Grenfell Street Securities Ltd v 74 Commercial Road Pty Ltd
[2008] SASC 37
•21 February 2008
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
GRENFELL STREET SECURITIES LTD v 74 COMMERCIAL ROAD PTY LTD
[2008] SASC 37
Reasons of Judge Lunn a Master of the Supreme Court
21 February 2008
REAL PROPERTY
Notice of default under s 132 of Real Property Act 1886 on mortgage of land - terms of notice unclear as to amount required to be paid to remedy default - held notice defective and order for possession under Part XVII of the Act retused.
GRENFELL STREET SECURITIES LTD v 74 COMMERCIAL ROAD PTY LTD
[2008] SASC 37
JUDGE LUNN: The plaintiff holds 2 registered mortgages over the subject property of which the defendant is the registered proprietor. These reasons are confined to the first mortgage, but similar conclusions apply to the claim under the second mortgage. The first mortgage was dated 11 March 2004 and had a principal sum of $1,495,000. Most, but not all, of that principal sum was advanced by the plaintiff to the defendant. The principal was repayable on 15 March 2006, but it has never been repaid.
On 25 July 2007 the plaintiff served a default notice dated 20 July 2007 on the defendant (“the default notice”) which read:
DEFAULT NOTICE
&
NOTICE OF INTENTION TO EXERCISE POWER OF SALE PURSUANT TO
SECTION 132 OF THE REAL PROPERTY ACT 1886 AS AMENDED AND
MEMORANDUM OF MORTGAGE REGISTERED NUMBER 98043335
NOTICE TO THE MORTGAGOR NAMED BELOW:
Mortgagor: 74 Commercial Road Pty Ltd ACN 104 346 661
(“you”)
Mortgagee: Grenfell Securities Limited ACN 075 358 075
Mortgaged Property: Allotment 6 on Filed Plan 105450 in the area named Port Adelaide, Hundred of Port Adelaide, Volume 5160 Fo0lio 215.
Mortgage:9804335
Amount due as at the $1,453,746.06
date of this notice: The amount due may change after the date of this notice, for example as interest and charges accrue.
1You are in default under the mortgage in that you have failed to pay to the Mortgagee the whole or part of the secured moneys (as that term is defined in the Mortgage).
2You are required within 31 days of service upon you of this notice to remedy the default by payment to the Mortgagee of the whole of the amount of the secured moneys.
3In addition at the time of repayment, you will be required to pay all further accrued interest to the date of payment and all usual duties, fees and charges properly payable by you under the Mortgage and also any penalties which you are required to pay pursuant to the Mortgage of terms of any offer of the agreement for any loan between you and the Mortgagee and all other moneys properly payable under the Mortgage.
4Any amount paid which is less than the Amount Due will be accepted without prejudice to the Mortgagee’s rights under the Mortgage, and this notice.
5If you fail to comply with this notice within the time specified, the Mortgagee may proceed to take possession of the Mortgaged Property (of any part of it) without further notice to you.
6The Mortgagee may exercise its power of sale in relation to the Mortgaged Property and the Mortgaged Property may be sold by the Mortgagee.
7The Mortgagee may exercise all or any of the other rights it has under the Mortgage or at law.
Dated the 20th day of July 2007
HUNT & HUNT
Per (signed)
Solicitors for the Mortgagee
26 Flinders Street
ADELAIDE SA 5000
The defendant has made no payments to the plaintiff since that notice.
On 13 December 2007 the plaintiff instituted this action under Part XVII of the Real Property Act seeking an order for possession of the subject property. It filed an affidavit of its director, David Ainsworth, in support of the summons which has not been disputed by the defendant. At the hearing of the summons the defendant’s solicitor submitted that on the plaintiff’s own evidence it had not established its entitlement to an order for possession.
In his outline of submissions the defendant’s solicitor stated:
12Having chosen to:
(a)issue and serve the Default Notices and Notices of Intention to Exercise of Power of Sale Pursuant to Section 132 of the Real Property Act 1886 as Amended and Memorandum of Mortgage Registered Number 9804335, and
(b)issue proceedings under Part XVII of the Real Property Act 1886 (“the RPA:”)
the plaintiff is now bound by the legislative regime and rules that apply to those proceedings.
In his reply the plaintiff’s solicitor did not take issue with this submission. The plaintiff did not dispute that it would fail if it could not prove due compliance with s 132 of the Real Property Act.
S 132 provides:
Every mortgage ….. under this Act shall have effect as a security, ….. and in case default be made in the payment of the principal sum, interest, annuity, or rent-charge, or any part thereof thereby secured, or in the observance of any covenant therein expressed or implied, and such default be continued for the space of one month, or for such other period of time as may therein for that purpose be expressly limited the mortgagee or encumbrancee may give to the mortgagor or encumbrancer notice in writing to pay the money then due or owing on such mortgage or encumbrance, or to observe the covenants therein expressed on implied, as the case may be, and that sale will be effected if such default be continued, or may such notice on the mortgaged or encumbered land, or at the usual or last known place of abode in South Australia of the mortgagor or encumbrancer.
The only authority to which I was referred which deals with s 132 was Circuit Finance Pty Ltd v Glenauchen Pty Ltd, Debelle J, 28 February 2001, Judgment No [2001] SASC 41. It does not deal with the issues in this action. Other authorities dealing with broadly similar, but not identical, provisions in other jurisdictions are not of great assistance in interpreting s 132. The crux of the notice required by s 132 is that the mortgagor is within the stipulated time “to pay the money then due or owing on such mortgage”.
I accept the defendant’s contention that it is impossible to discern from the face of the default notice precisely what the defendant was required to do to remedy its default. The amount due is stated in the default notice to be $1,453,746.06. Paragraph 2 of the notice requires the defendant to “remedy the default by payment to the (plaintiff) of the whole of the amount of the secured moneys”. In paragraph 1 “secured moneys” is stated to be as defined in the mortgage. Clause 3.1 of the mortgage defines “secured moneys” in very broad terms as follows:
Secured Moneys
3.1In addition to the Principal Sum, interest charges and costs as hereinafter provided the moneys secured by this mortgage extends to all moneys and damages which now or in the future are owing or unpaid actually or contingently by the Mortgagor, the Borrower or the Guarantor to the Mortgagee for any reason and on any account whatsoever and without limitation extends to all or any past or future advances by the Mortgagee to the Mortgagor, the Borrower of the Guarantor and whether owing by the Mortgagor, the Borrower of the Guarantor jointly or severally with any person and whether or not arising pursuant to any assignment (whether with or without the consent of the Mortgagor) to the Mortgagee of any debt of the Mortgagor, the Borrower or the Guarantor including all payments made by the Mortgagee to fulfil any obligation or to remedy any default of the Mortgagor, the Borrower or the Guarantee arising under this mortgage includes without limitation any arrangement under which the Mortgagee incurs any obligation or liability or holds security for performance of any such obligation or pays money to another person or suffers any loss or expense in relation to the Mortgagor, the Borrower or the Guarantor.
It extends to debts which are not the moneys advanced for the first mortgage and includes moneys paid by the plaintiff to remedy the defaults of the defendant and the guarantor. There is no suggestion that the defendant knew, or could have known, what amount constituted the “secured moneys” under the first mortgage at the time of the service of the default notice. Of particular significance is that there is no express link in the default notice between the stated amount due and the amount of the secured moneys. If they were the same, it would be expected that the default notice would say so. The fact that they are not linked leads to the inference that they are potentially different amounts. Thus the default notice is ambiguous as to whether the default can be remedied by payment of the $1,453,746.06, subject to adjustments for accrual of continuing charges, or whether it is some other amount calculated under the definition of “secured moneys”. The law will not act on notices which do not enable the recipient to understand with reasonable certainty what is required to be done to comply with the notice: Fox v Jolly [1916] 1 AC 1. For this reason the default notice is not proper compliance with s 132.
There is a further reason to conclude that the amount stated as due under the default notice was not “the secured moneys”. Exhibited to the affidavit of Mr Ainsworth as Exhibit “DSA8” was a true copy of the statement of the account which set out the full details of the “First Debt”, (ie the first loan). This exhibit shows a running debit balance as at 15 July 2007 of $1,471,312.16. No subsequent credits are shown and on 15 August 2007 the debt balance had increased to $1,489,090.52. Thus the amount shown as due in the default notice as at 25 July 2007 was $17,566.10 less than the amount as shown as due on the statement of account as at 15 July. The discrepancy was referred to by the defendant’s solicitor, but was not explained by the plaintiff’s solicitor. This reinforces the conclusion that the payment demanded of “the whole of the amount of the secured moneys” was significantly different from the amount as shown as due in the notice.
These conclusions are sufficient to dispose of the summons and it is not necessary to deal with the other submissions put forward by the defendant.
I have today made the following orders:
1Summons dismissed.
2Costs of the summons as agreed or taxed to be paid by the plaintiff to the defendant.
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