First Mortgage Capital Pty Ltd v Staniford - [2021] SASC 88

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
FIRST MORTGAGE CAPITAL PTY LTD v STANIFORD & ANOR
[2021] SASC 88
Judgment of Judge Dart a Master of the Supreme Court

REAL PROPERTY - TORRENS TITLE - MORTGAGES, CHARGES AND ENCUMBRANCES - POWERS AND REMEDIES OF MORTGAGEE - POSSESSION
Loan to company - director's guarantee - directors give mortgage to secure guarantee - term of the loan expired - company defaults - mortgagee seeks possession - is there an arguable defence?
Held:
1. No arguable defence established.
2. Applicant entitled to order for possession.
Australian Securities and Investments Commission Act 2001 (Cth) s 12BF, s 12BI; National Consumer Credit Protection Act 2009 (Cth); Real Property Act 1886 (SA) Part 17, referred to.
Armour Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1978) 17 SASR 259; Corporation of the Town of Moonta v Rodgers and Rodgers [1980] 26 SASR 143; Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; Russo v Buck & Ors [2006] SASC 380; Westpac Banking Corporation v Chadha [2012] SASC 223, considered.

FIRST MORTGAGE CAPITAL PTY LTD v STANIFORD & ANOR
[2021] SASC 88
Civil

This is an application seeking an order for the possession of real property. It is made pursuant to Part 17 of the Real Property Act 1886 (“the Act”). The respondents are the registered proprietors of the subject property. The applicant is entitled to the order for possession.
Background
The respondents are the directors of Staniford Livestock Pty Ltd. On or about 13 September 2018 the company borrowed the sum of $220,796 from the applicant. The loan was for a term of 12 months. The respondents, in their capacity as directors of the company, gave a guarantee in respect of the company’s obligations. That obligation was secured by a mortgage given over their property at 388 Carey Gully Road, Carey Gully. It is a registered second mortgage.
At the end of the term the loan was not repaid. It appears that the loan may have been rolled over for a period of months. The principal and interest that accrued on the loan have not been repaid. On any view, the term expired more than a year ago. I assume the company is unable to make payment.
On or about 16 July 2020 the applicant served a demand on the respondents pursuant to the guarantee. The demand was not complied with. On or about 14 October 2020 relevant statutory notices were issued under the mortgage.
The terms of the loan were onerous. Interest accrued at the rate of 24% per annum. The interest rate doubled in the event of a default. The charging of such interest rates is not of itself unlawful.
It should be noted that the respondents took legal advice in relation to the transaction. A solicitor provided certificates in relation to the guarantee. No point is taken by the respondents in relation to the statutory notices. The primary issue in dispute appears to be…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] SASC 88
Decision Date: 22 July 2021

CaseChat Overview and Summary

In the matter of First Mortgage Capital Pty Ltd v Staniford, the applicant, a mortgagee, sought an order for possession of a property held by the respondents, who are the directors of a company that had borrowed funds from the applicant. The loan was secured by a registered second mortgage over the respondents' property. The applicant's claim is based on the failure of the company to repay the loan, leading to a default under the terms of the mortgage. The respondents' primary contention appears to be related to the calculation of interest on the loan, which was substantial and increased significantly upon default.

The court was tasked with determining whether the applicant had established a prima facie case for possession, and whether the respondents had raised any arguable defence to the claim. Given that the loan was secured by a registered mortgage, and there was a default in repayment, the court needed to assess whether any defences presented by the respondents were sufficient to warrant a full hearing. The court found that the respondents had not provided any evidence to suggest that there was an arguable defence to the applicant's claim. The respondents had taken legal advice during the transaction and had not contested the statutory notices issued under the mortgage.

The court concluded that the applicant had established a prima facie case for possession. The respondents had failed to demonstrate any arguable defence to the claim, and the court was satisfied that the mortgage was duly registered and valid. The interest rates charged were lawful and did not invalidate the mortgage. Consequently, the court granted the applicant's application for an order for possession of the property. The order was made on the basis that there was money secured by the mortgage and that the respondents had defaulted on the repayment terms, triggering the right to possession.

Orders

Orders of the court

Loan to company - director's guarantee - directors give mortgage to secure guarantee - term of the loan expired - company defaults - mortgagee seeks possession - is there an arguable defence?

Held:

1. No arguable defence established.

2. Applicant entitled to order for possession.

Background

Background to the litigation

This is an application seeking an order for the possession of real property. It is made pursuant to Part 17 of the Real Property Act 1886 (“the Act”). The respondents are the registered proprietors of the subject property. The applicant is entitled to the order for possession.Background The respondents are the directors of Staniford Livestock Pty Ltd. On or about 13 September 2018 the company borrowed the sum of $220,796 from the applicant. The loan was for a term of 12 months. The respondents, in their capacity as directors of the company, gave a guarantee in respect of the company’s obligations. That obligation was secured by a mortgage given over their property at 388 Carey Gully Road, Carey Gully. It is a registered second mortgage. At the end of the term the loan was not repaid. It appears that the loan may have been rolled over for a period of months. The principal and interest that accrued on the loan have not been repaid. On any view, the term expired more than a year ago. I assume the company is unable to make payment. On or about 16 July 2020 the applicant served a demand on the respondents pursuant to the guarantee. The demand was not complied with. On or about 14 October 2020 relevant statutory notices were issued under the mortgage. The terms of the loan were onerous. Interest accrued at the rate of 24% per annum. The interest rate doubled in the event of a default. The charging of such interest rates is not of itself unlawful. It should be noted that the respondents took legal advice in relation to the transaction. A solicitor provided certificates in relation to the guarantee. No point is taken by the respondents in relation to the statutory notices. The primary issue in dispute appears to be in relation to the interest calculation. A summary procedure Applications made pursuant to Part 17 of the Act are dealt with on a summary basis. That is, they are dealt with on the papers. It is usually a straightforward matter of establishing the existence of a loan, a registered mortgage and a default in respect of the contractual arrangements. Absent a defence, it is simply a matter of the Court being satisfied that, at the date the order was sought, there was money secured by a mortgage. In Russo v Buck & Ors Doyle CJ said: [1]The order for possession necessarily involves a judicial determination that the Bucks were, at the date of the order, entitled to possession of the Aldinga property pursuant to the mortgage. That determination must have been based on a conclusion that the mortgage was duly registered and was valid and effective as between Mr Russo and the Bucks; a conclusion that at the date of the order there was money secured by the mortgage; and a conclusion that there had been an event of default as defined by the mortgage (a failure to pay money due) giving rise (upon the giving of the necessary notices) to a right of possession: see Morlend Finance Corp (Vic) Pty Ltd v Levine [1990] VR 205 and Angel v National Australia Bank Ltd [2001] FCA 1053; (2001) ATPR 41-832.[1] [2006] SASC 380 at [174].

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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