Gaudry v Rello Finance Pty Ltd
[2023] VSC 630
•1 November 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
COMMON LAW DIVISION
S ECI 2023 04697
| ANTON GAUDRY | Plaintiff |
| v | |
| RELLO FINANCE PTY LTD ACN 633 994 859 & ORS (in accordance with the attached schedule of parties) | Defendants |
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JUDGE: | GRAY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 12 October 2023 |
DATE OF JUDGMENT: | Previous orders on 13 and 17 October 2023 Written judgment and further orders on 1 November 2023 |
CASE MAY BE CITED AS: | Gaudry v Rello Finance Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2023] VSC 630 |
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REAL PROPERTY — Warrant of seizure and sale — Service on Registrar of Titles — Rights and interest of judgment creditor under warrant of seizure and sale issued by County Court of Victoria — Application by registered mortgagee in possession to remove warrant — Whether maintenance and execution of warrant futile — Where title holder’s equity in land is valueless — Where no reasonable prospect that titleholder or associates will satisfy judgment debt from other resources — Impact of maintenance and execution of warrant on mortgagees, creditors and other parties — Charge in favour of judgment creditor — Priority of claims to proceeds of sale by mortgagee — Rule against tacking — Inherent jurisdiction to prevent abuse of process — Supervisory jurisdiction — Effect of undertaking — Temporary injunction to prevent re‑notification of warrant during mortgagee sale process — Transfer of Land Act 1958 ss 52, 77, 103 — Property Law Act 1958 s 94.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Rimmer | King & Collins |
| For the First Defendant | Mr M Grady | SLF Lawyers |
| For the Second Defendant | Ms K Finemore | Blue Rock Law |
| For the Third Defendant | Ms H Tiplady | Victorian Government Solicitor’s Office |
| For the Fourth Defendant | No appearance |
HIS HONOUR:
Overview
This was an application for orders requiring the Registrar of Titles to remove recordings of a warrant of seizure and sale (Warrant) from the folios of the Register for Units 1 and 2, 16 Horsburgh Grove, Armadale (Units), and to restrain the first defendant from making further applications to the Registrar to record the Warrant on those folios of the Register.
The application was urgent in respect of Unit 1, because of an imminent settlement. The primary issue in respect of both Units was whether there would be any utility in maintenance and execution of the Warrant. As explained by Dodds-Street J in Capital Finance Australia Limited v The O’Bryan Group Pty Ltd[1] (Capital Finance), if the recording of a process such as a warrant serves no useful purpose and would work an injustice, the Court may order the Registrar to remove it. The power to do so arises from the Court’s inherent jurisdiction to prevent abuse of process. There was a secondary issue in relation to Unit 2: did an undertaking given by the plaintiff adequately protect the interests of the first defendant as chargee in relation to Unit 2?
[1][2003] VSC 355.
On 13 October 2023, I made orders for the removal of the Warrant in respect of Unit 1. I have now decided to make similar orders in respect of Unit 2, in light of the undertaking given by the plaintiff.[2] I am satisfied that the undertaking will adequately prevent prejudice to the first defendant’s claim of priority in the distribution of proceeds of the sale of Unit 2 over some of the amount secured by the plaintiff’s mortgage.
[2]Plaintiff’s minute — proposed general form of order, submitted 17 October 2023, recital B.
The parties
The plaintiff, Mr Gaudry, is seeking to sell the Units as a registered mortgagee in possession pursuant to s 77 of the Transfer of Land Act 1958 (TLA). The mortgage secures liabilities under a joint venture agreement in relation to purchase and development of land, and construction and sale of the Units.
The second defendant, Mr Rogers, is the registered proprietor and mortgagor of the Units. Mr Rogers appeared at the hearing, but did not take an active role on the question of relief.
The first defendant, Rello Finance Pty Ltd (Rello), is a judgment creditor of Mr Rogers. Rello obtained a default judgment against Mr Rogers in the County Court of Victoria for unpaid amounts owing under an agreement with Mr Rogers for the marketing of Unit 2 in 2021. Mr Rogers granted a charge to Rello over Unit 2 securing those liabilities. Rello is caveator over Unit 2 as chargee. Rello holds no security interest over Unit 1.
The Sheriff for the State of Victoria and the Registrar of Titles for Victoria were also joined as defendants. On Rello’s application, the County Court had issued the Warrant to the Sheriff; and upon application to the Registrar, the Warrant had then been recorded on the titles for the Units.
Legislative framework
Warrants of seizure and sale in execution of judgment debts in the County Court are issued under Order 69 of the County Court Civil Procedure Rules 2018. Warrants confer authority on the Sheriff pursuant to the Sheriff Act 2009 (the Sheriff Act).[3] Before the commencement of the Sheriff Act, the Sheriff was employed under the Supreme Court Act 1986 (the Supreme Court Act). The Sheriff remains an officer of the Court, is subject to supervision by the Court under r 66.15 of the Supreme Court (General Civil Procedure) Rules 2015 (the Rules) and the inherent jurisdiction of the Court, and is subject to pre-existing common law duties — provided they are not inconsistent with later statutory provisions and rules.[4]
[3]Section 7(1) of the Sheriff Act provides that ‘[t]he sheriff has the functions and powers conferred, and duties imposed, on the sheriff by … court and enforcement legislation … or a warrant’. ‘Court and enforcement legislation’ is defined in s 3 of that Act, and relevantly includes the Supreme Court Act 1986, the County Court Act 1958, and a rule of court.
[4]Section 7(2)(a) of the Sheriff Act provides that the sheriff has all the functions, powers and duties at law that the sheriff employed under s 106(a) of the Supreme Court Act had immediately before its repeal. See Zhou v Kousal (2012) 35 VR 419, [102]-[113]; and Hoskin v the Sheriff for the State of Victoria [2018] VSC 216, [60]–[77].
Part 3 div 5 of the Sheriff Act is entitled ‘Powers to seize, sell and deal with property’. It consists of three sections. Section 23 provides that the Sheriff may seize or take possession of ‘recoverable property’ in accordance with the relevant court and enforcement legislation or a warrant regardless of who has current possession. ‘Recoverable property’ is ‘property specified in a warrant that may be lawfully seized under the warrant’.[5] Section 24(a) of the Sheriff Act provides relevantly that the Sheriff may sell property so seized for the purpose of applying the proceeds of the sale to the payment of a ‘payable amount’. A ‘payable amount’ is ‘the amount specified in a money warrant as being required to be paid by the person named or described in the money warrant’, and a ‘money warranty’ includes a warrant of seizure and sale.[6] Section 25 is entitled ‘Buyer of property sold by sheriff acquires good title’ and provides:
[5]Sheriff Act s 3.
[6]Sheriff Act s 3, definitions of ‘money warrant’ and ‘civil warrant’.
(1)A person who buys property sold by the sheriff under this Division acquires good title to the property if the person buys the property—
(a)in good faith; and
(b)without notice of any defect or want of title.
(2)The sheriff is not liable in respect of the sale of property under this Division unless it is proved that the sheriff had notice, or might, by making reasonable enquiry, have ascertained, that the property was not the property of the person named or described in the warrant under which that property was seized.
(3)Nothing in this section limits or affects any right or remedy that the previous owner of property sold under this Division has or may seek otherwise than—
(a)against the property sold; or
(b)against the sheriff in the exercise of a power of sale under this Division.
Service on the Registrar of Titles of a warrant of seizure and sale affecting land in Victoria results in the recording of service on the relevant folio of the Register, and triggers statutory consequences under s 52 of the TLA. That provision is central to this case, and it is necessary to set it out virtually in full:[7]
[7]Omitting sub-s (7), which relates to writs of fieri facias issued by the High Court and is irrelevant to this case.
52 Sale under writ of fieri facias or decree of Supreme Court etc.
(1)Save as in this Division or Division 3 of Part II provided no execution or lis pendens shall bind or affect any land under the operation of this Act[8].
(2)The Registrar, on being served with a copy of any judgment, decree, order or process of execution of a court that identifies a folio or folios of the Register that are affected by the judgment, decree, order or process of execution, must record notice of the receipt of the judgement, decree, order or process of execution.
(3)After any land so specified has been sold under any such judgment decree order or process the Registrar shall, on lodgment of a transfer thereof in an appropriate approved form, register such transfer if lodged within the period of 6 months from the day on which the copy of such judgment decree order or process was served on the Registrar, in which case no other instrument dealing with the land lodged with the Registrar after the time of service of the copy and before the lodging of the transfer shall be registered or be deemed to have been lodged for registration.
(4)On registration of such transfer the purchaser shall become the transferee and be the proprietor of the land in all respects as if the transfer were a transfer for valuable consideration to the purchaser by the registered proprietor, but until a recording of the service of the copy has been made in the Register as aforesaid no sale under the judgment, decree, order or process shall be made by the sheriff or other officer.
(5)Unless a transfer on sale under such judgment decree order or process is lodged with the Registrar within the period of 6 months from the day on which the copy of such judgment decree order or process was served on the Registrar such judgment decree order or process shall cease to bind or affect the land.
(6)Upon production to the Registrar of sufficient evidence of the satisfaction of any judgment decree order or process a copy whereof has been served as aforesaid he shall make a recording in the Register to that effect, whereupon such judgment decree order or process shall cease to bind or affect the land.
(6A)A judgment creditor may apply to the Registrar in the appropriate approved form to remove a notice of the receipt of the judgment, decree, order or process of execution of a court recorded on the relevant folio of the Register under subsection (2).
(6B)On receiving an application by a judgment creditor under subsection (6A), the Registrar may amend the Register to remove the notice of the relevant receipt of the judgment, decree, order or process of execution of a court recorded on the relevant folio of the Register.
[8]See Part 3 of the Property Law Act 1958.
Part IV div 9 of the TLA relates to registered mortgages and charges over land. Section 76 provides for notices of default in payment of amounts secured by a registered mortgage or charge. Section 77 provides for the consequences of a failure to remedy a default specified in a notice under s 76. Section 77(1) confers a power of sale on the mortgagee, and s 77(2) provides for registration of an instrument of transfer upon an exercise of the power of sale. The distribution of proceeds of sale is governed by s 77(3). There are three categories of priority distribution: firstly, in payment of all costs, charges and expenses of and incidental to the sale; secondly, in payment of the amounts due on the mortgage or charge; and thirdly, ‘in payment of moneys owing under or in respect of subsequent mortgages and charges in the order of their respective priorities’.
Relevant facts and procedural history
On 15 April 2016, Mr Gaudry entered into the joint venture agreement with Mr Rogers and a third person, Mr a’Beckett, by signing a written joint venture terms of agreement concerning the acquisition, financing, and development of land at 16 Horsburgh Grove, Armadale, and providing for an even three-way division of any profits from the proceeds of sale (Joint Venture Terms).
The Joint Venture Terms provided for Mr Gaudry to advance two categories of financing for the project, via a special purpose vehicle for the joint venture or nominees.[9] The first category of financing from Mr Gaudry was defined as the ‘Initial Gaudry equity’, and consisted of a little over $2 million in itemised acquisition, development, project management and marketing costs. The second category of financing from Mr Gaudry was defined as ‘Additional Equity’, or ‘Additional Priority Equity’. This topic merits more detailed attention. It appears that there is a dispute concerning the joint venture, and this aspect of it in particular. My observations on the terms relating to financing are intended to be of contextual assistance only, and should not be regarded as conclusive findings.
[9]The choice of vehicle was to depend on advice about capital gains tax.
The Joint Venture Terms contemplated the establishment of a project control group as a decision-making body. It also contemplated that the parties would enter into a separate financial management agreement by which Mr Rogers would use reasonable endeavours to procure project finance consisting of financing from a senior lender and, if necessary, from Mr Gaudry.
This potential additional financing from Mr Gaudry was defined in the Joint Venture Terms as ‘Additional Equity’ or ‘Additional Priority Equity’. The reference to ‘equity’ in these defined terms may have been a misnomer, in that the Joint Venture Terms specified that interest would accrue on this category of potential financing from Mr Gaudry. It was also provided that this category would rank first in receiving repayment from the surplus proceeds of sale after repayment of senior debt. Next in ranking would be ‘repayment of the initial Equity contributed by the parties (as required) in their Respective Proportions’. I am in some doubt about what this was intended to mean. Only after these two priority distributions would there be a final distribution of any profits to the three joint venturers, in equal shares.
The Joint Venture Terms also provided for certain securities. A deposit to be made on the relevant land, forming part of the ‘Initial Gaudry equity’, would be secured by caveat ‘noting Gaudry’s interest in the Land’, and ‘Security for the further Costs’ would be secured by an ‘executed, unregistered 2nd mortgage’ noting Mr Gaudry’s interest as second mortgagee. Again, I am in some doubt about the full extent of the financing from Mr Gaudry that was intended to be secured under these provisions. However, it seems clear enough that at least any additional financing provided by Mr Gaudry by way of ‘Additional Equity’ or ‘Additional Priority Equity’ was intended to be secured by the proposed second mortgage in favour of Mr Gaudry.
The land was acquired and become subject to a first mortgage in favour of the Commonwealth Bank of Australia (CBA) registered on 7 December 2016. The land was subsequently developed and the Units were constructed on the land, following which the land was subdivided into two strata title lots, one for each Unit. The evidence does not disclose the identity of the registered proprietor in the period following August 2016, but it is clear that, by February 2020, Mr Rogers was the registered proprietor of the Units.
On 13 February 2020, Mr Rogers mortgaged the fee simple estate in the parent title of the Units to Mr Gaudry. For nearly three years, until 6 February 2023, this mortgage was unregistered. At the hearing, Rello made a submission questioning the validity of Mr Gaudry’s registered mortgage. In support of this submission, Rello referred me to documentation lodged with the Registrar at the time of registration of the mortgage on 6 February 2023, which included a memorandum of common provisions but no instrument of mortgage. Later in the hearing, Mr Gaudry tendered a copy of the instrument of mortgage dated 13 February 2020. Rello was given an opportunity to reply on this issue at the end of the hearing but did not do so. I am satisfied that Mr Rogers did, indeed, execute a second mortgage of the Units to Mr Gaudry and that this occurred on 13 February 2020.
It appears that, on or about 26 August 2021, the parent title was subdivided, and Mr Rogers became registered proprietor of each of the properties on those titles. The titles were subject to the same encumbrances: that is, the CBA’s registered first mortgage and Mr Gaudry’s unregistered second mortgage.
Mr Gaudry’s unregistered second mortgage secured the debt or liability described in the applicable memorandum of common provisions as ‘Secured Money’. The instrument of mortgage stated that this was to include ‘any amounts’ payable to Mr Gaudry under the Joint Venture Terms.
On 20 September 2021, Mr Rogers entered into a written agreement with Convivi Pty Ltd, a property marketing company that later changed its name to Rello. The agreement related to Unit 2. It referred to a marketing campaign to commence on that date, and total marketing costs of $153,781. It provided for Rello to recover those costs from the proceeds of sale of Unit 2, together with its fee and monthly interest to commence accruing after three months. If Unit 2 was not sold within six months, it provided for Rello to be paid that amount in any event. It also provided that Mr Rogers ‘grants a security interest over and charges [Unit 2] and the sale proceeds … to secure [Mr Rogers’] obligations under this agreement’, and recorded Mr Rogers’ consent to the lodging of a caveat.
On 21 March 2022, Rello lodged a caveat, no AV449317L, over the title for Unit 2, referring to its ‘interest as chargee’ and identifying the date of the marketing agreement between Rello and Mr Rogers.
On or about 8 July 2022, Rello commenced a proceeding in the County Court of Victoria against Mr Rogers for repayment of a debt owed by Mr Rogers to Rello in respect of the marketing agreement. In about 14 November 2022, Rello obtained a default judgment against Mr Rogers in the County Court proceeding, including an order that Mr Rogers pay $184,739 to Rello together with costs. Costs were fixed at $3,926.
On 6 December 2022, Rello obtained the Warrant from the County Court. By a letter dated 19 December 2022, the Sheriff wrote to the solicitors for Rello enclosing documentation that included a copy of the issued Warrant, endorsed as W22012739707 and identifying the land in the folios of the Register relating to the Units as being, for the purpose of s 52(2) of the TLA, affected by the Warrant. The last page of the enclosures was a notice with included a statement that ‘the Judgment Creditor is responsible for notifying the Sheriff’s Office Victoria (SOV) Real Estate Section that a sealed copy of a Warrant of Seizure and Sale has been served on the Registrar of Titles’.
The evidence does not disclose whether there was any other communication between late December 2022 and early February 2023 between Rello and the Sheriff concerning service of the Warrant on the Registrar of Titles.
On 6 February 2023, the hitherto unregistered second mortgage granted by Mr Rogers to Mr Gaudry was registered on the titles of the properties as a second registered mortgage on the properties, ranking after the CBA’s first mortgage.
On 8 March 2023, pursuant to s 52(2) of the TLA, the Registrar made a recording of service of the Warrant on the folios of the Register for each of the Units, stating on each title:
WARRANT OF SEIZURE AND SALE AW616794l SERVED 08/03/2024 ACTION NUMBER CI 02630/2022
Pursuant to s 52(3) of the TLA, which is extracted earlier in these reasons, if a transfer of title upon sale pursuant to the Warrant were to have been lodged within six months of 8 March 2023, the Registrar would have been under a duty to register that transfer, and in the meantime ‘no other instrument dealing with the land lodged with the Registrar after the time of service of the copy and before the lodging of the transfer’ could have been registered. Under s 52(5), if such a transfer was not lodged the period of six months, the Warrant would ‘cease to bind or affect the land’.
The evidence included a printout of a spreadsheet of amounts advanced by Mr Gaudry for the joint venture in the period from August 2016 to May 2023, purported interest calculations, and figures that appear to constitute a running balance. This document is the subject of some controversy. Mr Rogers’ solicitor deposed that a dispute had arisen between the joint venturers, including a dispute relating to an alleged failure by Mr Gaudry to continue to fund the development. Neither Mr Rogers nor Rello accepted the quantification in the document.
Mr Rogers disputed that the full amount calculated in the spreadsheet was owing but accepted that an amount of about $12,888,000 was owing, subject to adjustments for other joint venture expenditure in dispute between the joint venturers. It appeared that Mr Rogers claimed that those adjustments should include the ‘financing’ from Rello on the basis that Mr Rogers obtained it due to Mr Gaudry’s alleged failure to fund additional joint venture expenses, allegedly in breach of the agreement between the joint venturers. I was informed that the current amount of the liability to Rello is approximately $205,000. It is not clear to me what, if any, other adjustments were claimed by Mr Rogers.
In total, therefore, Mr Rogers appeared to accept that an amount in the vicinity of, or somewhat more than, $12.6 million would be ‘Additional Equity’ or ‘Additional Priority Equity’ within the meaning of the Joint Venture Terms, falling due to Mr Gaudry from the proceeds of sale of the Units after repayment of senior debt to the CBA. Mr Rogers seemed to accept that at least this amount was secured by Mr Gaudry’s recently registered second mortgage.
The CBA’s secured loan was approximately $3.5 million. Prima facie, therefore, the registered mortgages together secured at least about $16.1 million of Mr Rogers’ indebtedness.
On 19 June 2023, Mr Gaudry instructed his solicitors to issue a notice to pay pursuant to s 76 of the TLA to Mr Rogers, citing alleged events of default under the common provisions of the mortgage. Mr Rogers did not remedy the defaults set out in the notice.
On 4 July 2023, Mr Gaudry entered into possession of the two properties as mortgagee in possession, pursuant to s 78 of the TLA, and commenced steps to exercise his mortgagee’s power of sale.
On 5 July 2023, Mr Gaudry executed an exclusive sale authority engaging Mark Ridgeway of RT Edgar to prepare, market and sell the properties, and RT Edgar commenced an expression of interest campaign to market and sell the properties.
On 11 August 2023, Mr Gaudry received a letter from the Sheriff in relation to the Warrant, seeking details of the amount owing under Mr Gaudry’s mortgage and whether it related to a loan which was also secured by mortgages of other properties.
On 22 August 2023, Mr Gaudry responded to the Sheriff’s letter, informing the Sheriff of the amounts Mr Gaudry claimed were secured by the CBA mortgage and the second mortgage in favour of Mr Gaudry, together with an indication of the sale prices of the properties.
Also on 22 August 2023, the Sheriff informed Mr Ridgeway of RT Edgar that the Sheriff was instructed by Rello to execute the Warrant, and that the properties would be advertised for sale from 24 August 2023, with an online auction to be conducted on 27 September 2023.
On 23 August 2023, a fresh recording of service of the Warrant on the Registrar was made on the titles to each of the Units, citing a different registration number. I assume this was done because six months had nearly elapsed since the initial recordings without any transfer resulting from sale by the Sheriff, and it appeared that the online auction intended by the Sheriff would not be held in time for a transfer to be effected within the six month period referred to in s 52(3) and (5) of the TLA. The new recordings were as follows:
WARRANT OF SEIZURE AND SALE AX182084A SERVED 23/08/2023 ACTION NUMBER 02630/2022
On 3 September 2023, information was published on the Sheriff’s website in relation to the proposed sale of the properties.
An ‘Information Sheet’ forming part of the information notified to prospective purchasers including the following:
What is the Sheriff selling at an auction of property?
The Sheriff auctions a person’s interest in property under a Warrant of Seizure and Sale.
A person’s interest may be subject to any other interests in the property registered on the title to the property at the time of the auction, including mortgages and caveats. These other interests are noted on the advertisement of the Sheriff’s auction. There may also be unregistered interests that are not recorded on the title. Where known, the Sheriff will advise prospective purchasers of unregistered interests. The Sheriff cannot guarantee that there may not be other unregistered interests in the property.
A ‘Frequently Asked Questions’ document, also forming part of the information notified to prospective purchasers, included the following items:
What is the Sheriff selling at a real estate auction?
A person’s equitable interest in a property only.
Does the Sheriff provide the certificate of title to the property?
No, the Sheriff does not have access to the certificate of title. The purchaser may need to take legal action to obtain the title.
Does a Sheriff sale discharge other interests on the title - such as caveats?
No, the Sheriff sells the debtor’s interest in the property subject to all other interests and recordings on the title. The purchaser must pay any other encumbrances (such as mortgages or caveats) in addition to the final auction bid amount.
The advertised conditions of sale noted that title could be affected by ‘Encumbrances and other interests affecting the Property’ and included:
1.1 The purchaser buys the Property SUBJECT TO:
(a) any encumbrance, charge or other interest, whether registered or unregistered, affecting the Property as at the Day of Sale; …
The information accompanying the notification of online auction also contained a ‘Property Details’ sheet. That sheet included a section entitled ‘Encumbrances and other registered interests affecting the property’. This section included a condition in slightly different terms from condition 1.1(a) extracted above. It stated:
1. The purchaser buys the property subject to:
1.1. any encumbrance or other interest shown in the Certificate of Title to the property as at the day of sale …
The ‘Property Details’ sheet also stated that the encumbrance amounts as advised to the Sheriff’s office were: $3,495,675 for the CBA mortgage; $17,545,351 for Mr Gaudry’s mortgage; $26,970 for an owners corporation; and $11,339 on rates for each of the two Units. The property sheet also, apparently mistakenly, stated that the caveat lodged by Rello related to the Warrant and would be removed if sold. My understanding is that Rello’s caveat relates to its charge over Unit 2.
Some aspects of the information provided to prospective purchasers suggest that unregistered encumbrances must also be discharged in order for a successful purchaser to obtain title. This seems arguably to be inconsistent with the policy objectives that have been identified by the courts as having motivated legislative reforms in this area, at least in New South Wales.[10]
[10]See, albeit in the context of the legislative framework in New South Wales, Black v Garnock (2007) 230 CLR 438, [21]-[29] (Gummow and Hayne JJ) and [78]-[86] (Callinan J); see also [5]-[6] and [94]-[96] (Gleeson CJ and Crennan J, dissenting) (Black v Garnock).
There may be an issue as to whether all of the above information provided to prospective purchasers is consistent with s 25 of the Sheriff Act, and with s 52(4) of the TLA. However that may be, no party addressed this question and I will not consider it further.
In any event, the information provided to prospective purchasers of the Units by the Sheriff would tend to generate a degree of uncertainty on the part of prospective purchasers about the true value of any interest they might acquire from a purchase at auction by the Sheriff and their ability to rely on the Register for notification of encumbrances.
I was informed by the parties, and I am satisfied, that the online auction did not proceed, and the Sheriff has not sold either of the Units.
On 21 September 2023, Mr Gaudry executed a contract for sale of Unit 1 as mortgagee in possession at a sale price of $8,025,000, with settlement scheduled to take place on or about 20 October 2023. The purchasers were not involved in this proceeding. The contract required Mr Gaudry to provide the purchasers with clear title. Mr Gaudry would have been unable to provide the purchasers with clear title if the recording of the Warrant were to have remained on the title of Unit 1 at the time of settlement. Mr Gaudry entered into the contract for sale of Unit 1 with knowledge that the Warrant was recorded on the title. On the other hand, he did so in exercise of his power of sale as mortgagee under a mortgage that was registered on the title before the recording of the Warrant on the title.
On 28 September 2023, RT Edgar provided a market appraisal of the value of Unit 2 in the range of $7 million to $7.7 million. Together with the contracted sale price of Unit 1, the expected proceeds of sale of the Units was therefore in the range of $15,025,000 to $15,725,000. This is below the amount of at least $16.1 million apparently secured by the two registered mortgages.
As is clear from the extract of s 52 of the TLA earlier in these reasons, ss 52(6A) and (6B) provide a mechanism for a judgment creditor to cause the Registrar to remove the recording of service of a warrant from the relevant folio of the Register.
On 29 September 2023, Mr Gaudry, through his solicitors, wrote to Rello requesting that Rello remove the Warrant from the titles to the properties and provide an undertaking not to relodge such a notice so long as Mr Gaudry remained mortgagee in possession. The letter warned that, failing this, Mr Gaudry would apply to the Practice Court for urgent orders. The letter referred to Capital Finance and asserted that the proceeds of sale of the Units would be insufficient to meet debts secured to the CBA and Mr Gaudry, ‘such that Mr Rogers’ interest in the [Units] has a value of nil’. The letter also asserted that the Warrant had ‘no efficacy on Mr Rogers or anyone else who might be interested in him retaining the property’, and that there would be significant detriment to Mr Gaudry, Rello itself, Mr Rogers, other unsecured creditors, and the purchasers of Unit 1, if Mr Gaudry’s mortgagee sales process were delayed. Finally, the letter offered that, if Rello were to remove the Warrant and undertake not to relodge, Mr Gaudry would undertake to pay into court any surplus proceeds of sale after completion of the mortgage sales and payment of proceeds in accordance with s 77(3) of the TLA.
At the time of the hearing, settlement of the contract of sale of Unit 1 was required to take place on or about 20 October 2023, whereas there was no contract for the sale of Unit 2. After receiving post-hearing submissions from Mr Gaudry on the power of this Court to prevent an abuse of the Country Court’s process, on 13 October 2023, I made orders for the removal of the recording of the Warrant on the title for Unit 1, provided Mr Gaudry lodged an application in proper form, as indicated in the letter from the Registrar. The recitals to my orders included the following:
I. The Court is satisfied that in relation to the proceeds of sale of Unit 1, in which the first defendant has no secured interest, there is no realistic prospect of any distribution to the first defendant after claims of secured creditors and other priority claims have been met, and that there is no other appropriate reason for maintaining the Warrant in relation to Unit 1.
J. The Court is satisfied that, in the circumstances of this case, it has jurisdiction and powers of the kind identified by Dodds-Streeton J in Capital Finance Limited v The O’Bryan Group Pty Ltd [2003] VSC 355 to order removal of the recording of a warrant of seizure and sale from a folio of the Register, notwithstanding that the Warrant in this case was issued by the County Court of Victoria.
K. The Court is satisfied that it should make an order requiring the removal of the Warrant from the folio of the Register for Unit 1.
L. Because of the imminence of the settlement of the sale of Unit 1, the Court has decided to grant the orders set out below now, notwithstanding that it is continuing to consider what, if any, relief should be granted in respect of Unit 2.
M. In framing orders 3 and 4 below, the Court has noted the contents of the Registrar’s Letter, which identifies a form that must be lodged in order to facilitate implementation of the Court’s order removing the recording of the Warrant.
The resolution of the issues relating to Unit 2 were somewhat more complex. In addition to its other arguments, Rello relied on its interest as a chargee, and on the rule against ‘tacking’. On this basis, Rello claimed that it may have priority over Mr Gaudry of a sufficient portion of Mr Gaudry’s debt secured by his second mortgage to refute Mr Gaudry’s assertion that the maintenance of the recording of the Warrant on the title for Unit 2 would be an abuse of process.
During the hearing of this matter, Mr Gaudry, through his counsel, indicated that the plaintiff would undertake to pay into court any surplus funds available from a mortgagee sale by him of Unit 2. The form in which the undertaking was ultimately made was as follows:
The plaintiff through his counsel has provided an undertaking to pay into Court any surplus proceeds of sale available from a mortgagee sale by him of Unit 2, 16 Horsburgh Grove, Armadale after payment of the costs of sale, and payment to Commonwealth Bank of so much of the amount secured by its first mortgage as remains unpaid and payment to him of so much of the amount secured by the second mortgage as takes priority over the amount secured by the first defendant’s charge which is the subject of caveat registered no. AV449317L.
My orders on 13 October 2023 became spent after an administrative error by Mr Gaudry led to his failure to lodge the correct form with the Registrar within the time provided. I made further orders on 17 October 2023 in similar form.
Analysis
The plaintiff’s application
The substantive relief sought by Mr Gaudry in his originating motion and summons on originating motion was as follows:
2.An order that the first defendant make an immediate application to the Registrar of Titles under s 52(6A) of the [TLA] for the removal of the recording registered no. AX182084A (Warrant) of a warrant of seizure and sale from the folios of the Register for the properties known as Units 1 and 2, 16 Horsburgh Grove, Armadale, being folios of the Register:
(a)Volume 12327 Folio 190; and
(b)Volume 12327 Folio 191 …
3.An order that, if the first defendant does not comply with paragraph [scil., 2] of these Orders within three business days of the date of these Orders, the Registrar of Titles remove the Warrant from the folios of the Register for the Land upon the plaintiff filing and serving on the Registrar of Titles an Affidavit that exhibits a register search statement for the Land obtained that day which shows that no application has been lodged in accordance with paragraph [scil., 2] of these Orders.
4.A permanent injunction restraining the defendant from lodging any further application with the Registrar of Titles to record its warrant on either folio of the Register for the Land.
The summons raised questions relating to the existence and nature of the Court’s powers.
At the outset I should comment on paragraph 2 of the summons, although it ultimately played an insubstantial role in the hearing. Paragraph 2 sought to enlist s 52(6A) of the TLA to achieve the removal of the Warrant from the titles to the Units in an indirect way. Section 52(6A) confers no powers on the Court — at least, not expressly or obviously. It enables a judgment creditor to apply to the Registrar to remove a process such as a warrant from the folio of the Register affected by a recording of the process. Upon receiving such an application the Registrar is empowered by s 52(6B) to remove the recording. It is unclear whether — and if so, in what circumstances — the Court could or should order a judgment creditor to make such an application. It has proved unnecessary for me to consider that matter any further.
Paragraph 3 of the plaintiff’s summons sought the same outcome but through the making of orders directly addressed to the Registrar. This appeared a more appropriate, or at least a more straightforward, approach: if the Court lacked power to directly order the Registrar to remove the Warrant, it was not clear how the Court would have power to bring about that outcome indirectly.
The question of the Court’s power
Turning to paragraph 3 of the summons in more detail, Mr Gaudry initially identified s 103(1) of the TLA as the source of the Court’s power to order the Registrar to remove the recordings of the Warrant. Section 103 is entitled ‘General provision as to correction of errors etc.’. Section 103(1) no doubt has an important facilitative role. It provides relevantly that in a proceeding relating to land a court may direct the Registrar to make any amendments to the Register or otherwise to do any act or make any recordings necessary to give effect to any judgment and that the Registrar must obey. In addition to its obvious facilitative role in giving effect to judgments, does s 103(1) also confer substantive jurisdiction on the Court to make judgments? And if so, on what issues, and in what circumstances?[11] It might readily be concluded that such circumstances include the correction of errors, but how much further might they extend, or is s 103 predicated on the court otherwise drawing on independent sources of jurisdiction and power for the making of the relevant judgment?
[11]Marchesi v Registrar of Titles (2020) 30 VR 397, 400–404 [12]–[20]; see also Official Trustee in Bankruptcy v Registrar of Titles [2015] VSC 563; Prior v Lakic [2017] VSC 255; PropertyShares Holdings Pty Ltd v 8 Hopetoun Rd Pty Ltd (2020) 61 VR 194; McFarlane v McFarlane [2021] VSC 197.
In the end, it has not proved necessary to answer these questions, important though they may prove in future cases. That is because Mr Gaudry ultimately withdrew his reliance on s 103(1) as the relevant source of substantive jurisdiction or power, and instead relied solely on the Court’s inherent jurisdiction to prevent abuse of court processes, relying on Capital Finance.
At my request, in post-hearing submissions, Mr Gaudry addressed the question whether the Court could make orders on the basis explained in Capital Finance when the court process in question was a process of the County Court rather than the Supreme Court. Mr Gaudry submitted that this made no material difference, because the Supreme Court’s inherent and supervisory jurisdictions extended to the prevention of abuses of process of any courts or tribunals in Victoria. He relied on cases including John Fairfax & Sons v McRae,[12] in which the High Court recognised the inherent jurisdiction of a Supreme Court of a State to deal summarily with contempts of inferior courts in the relevant State, and on s 85(1) and (3) of the Constitution Act 1975 (Vic).
[12](1955) 93 CLR 351, 365.
Section 85(1) confers jurisdiction in or in relation to Victoria on this Court in the broadest of terms. Section 85(3) declares that the Court has and may exercise the jurisdiction, powers and authorities it had prior to the commencement of the Supreme Court Act, which can be traced to those of the superior Courts in England and Lord High Chancellor of England before 1874.[13]
[13]Constitution Act 1975 s 85(2) (as enacted, repealed by Supreme Court Act 1986 (Vic) s 132(d)) and Judicature Act 1874 (Vic) (No 502). See also CA Foley, ‘Section 85 Victorian Constitution Act: Constitutionally Entrenched Right … or Wrong?’ (1994) 20(1) Monash University Law Review 110, 121–122. The Supreme Courts are superior courts that are said to have the ‘unlimited powers of the courts of Westminster’: Grassby v The Queen (1989) 168 CLR 1, 16–17; Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435, 451–452; Assistant Commissioner Michael James Condon v Pompano (2013) 252 CLR 38, 60–61 [40]–[41].
During the hearing, counsel for Rello helpfully drew my attention to Herron v McGregor.[14] This authority also featured in Mr Gaudry’s post-hearing submissions. It concerned the question of whether a State Supreme Court has power to order a stay of proceedings to prevent an abuse of the process of a disciplinary tribunal. Giving the judgment of the New South Wales Court of Appeal, McHugh JA said:
In the absence of a contrary decision of the High Court on the point I think that this Court, as a superior court of justice, has inherent power to prevent an abuse of procedure in instituting or continuing proceedings in both civil and criminal cases … I am strongly of the opinion that not only has this Court the inherent power to stay its own civil and criminal proceedings for abuse of process but its general supervisory and protective power extends to protecting inferior courts and tribunals from abuse of their procedure in relation to civil, criminal and disciplinary matters.
[14](1986) 6 NSWLR 246.
Like Mr Gaudry, Rello submitted that the Court’s inherent jurisdiction to prevent an abuse of process, coupled with its supervisory jurisdiction, extended to any abuse of process of the County Court.
I am grateful to the parties for addressing this issue. I am satisfied that the Court does, indeed, possess the necessary powers to grant orders of the kind sought in paragraph 3 of the summons, as well as ancillary injunctive orders of the kind sought in paragraph 4.
The plaintiff’s case
Mr Gaudry relied on four substantive affidavits.[15] By his written and oral submissions, Mr Gaudry submitted:
[15]Affidavit of Mr Gaudry sworn 10 October 2023; Affidavit of Tara Monique Privitelli sworn 10 October 2023; Third affidavit of Tara Monique Privitelli sworn 11 October 2023; Fourth affidavit of Tara Monique Privitelli sworn 12 October 2023. There was also an affidavit of service of Tara Monique Privitelli sworn 10 October 2023.
(a) the amount owed by Mr Rogers to Mr Gaudry under the joint venture agreement and secured by Mr Gaudry’s registered mortgage (asserted to be approximately $16,270,000) plus higher ranking liabilities (approximately $3,500,000) was substantially more than the likely value at sale of the Units (approximately $15,025,000 to $15,725,000);
(b) this meant that Mr Rogers had no equity in the Units and that the recording of the Warrant on the titles to the Units was futile because:
(i) none of the proceeds of a sale by the Sheriff of Unit 1 would go to Rello due to its status as a mere unsecured judgment creditor of Mr Rogers;
(ii) as to Unit 2, any implications of Rello’s unregistered charge should be solely determined through processes relating to Rello’s caveat and not Rello’s warrant, because that warrant was obtained by Rello for an unsecured judgment debt, and so the outcome with respect to Unit 2 should be the same as with Unit 1;
(c) there could be no other appropriate reason to maintain the recordings of the Warrant, such as putting commercial pressure on the judgment debtor or others to satisfy the judgment debt, because the only effect of the recordings was to place pressure on persons with no relevant interest related to Mr Rogers;
(d) the continued recording of the Warrant would merely obstruct the operation of the mortgagee sale process, causing loss, inconvenience and injustice to Mr Gaudry and non-parties; and
(e) therefore, applying the principles explained by Dodds-Streeton J in Capital Finance, the Court should order the Registrar to remove the recordings of the Warrant from the titles to the Units.
Rello’s response
Rello relied on an affidavit of its solicitor exhibiting correspondence between the parties and raising questions about the substantiation of the amount of the liability Mr Gaudry asserted to be secured by his second mortgage over the Units.[16] At the hearing, Rello submitted that:
[16]Affidavit of Amanda Jane McDermott affirmed 12 October 2023.
(a) the Court’s power to grant relief depended on whether the maintenance of the recording of the Warrant on the titles to the Units would be an abuse of process, on the principles explained in Capital Finance;
(b) Mr Gaudry bore the onus of establishing that the recordings of the Warrant were working an injustice and had no utility;
(c) the material before the Court did not establish that Mr Gaudry had a valid mortgage securing an amount more than the likely value of Units upon sale and that the mortgagee sale process should displace the process of sale by the Sheriff pursuant to the Warrant; and
(d) further, at least with respect to Unit 2 by reason of Rello’s secured interest as chargee, there was considerable doubt relating to the ranking of its interests and Mr Gaudry’s interests, because of the need to determine the priority of equities by reference to the timing of notice of bona fide third party security interests, and the principles against ‘tacking’.[17]
[17]Rello referred the Court to Matzner v Clyde Securities Limited [1975] 2 NSWLR 293.
The positions of other defendants
Mr Rogers filed an affidavit of his solicitor describing various disputes between himself and Mr Gaudry and responding to Mr Gaudry’s evidence as to the amount owed by Mr Rogers to Mr Gaudry under the joint venture agreement.[18]
[18]Affidavit of Kathryn Margaret Finemore sworn 12 October 2023; Supplementary affidavit of Kathryn Margaret Finemore sworn 12 October 2023.
The Sheriff appeared for the purpose of assisting the Court, and did not take an active position on the question of relief.
The Court received correspondence from the Registrar, including a letter sent to the solicitors for Mr Gaudry that raised various issues about the relief he sought, and that otherwise indicated that the Registrar did not intend to appear, provided that there was no costs claim against her.
The Capital Finance case
There are substantial similarities between the facts of Capital Finance and the present case.
An incorporated developer was the registered proprietor of land on which it constructed an apartment complex. It granted mortgages and other securities over the land to various lenders, including the plaintiff, securing substantial debts. The developer defaulted on the terms of its loan agreement with the plaintiff, who was the first registered mortgagee, entitling the plaintiff to enter into possession and exercise its powers as mortgagee, including the power of sale. The project manager of the apartment complex obtained a judgment against the developer and another party, and caused a warrant for seizure and sale to be issued and attached to various apartments, including apartments that were either under a contract of sale or scheduled to be sold. The project manager had no security over the apartments. The developer and the other registered mortgagees supported the plaintiff’s application to have the recording of the warrant on the titles to the apartments removed.[19]
[19]Capital Finance, [5]–[27].
Dodds-Streeton J identified the basis of the Court’s power to grant such orders as being its power to restrain abusive or futile applications of its processes, citing Jago v District Court of New South Wales.[20] However, Dodds-Streeton J reasoned that the futility of maintaining and executing a warrant obtained by an unsecured judgment creditor would depend on establishing not only that the proceeds of sale would furnish no surplus over the amount owing to secured creditors but also that the maintenance of the warrant would not be effective to result in payment of the claim from other resources.[21]
[20](1989) 168 CLR 23, 25–26 (Mason CJ).
[21]Capital Finance, [36]–[53].
Capital Finance was followed by Robson J in Rubytime Nominees Pty Ltd v Bottiglieri.[22]
[22][2011] VSC 678.
I note that there is High Court authority suggesting that service on the Registrar of a process of execution of a judgment would generally be permitted to run its course pursuant to statute, irrespective of a conflicting process of sale.[23] In Black v Garnock, a stranger to litigation between a landowner and judgment creditor entered into a contract with the landowner to purchase land prior to the recording of any warrant on the relevant title. A warrant in execution of the judgment debt against the landowner was recorded on the title only hours before settlement, and settlement proceeded in apparent ignorance of the recording. After settlement, the Registrar refused to record the transfer, and the purchaser sought an injunction from the Supreme Court of New South Wales to compel registration of the transfer. The Sheriff had not yet sold the land pursuant to the warrant. By majority in the High Court, it was ultimately held that the injunction should be refused, permitting the Sheriff’s statutory sale process on the warrant to proceed.
[23]See Black v Garnock.
None of the parties relied upon or raised Black v Garnock. Although it may be supposed on a superficial comparison of the underlying facts to support Rello’s case, on closer consideration this is not so. That is because Mr Gaudry achieved the registration of his second mortgage over the Units (on 6 February 2023) prior to the first recording of the Warrant on the titles (on 8 March 2023), and in any event the first recording of the Warrant on both titles ceased to bind the Registrar by 8 September 2023.[24] In contrast, the purchaser’s interest in Black v Garnock remained at all times unregistered and merely equitable in nature, and this was central to the decision of the majority.
[24]By the time of hearing and determination of this matter, only the second recording of service of the Warrant, on 22 August 2023, was capable of binding the Registrar. This recording took place even longer after Mr Gaudry had registered his mortgage.
Should the Court order removal of the recording of the Warrant from the title for Unit 2?
As already mentioned, I made orders on 13 and 17 October 2023 for the removal of the recording of the Warrant from the title for Unit 1.
The circumstances relating to Unit 1 and Unit 2 were markedly different. The differences were not merely that settlement of a contract of sale of Unit 1 was imminent, but extended to substantive legal issues. Rello had no security over Unit 1 but does have security over Unit 2, in the form of an equitable chargee’s interest that arose on 20 September 2021. As outlined above, Rello claims that at least some of the advances made by Mr Gaudry secured by his second mortgage would have been made after Mr Gaudry had notice of Rello’s equitable charge and would therefore not be accorded priority over repayment to Rello out of the proceeds of sale of Unit 2 because of the rule against tacking. This means that the maintenance of the recording of the Warrant, and the seizure and sale process under the Warrant, would not, or at least might not, be futile. Rello contends that the burden of persuading the Court to order the removal of the Warrant lies on Mr Gaudry, and that he has not discharged that burden.
Tacking
‘Tacking’ is where a mortgagee claims priority over a third party’s security interest for advances the mortgagee made to the mortgagor after receiving notice of the third party’s security interest. The rule against tacking was established in Hopkinson v Rolt[25] and is the subject of statutory codification in s 94 of the Property Law Act 1958. Section 94 relevantly provides:
[25]Hopkinson v Rolt (1861) 9 HL Cas 514; 11 ER 829.
(1)After the commencement of this Act, a prior mortgagee shall have a right to make further advances to rank in priority to subsequent mortgages (whether legal or equitable)—
…
(b)if he had no notice of such subsequent mortgages at the time when the further advance was made by him; or
(c)whether or not he had such notice as aforesaid, where the mortgage imposes an obligation on him to make such further advances.
…
(3)The right to tack, save in regard to the making of further advances as aforesaid, is hereby declared to have been abolished by the Property Law Act 1928, section 94(3) …
A preliminary point
Mr Gaudry argued that Rello’s interest as chargee was protected by its caveat and that in its capacity as a judgment creditor pursuing seizure and sale under the Warrant, Rello should be regarded as an unsecured creditor. There is considerable force in Mr Gaudry’s submission that Rello’s interests are protected by its caveat. In the circumstances of this case, it is not immediately apparent that Rello would be any worse off in prosecuting its claim of priority in the context of its caveat[26] rather than in the context of a sale by the Sheriff, or for that matter, in the context of a distribution of proceeds after a mortgagee sale pursuant s 77(3) of the TLA. However, in deciding whether to order the removal of the recording of the Warrant from the title to Unit 2, I am not persuaded that I should compartmentalise and disregard Rello’s secured interest in the manner invited by Mr Gaudry. Mr Gaudry’s submission was not developed in detail by reference to any applicable authorities.
[26]See TLA ss 89A and 90.
Determination of the issues
On the current state of the evidence before me, there is indeed some doubt as to when Mr Gaudry can be said to have had notice of Rello’s equitable charge. There is also uncertainty about the extent to which the ‘Additional Equity’ or ‘Additional Priority Equity’ under the Joint Venture Terms is made up of advances that were made after Mr Gaudry had notice of Rello’s charge. So much of Rello’s submissions may be accepted. Is this enough to make a difference?
If the available evidence is treated at face value, it seems doubtful that Rello will receive any payment from the sale of Unit 2, irrespective of the form of sale adopted. At best, the prospect of a payment to Rello after a mortgagee sale cannot be ruled out. There is no real prospect of any payment if Unit 2 is sold by the Sheriff. I will now explain how I reached these conclusions.
Examining the printout of the spreadsheet of advances that Mr Gaudry put into evidence, it is not possible to be sure what amount had been advanced before the earliest potential time Mr Gaudry might have received notice of the charge. Assuming that date might have been as early as 20 September 2021, and doing the best I can to interpret the spreadsheet, it seems that the amount that had been advanced by that time (apparently including various accretions of interest) was in the vicinity of $11 million. No doubt some allowance for interest on this amount from September 2021 to the present is also needed, and I will assume that this might be in the vicinity of over $1.5–1.8 million. On this basis, it appears that Rello might be able to establish that priority over Rello’s charge could only be accorded to about, say, $12.8 million of the amount that was apparently owing to Mr Gaudry prior to the sale of Unit 1.
After the costs of sale of Unit 1 and repayment to the CBA of the joint venture’s senior debt of about $3.5 million, I infer that a significant amount of Mr Gaudry’s second-ranking secured loan will by now have been repaid from the sale proceeds of Unit 1. I infer that those proceeds will have been the contracted amount of $8,025,000. I infer that the extent of repayment in this way of money owed to Mr Gaudry amounts to about $4.5 million. These would serve to reduce the amount apparently owing to Mr Gaudry that has priority over Rello’s charge, but the remainder would still seem to exceed $8 million.
It might be possible to sell Unit 2 for something in the order of RT Edgar’s estimate of $7 million to $7.7 million, or even higher. If a very high price were to be achieved, and if Rello were to succeed in its argument that repayment of Mr Gaudry’s advances after notice of Rello’s charge must be deferred, then arguably the proceeds might be sufficient to provide a return to Rello.
However, the above analysis is premised on the estimate of sale price for Unit 2 provided by RT Edgar, which was given in the context of a sale campaign on behalf of Mr Gaudry as mortgagee in possession. There was no estimate of the price that might be obtained from a sale by the Sheriff in the evidence before me. Further, in light of the comments I made earlier in these reasons relating to the information provided by the Sheriff to prospective purchasers, on the facts of this case, it is difficult to see how any meaningful sale price would be achieved from an auction by the Sheriff of Unit 2. The information provided to prospective purchasers of the Units by the Sheriff would tend to generate a degree of uncertainty on the part of prospective purchasers about the true value of any interest they might acquire from a purchase at auction by the Sheriff and their ability to rely on the Register for notification of encumbrances. Indeed, given the magnitude of the values of the registered encumbrances alone, and the estimated value of the Units furnished by RT Edgar, it may be doubted whether any meaningful offers to purchase the Units could be expected from an auction by the Sheriff.
It is not possible for me to resolve the priority dispute between Rello and Mr Gaudry, or to make conclusive findings about the amount of Mr Gaudry’s loan secured by his second mortgage from Mr Rogers, on the available evidence. Any determination of these issues, or other appropriate resolution, will have to be pursued separately from this proceeding, and the outcomes then applied in the distribution of the proceeds of sale of Unit 2. The present question before me is in effect simply to decide which form of sale is to be permitted to proceed: sale by the Sheriff or exercise of Mr Gaudry’s power of sale as mortgagee.
If the recording of the Warrant were to be removed from the title, the likelihood is that there will in due course be a sale by Mr Gaudry to which s 77 of the TLA will apply. As already noted, s 77(3) relevantly provides for three priority rankings of payments of the proceeds of a mortgagee sale, including :
(3)The purchase money received arising from the sale shall be applied—
…
(b)secondly in payment of the moneys which are due or owing on the mortgage or charge;
(c)thirdly in payment of moneys owing under or in respect of subsequent mortgages and charges in the order of their respective priorities; …
It is at this point in the analysis that Mr Gaudry’s undertaking to the Court assumes significance. That undertaking will, in the application of s 77(3)(b) and (c) of the TLA, ensure that Rello may press for a determination or other form of resolution, on the merits, of its claim that it should receive repayment of its judgment debt against Mr Rogers from the proceeds of sale of Unit 2, in priority over advances made by Mr Gaudry after Mr Gaudry had notice of Rello’s charge. Perhaps Rello would have been able to do so in any event by reason of its caveat. The undertaking, however, ensures that the preservation of Rello’s position is abundantly clear.
If the recording of the Warrant is not removed from the title to Unit 2, the likelihood is that it will be sold by the Sheriff. RT Edgar’s estimate of $7 million to $7.7 million would be inapplicable. In light of the information that was provided to prospective purchasers in connection with the online auction that was proposed by the Sheriff, it is doubtful whether meaningful offers would be received, and there would at least be downward pressure on price. This would be to the general detriment of all concerned.
Orders
Mr Gaudry provided a proposed form of order relating to Unit 2.
There might be a return to Rello from a mortgagee sale by Mr Gaudry, if a very good outcome exceeding RT Edgar’s estimated sale price range can be achieved, and if advances by Mr Gaudry for the joint venture after he had notice of Rello’s equitable charge are deferred in favour of repayment of the debt due to Rello. There is no evidence that this is a realistic possibility if a sale by the Sheriff proceeds.
As was the case with respect to Unit 1, there is no collateral advantage to be obtained by Rello from maintenance of the Warrant on the title to Unit 2 in the form of commercial pressure on Mr Rogers, or parties related to him, to meet the judgment debt.
There is ample reason to believe that particular forms of detriment would be occasioned to Mr Gaudry by the maintenance of the Warrant on the title to Unit 2. It is likely that this would result in waste of marketing expenses already incurred in RT Edgar’s campaign to attract interest in Unit 2, could add to confusion in the market of potential purchasers, and might depress the ultimate sale price.
In all the circumstances of the case, and having regard to the principles expressed by Dodds-Streeton J in Capital Finance, I am satisfied that the maintenance of the recording of the Warrant would be futile and would occasion injustice, and that I should order the Registrar to remove the recording of the Warrant from the title to Unit 2.
Mr Gaudry also seeks an injunction to prevent Rello from re‑serving the Warrant on the Registrar, and has provided the usual undertaking as to damages in support of this application. Rello did not give, and was not under any obligation to give, any indication of its intentions in this regard. I have decided to grant such an injunction, to apply during the mortgagee sale process and subject to liberty to apply.
I will make orders substantially in those terms. In fashioning the orders, I have taken into consideration the matters the Registrar raised with respect to the form of relief, including the need to avoid making a permanent injunction preventing re-notification of the Warrant.
I will hear the parties on the question of costs of the proceeding to date.
Provided the mortgagee sale process for Unit 2 duly takes place in the manner contemplated in these reasons, in due course I expect that the parties will inform the Court that the proceeding can then be dismissed, with no further order as to costs.
SCHEDULE OF PARTIES
PLAINTIFF: | |
| ANTON GAUDRY | Plaintiff |
DEFENDANTS: | |
| RELLO FINANCE PTY LTD ACN 633 994 859 | First Defendant |
| DARREN ANDREW ROGERS | Second Defendant |
| THE SHERIFF FOR THE STATE OF VICTORIA | Third Defendant |
| REGISTRAR OF TITLES | Fourth Defendant |
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