be permanently stayed immediately upon the occurrence of any of the following events: 

(1)       The Application is withdrawn. 

(2)       The Application is dismissed. 

(3)       The Application is granted but the resultant appeal is dismissed.

1. I will hear the parties on the question of costs.

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Annexure A

18 November 2013	Transfer of ownership agreement (unsigned) transferring ownership of the Property from wife, Kathleen Devon, to Devon
7 January 2014	1st mortgage - letter of offer accepted by Devon (signing on his own behalf and as director of Southco as guarantor)
20 February 2014	2nd mortgage - letter of offer dated 18 Feb 14 accepted by Devon signing on behalf of Southco & Kathleen Devon (signing as director of Southco)
5 March 2014	Devon and his advisors sign various documents relating to 1st mortgage
14 March 2014	1st mortgage executed by Devon
17 March 2014	1st mortgage registered with Land Titles Office
30 April 2014	Residential tenancy agreement between Devon with Kathleen Devon executed
7 June 2014	Devon fails to pay interest instalment (1)
26 June 2014	Notice to pay sent to Devon
7 July 2014	Devon fails to pay interest instalment (2)
14 July 2014	Writ issued (2014 proceeding)
17 September 2014	Default judgment (2014 proceeding)
25 September 2014	Warrant of possession (2014 proceeding)
3 November 2014	Summons to set aside default judgment (2014 proceeding)
3 December 2014	Summons to set aside default judgment adjourned (order of Lansdowne AsJ) (2014 proceeding)
9 December 2014	Devon executes exclusive auction authority engaging Kay & Burton to sell the Property
12 December 2014	Summons to set aside default judgment dismissed (order of Lansdowne AsJ) (2014 proceeding)
21 February 2015	Jeruzalski attends meeting with selling agent
26 February 2015	Spigler and others inspect the Property
28 February 2015	Public auction of the Property
28 February 2015	Contract of sale executed for the Property
4 March 2015	Spigler letter refusing to consent of 3rd to 11th defendants to sale of the Property
16 March 2015	Summons filed by Devon to convert contract of sale into mortgagees' sale pursuant to section 77 of the Transfer of Land Act 1958 (Vic) (2014 proceeding)
23 March 2015	Orders (Lansdowne AsJ) (2014 proceeding)
29 April 2015	Residential tenancy agreement between Devon with  Kathleen Devon expires
29 April 2015	New residential tenancy agreement between Devon with  Kathleen Devon executed
20 May 2015	Email from Gowan Stubbings of Kay & Burton to Jeruzalski - "Kay & Burton is not holding any deposit in its bank trust account"
28 May 2015	Defence filed by Devon (County Court proceeding CI-15-01746)
26 June 2015	Orders (Lansdowne AsJ) (2014 proceeding)
2 July 2015	Summons for stay filed by Devon (2014 proceeding)
15 July 2015	Application for stay refused (order of Lansdowne AsJ) (2014 proceeding)
3 August 2015	Solicitors for 1st and 2nd defendants receive email from the Sheriff's office advising the Sheriff is unable to execute the warrant of possession due to the existence of the residential tenancy agreement
1 September 2015	Federal Court of Australia Proceeding (VID496/2015) commenced
14 September 2015	Judgment County Court (Tran JR) (CI-15-01747)
18 September 2015	Devon affidavit (2014 Proceeding)
16 October 2015	Orders (Davies J) (Federal Court Proceeding)
27 October 2015	1st and 2nd defendants send Notice to Vacate to Devon
6 November 2015	Summons filed by Devon (2014 proceeding)
26 November 2015	Orders (Sloss J) striking out summons filed 6 November 2015 (2014 proceeding)
27 November 2015	Statement of claim (Federal Court Proceeding)
2 December 2015	1st and 2nd defendants apply to VCAT for a possession order on the basis of the Notice to Vacate
14 December 2015	Devon affidavit sworn
15 December 2015	Originating motion (summons)
16 December 2015	VCAT hearing
18 December 2015	Orders (Davies J) (Federal Court Proceeding)
9 February 2016	VCAT hearing (Devon does not appear)
16 February 2016	Jeruzalski affidavit sworn
22 February 2016	Spigler affidavit affirmed
23 February 2016	Submissions  filed by 1st and 2nd defendants
23 February 2016	Notice of change of solicitor filed on behalf of Devon
4 April 2016	VCAT order (Member Campana)
13 April 2016	Judgment (Davies J) (Federal Court Proceeding)
6 May 2016	Summons filed by 1st and 2nd defendants
9 May 2016	Jeruzalski affidavit sworn
9 May 2016	Summons filed by 3rd to 11th defendants
10 May 2016	Spigler affidavit affirmed
11 May 2016	Submissions filed by 1st and 2nd defendants
12 May 2016	Spigler affidavit affirmed
12 May 2016	Submissions filed by 3rd to 11th defendants