Ghannam v BB&B Penrith Pty Ltd

[2022] NSWSC 1588

Supreme Court

New South Wales

Medium Neutral Citation:

Ghannam v BB&B Penrith Pty Ltd [2022] NSWSC 1588

Hearing dates:

21 November 2022

Decision date:

21 November 2022

Jurisdiction:

Equity - Real Property List

Before:

Peden J

Decision:

See paragraph [34]

Catchwords:

EQUITY — Equitable remedies — Orders for judicial sale out of court — Where first defendant accepted that plaintiff had an equitable charge over the property — Where second defendant was first registered mortgagee and excused from appearing — Where first defendant in default of previous court orders regarding agreed sale or refinance — Where sale primarily resisted on the basis of an abuse of process — Where orders for sale made

Legislation Cited:

Civil Procedure Act 2005 (NSW) s 56

Cases Cited:

Australia and New Zealand Banking Group Pty Ltd v Donnelly [2012] NSWSC 1615

Bai v Watson Elite Pty Ltd [2022] NSWSC 318

King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441

Lion White Lead Ltd v Rogers (1918) 25 CLR 533

Sood v Christianos [2008] NSWSC 1087

Category:

Principal judgment

Parties:

Jamal Ghannam (Plaintiff)
BB&B Penrith Pty Ltd (First Defendant)
Australia and New Zealand Banking Group Ltd (Second Defendant)

Representation:

Counsel:
S Lipp (Plaintiff)
T Hall, solicitor (First Defendant)
Excused from appearing (Second Defendant)

Solicitors:
SD Commercial Lawyers (Plaintiff)
Hall Partners (First Defendant)
Dentons (Second Defendant)

File Number(s):

2022/155845

Publication restriction:

Nil

Judgment

1. The plaintiff, Jamal Ghannam, paid $440,000, on behalf of himself and his daughter, as the deposit for two off the plan units on a property in Penrith (the Property) owned by the first defendant, BB&B Penrith Pty Ltd (BB&B). The development has not progressed at all and the Property remains a vacant lot.

2. Mr Ghannam seeks orders for the judicial sale of the Property so that the deposit may be repaid from the proceeds of sale.

3. BB&B accepted that Mr Ghannam has an entitlement to the refund of the deposit as “a debt due” and that it was secured by way of an equitable charge over the Property: see eg Bai v Watson Elite Pty Ltd [2022] NSWSC 318 at [28] (Darke J).

4. However, BB&B resisted Mr Ghannam’s relief because it was submitted:

1. The proceedings were improperly brought as an abuse of process; or

2. Mr Ghannam is not entitled to relief alone because his daughter was also named as a purchaser, and she ought to have been joined as a party.

5. The issues to be determined are:

1. Whether BB&B’s grounds of opposition are made out; and

2. Whether it is appropriate to make orders for the appointment of a trustee for a judicial sale or a receiver.

6. The Australia and New Zealand Banking Group Ltd (ANZ) was appropriately joined as the second defendant, being the first registered mortgagee (AK446566) and neither opposed nor consented to the orders sought by Mr Ghannam. At ANZ’s request, I excused it from appearing at the hearing. However, ANZ reserved its position as to its own mortgage. Mr Ghannam does not challenge ANZ’s right to be paid all of its debt on the sale of the Property.

Background

7. The following facts are not in dispute.

8. On 10 January 2017, Mr Ghannam and BB&B exchanged two contracts for the sale/purchase of two units on the Property, known as Lot 2 and Lot 6 (Sale Contracts). Pursuant to a Deed of Guarantee, Mr Danny Basseal, the director of BB&B, and Mr Habib Boustany, an acquaintance of Mr Basseal, “unconditionally guaranteed” BB&B’s obligations under the Contracts.

9. In three instalments over September 2016, December 2016, and January 2017, Mr Ghannam paid a total of $440,000 (Deposit) to Mr Boustany.

10. In partial performance of the Contracts, throughout 2018 and 2019, BB&B paid Mr Ghannam a total of $17,500 in interest payments on the Deposit.

11. On 22 October 2019, Mr Ghannam placed a caveat over the Property (First Caveat). On 14 July 2021, BB&B served a lapsing notice, and on 28 July 2021, Mr Ghannam commenced proceedings seeking to maintain his caveat. The terms of the caveat are not in evidence but appear to have sought to protect an equitable interest in the Property by reason of the Sale Contracts.

12. Those proceedings were resolved by consent orders made by Darke J on 5 August 2021. Those orders relevantly provided:

1. the Defendant, Habib Boustany and Danny Basseal each undertake to the Court not to deal with the real property described as Folio 2/11906 (Property) in any way other than to complete a sale of the Property or a refinance of the Property and including as to the current debt over the Property (refinance) until further order.

2. The Defendant undertakes and warrants to the Court and to the Plaintiff that in any refinance or sale of the Property, it will ensure that there are sufficient funds to pay to the Plaintiff the sum of $453,500.

3. The Defendant, Habib Boustany and Danny Basseal, are directed and undertake to:

(a) keep the Plaintiff informed of the progress of the sale or refinance of the Property in writing, (on a weekly basis), commencing from the date of these Orders;

(b) instruct Hall Partners as its solicitors in respect of the refinance, or conveyance and sale of the Property, and these proceedings;

(c) direct their solicitors to do everything necessary to comply with the terms, and the spirit and the intention of these orders;

save, and except in the event that they are granted leave of the Court to instruct other solicitors to appear and to act for them in these proceedings or concerning the refinance or the sale;

4. Upon settlement of any sale or refinance of the Property, the Defendant is to immediately pay to the Plaintiff the sum of $453,500.00 by electronic transfer, into the Plaintiffs solicitor's trust account.

5. Upon receipt of $453,500.00 in cleared funds, the Plaintiff is to rescind the contracts he entered into in relation to the purchase of two units in respect to the Property.

6. The proceedings are stood over to the Real Property List on 3 September 2021.

7. The Plaintiff is to remove Caveat AP622245 within 5 days of the making of these Orders.

8. Liberty to restore.

13. Mr Ghannam withdrew the First Caveat in accordance with those orders. However, to date, BB&B has not sold or refinanced the Property and did not provide Mr Ghannam with updates about the progress of any sale or refinance pursuant to those orders.

14. On 11 February 2022, following the failure of the first defendant to register “Contract Documents” on or before 30 September 2018 under a sunset clause in the Sale Contracts, Mr Ghannam served two written notices of rescission on BB&B.

15. On 5 April 2022, Mr Ghannam lodged a new caveat over the Property (Second Caveat) claiming a “purchaser’s equitable lien for the return of deposit money paid to the vendor” referencing the Sale Contracts and notices of rescission.

16. According to an ASIC search dated 18 November 2022, BB&B’s status is currently “Strike-Off Action in Progress”. Further, Mr Hall submitted that the ASIC search also evidences that recently “an agent of a mortgagee” has been appointed, whom he identified as Messers Richard Albarran and Brent Kijurina of Hall Chadwick, without identifying the mortgagee.

17. An appearance was filed with leave today by Mr Trevor Hall, of Hall Partners. He made oral submissions, but no written submissions were made, contrary to the Court’s previous orders.

Abuse of process?

18. BB&B submitted that the amended summons ought to be dismissed because Mr Ghannam ought to have brought a motion in the earlier proceedings when there was a breach of Darke J’s orders. No strike out application had ever been brought by BB&B and I was not referred to any correspondence where BB&B agitated for such a course, nor was I referred to any authority that would require that approach. To take such an approach would in my view, be contrary to just, quick and cheap litigation as expressed in the Civil Procedure Act 2005 (NSW) s 56.

19. While I accept that it was open to Mr Ghannam to bring a motion in those proceedings in circumstances where there is a clear and admitted breach of the Court’s orders, I do not consider that Mr Ghannam was prohibited from bringing these proceedings because:

1. At the time of the 2021 orders, Mr Ghannam had not issued notices of rescission of the Sale Contracts;

2. BB&B had not accepted that Mr Ghannam was entitled to an equitable charge by reason of an entitlement to the refund of the deposit monies.

20. Further, I consider that, had a motion been brought in the earlier proceedings, it is likely the relief sought would have included the same relief being sought by Mr Ghannam now.

21. BB&B submitted that not all of Darke J’s orders had been breached because there was no timeframe for the promise to refinance or sell and repay Mr Ghannam. It is unnecessary to determine this issue because of my conclusion above. However, briefly, I accept there is no express timeframe, but as Mr Hall for BB&B accepted, those orders needed to be complied with within a reasonable time and the parties clearly expected a reasonably quick process, as BB&B and its director were directed and undertook to give weekly updates of the process. It is unnecessary for me to determine with precision the timeframe in circumstances where I am satisfied that a reasonable time had expired by the time Mr Ghannam commenced these proceedings on 30 May 2022, and has certainly passed by now.

Can orders be made in favour of Mr Ghannam alone?

22. For the following reasons, I do not accept BB&B’s submission that the proceedings are improperly constituted because Mr Ghannam’s daughter is not a party, but she was a joint purchaser under the Sale Contracts:

1. Mr Ghannam’s uncontested evidence, which I accept, is that he paid the whole of the deposit monies for himself and his daughter.

2. Clause 23.2(g) of the Sale Contracts expressly provides that “an agreement… in favour of 2 or more persons is for the benefit of them jointly and severally”, and therefore entitles one purchaser to obtain the benefit pursuant to the agreement. See also Lion White Lead Ltd v Rogers (1918) 25 CLR 533 at 551 (Isaacs and Rich JJ).

3. It is not for BB&B to raise this as an issue standing in Mr Ghannam’s way of recovering the deposit. Any judgment in Mr Ghannam’s favour would not prevent his daughter making a claim against him, should she have any entitlement and desire to do so.

Should judicial sale be ordered or a receiver appointed over the Property?

23. In Sood v Christianos [2008] NSWSC 1087, Brereton J (as his Honour then was) observed at [16]:

As to the first, judicial sale is the standard remedy of an equitable chargee. Upon default, an equitable chargee is entitled as of right to an order for sale; this is not regarded as a matter of discretion. Sykes and Walker say as much (at 198): "The chargee on default has the right to apply to the court for an order for sale. Such order is of right and not regarded as a matter of discretion". In this field, where it is a remedy of an equitable chargee, judicial sale is not a remedy of last resort but the standard remedy, as I have previously observed in Mango Media Pty Ltd v Mertes [2006] NSWSC 1460, [31].

24. Garling J, in Australia and New Zealand Banking Group Pty Ltd v Donnelly [2012] NSWSC 1615 at [29]-[30], further observed that an equitable chargee does not need to demonstrate what steps have been taken to enforce the charge or any special entitlement to the order. Rather, it suffices that the equitable chargee establishes that the charge exists, the charge is enforceable, and that there has been a default. Further, the Court has a residual discretion in determining whether judicial sale should be ordered, having regard to the position of those who will be adversely affected by such an order, else the equitable remedy become an instrument of injustice.

25. BB&B made no submissions particularly against the exercise of the discretion to order a judicial sale, other than a faint complaint that such an order would be more expensive than if the parties sold the Property themselves. It has always been open to the parties and, in particular, BB&B to sell the Property, which has not occurred. It has also been open for the parties to resolve the matter by an agreement in other terms. That has not occurred.

26. Mr Ghannam submitted that the Property should be sold broadly for the following reasons:

1. BB&B has made various promises that it would repay the deposit monies to the plaintiff, including through the consent orders made by Darke J on 5 August 2021.

2. BB&B does not dispute Mr Ghannam’s right to be repaid the deposit monies.

3. There are no cross-claims or additional proceedings which would be disrupted by a judicial sale.

4. The deposit sum of $440,000 is a substantial amount and equates to 27.2% of the value of the Property, according to Mr Ghannam’s “curb-side” valuation figure.

5. No persons reside at the Property and the Property was part of a commercial venture between the parties.

6. BB&B’s continued operation is not known. According to the ASIC Register, there is a “Strike Off Action in Progress”.

27. Courts have exercised caution in ordering a judicial sale, for example where there is no evidence of the value of the property and the size of the existing mortgage. Here, an expert valuation was tendered by Mr Ghannam, without objection, valuing the Property at $1,550,000.

28. Mr Basseal gave evidence during cross-examination that the current debt owing to the ANZ is “about $878,000”.

29. Therefore, there does not appear to be any doubt that there is sufficient equity in the Property to pay both the second defendant and Mr Ghannam.

30. In light of King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; 64 NSWLR 441 at [100] and following (Campbell J), Mr Ghannam submitted that it would be appropriate to require the trustee to seek the Court’s leave, should he wish to sell the Property below a reserve price set in consultation with a real estate agent. Such an order will provide BB&B with further protection during the sale process.

31. I therefore consider that it is appropriate to exercise my discretion to order a judicial sale, with appropriate orders to ensure fairness to the defendants.

32. Mr Todd Gammel, official liquidator, has consented to appointment as trustee to sell the Property. The defendants raise no complaint about him. I consider it appropriate to order Mr Gammel be appointed as trustee to sell the Property.

Orders

33. BB&B made no submissions as to the form of orders, should I be minded to order a judicial sale.

34. I make the following orders:

1. Declaration that the first defendant has charged the property described in Certificate of Title Folio Identifier 2/1190616 and located at 29 – 31 Castlereagh Street, Penrith 2750 (Property) with payment to the plaintiff of $440,000 plus interest.

2. Order that pursuant to the Court’s inherent jurisdiction:

1. Mr Todd Gammel be appointed as trustee for the sale of the Property (Trustee);

2. the Property immediately vests in the Trustee upon the making of these orders; and

3. the Trustee conduct and complete the sale of the Property in accordance with these orders and convey title to the Property upon completion of the sale.

3. By way of ancillary order to Order 2, that the first defendant is to give vacant possession of the Property to the Trustee within two days of these orders.

4. Leave is granted to the plaintiff to issue a Writ of Possession forthwith, such writ not to be executed earlier than four days of these orders.

5. Orders that the first defendant must:

1. immediately deliver to the Trustee the Certificate of Title for the Property, should it be in possession of the Certificate of Title; and

2. within two days after being requested in writing by the Trustee, deliver to the Trustee any other documents in its possession or under its control relating to the Property that are reasonably required by the Trustee to conduct or complete the sale of the Property.

6. Orders that the Trustee is to take all reasonably necessary steps required (including but not limited to, appointing a real estate agent and auctioneer) to sell the Property by public auction.

7. The Trustee is to obtain a valuation of the Property by a registered valuer appointed by the Trustee and upon receipt of the valuation is to apply to the Court for the setting of a reserve price for the sale of the Property by public auction (Reserve Price).

8. Orders that the Trustee must not sell the Property for less that the Reserve Price except by leave of the Court.

9. Orders that if, at a public auction of the Property, the Reserve Price is not reached, the Property is to be passed in and the Trustee is to take all reasonably necessary steps required to sell the Property by further public auction or by private treaty at or above the Reserve Price.

10. Order that from the proceeds of sale the following be paid in this order:

1. first, for all the proper costs and expenses relating to the sale of the Property including any agent’s fees, tax, levies or rates and the Trustee’s costs and expenses;

2. second, the whole of the amount due to the second defendant pursuant to registered mortgage AK 446566;

3. third, as to any remaining proceeds of sale into Court and those surplus proceeds of sale remain charged with payment of $440,000 plus interest.

11. For the purpose of entering the order for possession and the entry of any writ of possession in accordance with these orders, transfer the proceedings (other than the remaining issue as to costs) to the Possession List in the Common Law Division of this Court.

12. Direct the first defendant to notify Messers Richard Albarran and Brent Kijurina of Hall Chadwick of these orders by 5pm 23 November 2022.

13. Directs the plaintiff to notify the second defendant of these orders by 5pm 23 November 2022.

14. Grants to the parties and Messers Richard Albarran and Brent Kijurina of Hall Chadwick liberty to apply to the Court on three days’ notice in connection with the operation of these orders including for the terms for payment out of the surplus proceeds of sale.

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Decision last updated: 21 November 2022