First Mortgage Capital Pty Ltd v Jeram
[2019] NSWSC 563
•01 May 2019
Supreme Court
New South Wales
Medium Neutral Citation: First Mortgage Capital Pty Ltd v Jeram [2019] NSWSC 563 Hearing dates: 29, 30 April 2019 Decision date: 01 May 2019 Jurisdiction: Common Law Before: Ierace J Decision: Notice of motion dismissed.
Catchwords: CIVIL PROCEDURE – application to stay a writ of possession – moneys owing under mortgage agreement - insufficient evidence of loan agreement to satisfy debt – application denied. Category: Principal judgment Parties: First Mortgage Capital Pty Ltd (Plaintiff)
Shila Jeram (/Defendant)Representation: Counsel:
Solicitors:
M Forgacs (Plaintiff)
B Lloyd (Defendant)
Summer Lawyers (Plaintiff)
Brander Smith McKnight (Defendant)
File Number(s): 2018/120880
Judgment
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HIS HONOUR: This matter, which has come before me as the Duty Judge, is a notice of motion filed by the defendant in proceedings concerning a writ of possession in respect of a property in New South Wales, which is a residence. The plaintiff, First Mortgage Capital Pty Ltd, is seeking to recover the balance of moneys owed to it pursuant to a loan secured by the property. The defendant, Shila Jeram, is the occupier of the property (“the Jerams’ property”), together with her husband Neil Jeram, their son Rikesh Jeram, who is aged 25, and Mr Jeram’s mother, Shanta Bhalshod, who is aged 75. According to an affidavit by Mr Neil Jeram that has been read in the hearing, Ms Bhalshod is in “the early stages of Alzheimer’s disease”.
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The relevant background is that the plaintiff entered into a loan agreement on 5 July 2017 for the sum of $171,530 with APAC Euro Capital Partners Pty Limited (“APAC Euro”), the defendant and her husband (“the borrowers”). The loan was secured by a second mortgage over the Jerams’ property. A term of the agreement was a requirement to repay the loan in full on or before 5 January 2018.
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By a statement of claim filed on 17 April 2018, the plaintiff contended that the borrowers had defaulted and that, as at the date of filing, the outstanding sum, including interest and costs, was $188,147.51. The plaintiff sought judgment for the possession of the Jerams’ property, an order for vacant possession and leave to issue a writ of possession.
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The plaintiff filed a notice of motion on 9 May 2018 seeking orders that personal service of the statement of claim be dispensed with. A supporting affidavit by the plaintiff’s solicitor alleged that the statement of claim had been served on Neil Jeram at their property, which was also the registered address of APAC Euro, but that the process server had been unable to serve the defendant. Attempts to arrange through Mr Jeram via email, an opportunity to serve the defendant personally, had not been responded to.
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A hearing of the notice of motion came before his Honour Justice Walton on 31 January 2019, by which time the amount alleged to be owed was $313,363.26. There was no appearance by or on behalf of the defendant. Attempts were made prior to and during the day of the hearing to contact the defendant, resulting in his Honour being informed by Senior Counsel appearing for the plaintiff that he had a phone conversation with both the defendant and her husband during an adjournment that day, and that the defendant said she did not wish to come to Court, but she and her husband had agreed to certain consent orders.
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Pursuant to that agreement, his Honour made orders in the following terms:
“1. Judgment for the plaintiff for possession of the whole of the land described in folio identifier xxxxxx, being the land situated at and known as xxxxxxx in the State of New South Wales.
2. Leave to issue a writ of possession forthwith.
3. The writ of possession will lie within the Court’s registry for 28 days of entry of those orders.”
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It appears from the transcript of proceedings that the reason for the third order was to provide a 28 day period of “grace” in anticipation that sufficient funds to repay the loan were imminently available. This was based on three emails sent by Mr Jeram to the Court that were tendered in the proceedings. Two were sent the evening before, at around 9.45pm.
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In the email first in time, Mr Jeram explained that he and his wife were legally unrepresented and that the purpose of the loan had been to provide working capital for APAC Euro for a construction project. However, that project had fallen through. He was unclear about the current status of APAC, but said that, together with the colleague, Christian Cadinas, he had established another company in the Netherlands, Sterling Investment Hospitality BV (“Sterling BV”). He said that this company had agreed to “absorb all the liabilities of APAC Euro” and that he expected that the new company would have funds at hand in a sufficient amount to pay out that owing to the plaintiff within 28 days.
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The second email was inconsequential. In the third email sent in the early hours of the day of hearing (Mr Jeram had explained he was in the UK), he said that he expected the funds to be available the following week.
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The proceedings before me were commenced by a notice of motion filed by the defendant on 29 April 2019 seeking an urgent application to stay the writ of possession until 1 June 2019; alternatively, an order that it be stayed until further order of this Court.
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An affidavit by the defendant (it is not apparent whether it was affirmed or sworn) attests that on 15 March 2019 she received a letter from the Sheriff of New South Wales attaching a notice to vacate the property. Correspondence annexed to her affidavit was to the effect that, as of 23 April 2019, the amount owed had increased to $479,096.93. The defendant goes on to state that on 18 April 2019, she asked her brother-in-law, Kaishal Lakha, who is a son of Shanta Bhalshod, whether he could lend her between $500,000 and $550,000 so that she could pay out the amount owing. He told her that he could lend her the outstanding amount. On 26 April she received a letter of offer from Ridcorp Capital (Private) Fund No 1 (“Ridcorp”) of the same date, addressed to Mr Lakha, offering a loan of $550,000 for a “business purpose, to acquire shareholding in Sterling Hospitality Investment”. According to the letter, the loan is to be secured by a second mortgage over a property owned by Mr Lakha and his wife (“the Lakhas’ property”) and a “lien over shares of Sterling Hospitality Investments that are issued to the borrower in not less than 25% of the issued shared (sic) of this entity”. As well, Ridcorp required:
“…[a] registered charge or other instrument to secure to Ridcorp Capital (Private) Fund No 1 the balance of the issued shares of Sterling Hospitality Investments not held under a lien by the borrower (which will be released upon discharge of this facility).”
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The last paragraph of the letter makes clear that it is not to be understood as an agreement or contract to provide the funds and that it is subject to further steps in the loan application process.
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An affidavit by Mr Lakha dated 28 April 2019 (also not indicated as sworn or affirmed) annexed to the defendant’s affidavit, confirms that if he receives the loan, he would lend the defendant sufficient funds for her to discharge the outstanding amount owed to the plaintiff.
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On the basis of this material, the defendant seeks that the writ of possession be stayed to enable the loan to be paid out from the loan moneys that she expects to receive from Mr Lakha.
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When the matter first came before me on Monday, 29 April 2019, counsel for the plaintiff indicated the application was opposed and highlighted the purpose of the loan, as expressed in the letter of offer from Ridcorp. The matter was stood over to the following day, Tuesday 30 April, to enable the defendant to tender further evidence as to the likelihood of a loan eventuating.
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On 30 April 2019, the defendant tendered an affidavit affirmed by Neil Jeram the same day. Mr Jeram stated that “earlier today” he had arranged for the incorporation of Sterling Hospitality Investment Pty Limited (“Sterling P/L”). He is the sole director and holds all 100 of its issued shares. The purpose of the company is to manage another entity which is yet to be established, to be known as the “Marriott Investment Fund”, which will “manage an investment fund in Australia for the Marriott hotel chain”.
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He further stated that “in early to mid-April” he agreed with Mr Lakha that he could acquire a 25 per cent stake in Sterling P/L through the purchase of shares for $550,000, which he understands to be the sum to be lent to Mr Lakha by Ridcorp. The loan would be used to discharge the defendant’s debt.
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The defendant also tendered an affidavit by Noel Ridler dated 30 April 2019. He is the managing director of Ridcorp and signed off on the letter of acceptance of 26 April 2019. Mr Ridler said he was approached by both Mr Jeram and Mr Lakha in mid-April seeking funds for a business venture. He has known Mr Jeram “professionally for some years” and understood that the loan sought was for a new business venture, involving investments in hotel properties in Australia and that Mr Jeram would be involved through a company known as “Sterling Hospitality Investments”. He was advised that day of the company’s name and that it had been incorporated earlier that day. He said that this information did not affect his willingness to proceed with the loan, subject to terms and approval conditions, and that the funds were available until 31 May 2019. Based on his 25 years of experience in the banking industry and his previous dealings with Mr Jeram, he considered that it was unlikely that the outstanding conditions would not be satisfied.
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He understood that “a large proportion of these funds” would be paid to the defendant to pay off an existing debt to the plaintiff.
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Counsel for the plaintiff has submitted that whether the loan proceeds depends on the consent of the first registered mortgagee on the Lakhas’ property and therefore there can be no assurance that the loan will proceed. He also submitted that, in view of the current amount owing and the limited security in the Jerams’ property, there was a real prospect of the accruing debt exceeding the recoverable security in that property. A valuation of the Jerams’ property before the Court on 31 January 2019 in the proceedings before Walton J placed it in the range of $1.25 million to $1.5 million. At that stage, the amount owing on a first registered mortgage on the property was $963,000, leaving a balance that, at best, is approaching the amount currently owing to the plaintiff.
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Having regard to this factor and the history of the matter, in spite of the assurances in the affidavit evidence of Mr Ridler of Ridcorp, as well as the defendant, Mr Jeram and Mr Lukha, I am not of the opinion that it is appropriate to stay the writ of execution.
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I am mindful of the fact that, if the funds are indeed forthcoming by the end of May, even if possession has by that time been taken by the plaintiff, it is most unlikely that the sale of the property would have occurred, given the necessary marketing for the sale to take place. Possession could be returned to the defendant if, in fact, the loan is discharged.
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Accordingly, I dismiss the notice of motion.
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Decision last updated: 15 May 2019
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