Grey v Zaratell Pty Ltd as Trustee for C and a Family Trust

[2004] WASC 129

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   GREY & ORS -v- ZARATELL PTY LTD As Trustee for C AND A FAMILY TRUST & ORS [2004] WASC 129

CORAM:   PULLIN J

HEARD:   4, 25 & 26 MAY 2004

DELIVERED          :   10 JUNE 2004

FILE NO/S:   CIV 1763 of 2002

BETWEEN:   BRIAN ALBERT JOHNSTON GREY

OLGA THERESE ANNE GREY
ELLA WHITEMAN BARNETT
DOROTHY MARGARET PEAD
JONELLE INVESTMENTS PTY LTD (ACN 077 269 535)
MARGARET RAE SPRY
Plaintiffs

AND

ZARATELL PTY LTD As Trustee for C AND A FAMILY TRUST (ACN 009 110 407)
First Defendant

CARMELLO FRANCESCO RACCUIA
ANITA RACCUIA
ZARATELL PTY LTD (ACN 009 110 407)
Second Defendants

LINA DIFRANCO
Third Defendant

JOHN ROBERT DIPERNA
Fourth Defendant

Catchwords:

Mortgages - Rights and liabilities of mortgagor and mortgage - Action for possession - Lease by mortgagor without consent of the mortgagee - Whether mortgagee bound by the lease

Caveat - Claiming interest as lessee under lease granted by the mortgagor without consent of mortgagee - Whether caveat should be removed

Legislation:

Transfer of Land Act 1893, s 140

Result:

Judgment for plaintiffs
Order that caveat be removed

Category:    B

Representation:

Counsel:

Plaintiffs:     Mr P A Tottle

First Defendant             :     In person (by Mr C F Raccuia)

Second Defendants       :     In person

Third Defendant           :     In person

Fourth Defendant          :     No appearance

Solicitors:

Plaintiffs:     Tottle Partners

First Defendant             :     In person

Second Defendants       :     In person

Third Defendant           :     In person

Fourth Defendant          :     No appearance

Case(s) referred to in judgment(s):

Alliance Acceptance Co Ltd v Ellison (1986) 5 NSWLR 102

Carroll v Azolia Pty Ltd [2000] WASC 95

Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589

Exchange& Hop Warehouses Ltd v Association of Land Financiers (1886) 34 Ch D 195

Frost v Chief Constable of South Yorkshire Police [1998] QB 254

Maher v Commonwealth Bank of Australia [2004] FCA 248

Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR 40‑490

Tame v New South Wales (2002) 211 CLR 317

Taylor v Mostyn (1883) 34 Ch D 583

Zoneff v Elcom Credit Union Ltd (1990) ATPR 41‑058

Case(s) also cited:

AMEV Finance Ltd v Canagon Engineering Pty Ltd 6 BPR 13899

Armagas Ltd v Mundogas SA [1986] 2 All ER 385

Attorney-General (Ceylon) v Silva [1953] AC 461

Beard v Bank of New South Wales [1983] ANZ ConvR 535

Commonwealth v Orr (1981) 37 ALR 653

Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising Co (1975) 133 CLR 72

Dudley & District Benefit Building Society v Emerson [1949] Ch 707

English, Scottish & Australian Bank Ltd v City National Bank Ltd [1933] St R Qd 81

Jones v Australia & New Zealand Banking Group Ltd [1987] ANZ ConvR 30

Kennedy v General Credits Limited (1982) 2 BPR 9456

Petersen v Moloney (1951) 84 CLR 91

Phoenix Assurance Co Ltd v Berechree (1906) 3 CLR 946

Quennell v Maltby [1979] 1 WLR 318

Thomson & Chipp v Finlay [1886] S NZLR 203

1. PULLIN J:  The plaintiffs bring an action, as mortgagees, to recover money secured under a mortgage and to recover possession of the property which is subject to the mortgage.  The plaintiffs also seek an order that the third defendant withdraw a caveat from the title to the land in question.

2. I make the following findings of fact which are either admitted or are proved by the evidence.

3. The land in question has a street address of Lot 719 Marriott Street, Cannington and has the title description "Lot 719 on Plan 3736 and being the whole of the land comprised in Certificate of Title Volume 2118 Folio 474 previously being the subject of Certificate of Title Volume 1768 Folio 104".  I will call this "the property".  The property is a vacant block of land.

4. The first defendant was incorporated pursuant to the Corporations Law and is a trustee of the C and A Family Trust.  At all material times, the first defendant was the registered proprietor of the property.

5. On or about 26 September 1997 some of the plaintiffs' predecessors in title, and some of the plaintiffs, advanced the sum of $600,000 to the first defendant.  As security for repayment of the advance, the first defendant, on 26 September 1997, executed a mortgage of the property to the lenders of the money.  I will refer to this as "the mortgage".  The mortgage was registered under the provisions of the Transfer of Land Act 1893 on 31 October 1997 as Mortgage No G624346.  The first and second‑named second defendants, Mr and Mrs Raccuia, and the third‑named second defendant Zaratell Pty Ltd in its own capacity, signed the mortgage as additional covenantors.

6. By transfers of mortgage, those mortgagees who were predecessors in title to some of the plaintiffs, transferred their interests in the mortgage to those plaintiffs who were not mortgagees at the time the original moneys were advanced.  Particulars of these transfers are accurately pleaded in [6] and [7] of the statement of claim.  I will refer to the plaintiffs and their predecessors in title indiscriminately as the "plaintiffs".

7. The mortgage contained covenants by the first and second defendants to:

   (a)repay the plaintiffs the principal sum with interest on the outstanding amount thereof by equal monthly instalments payable on the 26th day of each month, the first instalment being payable on the 26 October 1997;

   (b)repay the plaintiffs the outstanding balance of the principal sum and all interest thereon forthwith if the first defendant or second defendants made default in payment of the monthly instalments made or default in observance of any of the covenants contained or implied in the mortgage;

   (c)permit the plaintiffs to exercise all rights, powers, authorities and remedies impliedly or expressly conferred on the plaintiffs as mortgagees by the provisions of the Transfer of Land Act 1893 which includes, inter alia, the right to take possession of the property and sell it by public auction, private contract or tender at any price or on any terms;

   (d)not sell, transfer, assign, part with possession or grant any lease, over the Property or attempt to do so without first obtaining the consent of the mortgagees;

   (e)punctually to pay all rates, taxes, assessments, and outgoings which have been or may be levied or charged upon or be payable in respect of, the property;

   (f)pay on demand all the mortgagee's costs outgoings fees and expenses, including without limitation valuation fees of and incidental to any breach of the covenants given by them under the  mortgage;

   (g)pay interest to the Mortgagee at the rate of 12.25 per cent per annum on all outstanding costs outgoings and expenses secured by the mortgage, which interest is to be calculated from the date of demand for payment;

   (h)upon the mortgagees becoming entitled to demand the payment of the principal sum:

   (i)the mortgagees may upon default surrender any lease;

   (ii)the mortgagees may take possession of the property and demand and require the first defendant and the second defendants and all the tenants, occupiers, and other persons claiming from, through, or under the first defendant or second defendants to vacate and give the mortgagees undisturbed possession of the property; and

   (iii)the mortgagees may take any personalty which may for the time being be situated upon the property and deliver it, at the first defendants' and the second defendants' expense, to the address of the first defendant and second defendants or such other place as the first defendant and second defendants shall nominate in writing, store it at the first defendant's and second defendants' expense, or  sell it.

   By covenant 2.3 the plaintiffs were entitled to make demand if there was a breach of the mortgage terms.

8. The mortgage also contained a covenant 4(4) which provided that:

   "(a)Any demand notice consent or other communication to be made or given under this deed shall be in writing and signed by the party giving it and may be delivered or sent by registered post addressed:-

   (i)in the case of a notice to the Mortgagee to the Address; or

   (ii)in the case of a notice or demand to the Covenantor to the address of the Covenantor mentioned above or the address of the Covenantor last known to the Mortgagee or left in some conspicuous place upon the land or some part or sent through the post by registered letter addressed to the then proprietor of the land at the proprietor's address appearing in the register book at the Land Titles Office at Midland.

   (b)Any demand or notice shall be deemed to have been received by the addressee at the expiration of forty‑eight (48) hours after it shall have been posted."

   The "Address" of the first defendant was Suite 8, 88 Walters Drive, Morley.

9. In breach of covenant (a) referred to above, the first and second defendants failed to pay monthly instalments of interest due on 26 April 2000, 26 May 2000 and 26 June 2000.  As a result, on 26 June 2000, the plaintiffs caused to be sent by prepaid post to the first defendant at suite 8, 88 Walters Drive, Morley, a notice demanding payment of the outstanding balance of the principal sum and the interest.  Mr Raccuia, who appeared in person, suggested that the notice of default, which was sent by a solicitor, Mr Ian Murie, was sent without the authority of the plaintiffs.  I find however, that Mr Murie had authority to send the notice from a committee appointed by the plaintiffs.  This notice was in fact not necessary before the plaintiff sued for recovery of the moneys secured under the mortgage.  This is so because, upon a breach of the covenant which I referred to above, all of the moneys immediately became due and payable.  However, a demand in writing was required before the power of sale could be exercised.  See s 107 and s 108 of the Transfer of Land Act 1893.  I find that the demand in writing was served on the first defendant on 29 June 2000.

10. The first and second defendants failed to pay any of the moneys demanded until 2002.  In 2002 some payments were made by or on behalf of the first and second defendants.  These payments partly reduced the amount due to the plaintiffs.  The details of those payments are set out below.

11. In further breach of the covenants in the mortgage, the first and second defendants failed to pay rates due and payable in respect of the property, as particularised in the statement of claim.  In consequence the City of Canning lodged a caveat against the title to the property.

12. The plaintiffs exercised their power of sale, and on 18 January 2002 entered into a contract for the sale of the property with Alan Robert Wall and Helen Marie Wall.  The sale price was $85,000 with settlement due on 7 March 2002.  After the contract of sale had been entered into, the third defendant, Mrs Difranco, on 28 February 2002 lodged a caveat I028627 against the title to the property, claiming an interest in the land as a lessee.

13. Mr and Mrs Wall wish to proceed with the contract of sale.  The $85,000 to be paid by the Walls (less expenses of sale) will reduce the amount presently owing by the first and second defendants.  The contract of sale has not settled because of the third defendant's caveat.  Mr Raccuia asked questions of witnesses, and made submissions, seeking to show that the contract had come to an end and that the land should have been resold.  I assume this was because Mr Raccuia considered that a resale may have generated a higher price.  This was not an issue on the pleadings and there was no evidence that the sale at $85,000 was a sale at an under value.  Mrs Difranco gave some vague evidence about offers to purchase the property, but it became clear that she was referring to offers coupled with proposals to settle the litigation.  In any event, as I have already said, there was no issue raised on the pleadings and therefore I need not consider this aspect any further.

14. On or about 10 March 2002, the following plaintiffs received the following amounts from the first or second defendants in reduction of the amounts due and owing pursuant to the mortgage:

(a)	Brian Albert Johnston Grey and Olga Grey	$61,750.98
(b)	Ella Whiteman Barnett	$9,489.19
(c)	Dorothy Margaret Pead	$42,744.10
(d)	Jonelle Investments Pty Ltd And	$142,480.34
(e)	Margaret Rae Spry	$28,496.07
TOTAL	$284,960.68

1. I now turn to the issue which occupied most time in the case.  It is an issue relating to the plaintiffs' claim for possession.  The issue concerns the third defendant's claimed leasehold interest in the land.

2. The plaintiff's themselves plead in the statement of claim that in breach of the covenant against leasing referred to above, the first defendant entered into a lease with the third defendant, Mrs Difranco, without first obtaining the consent of the mortgagees.  The defendants deny this, but then plead that the first defendant did enter into a written lease, dated 28 July 1999, with Mrs Difranco.  The plaintiffs submit that, although the document is dated 28 July 1999, it was executed shortly before Mrs Difranco lodged a caveat against the title to the property (caveat I028627).  This caveat was lodged on 28 February 2002.  Mrs Difranco, in her defence, also pleads the existence of the lease and relies on it to resist an order for possession.  Mrs Difranco pleads that the lease provided for an initial term of five years, commencing on 1 August 1999 at an annual rental of $3,600 payable by lump sum amounts in advance as mutually agreed by the lessor and lessee.  The defendants plead that Mrs Difranco paid $18,000, being the first five years' rent for the period from 1 August 1999 to 30 July 2004, that she has complied with the lease terms and is in possession of the property. 

3. The first, second and third defendants plead that in early July 1999, Mr Raccuia, the first‑named second defendant, on behalf of Zaratell and the defendants, sought and obtained the oral consent of the plaintiffs to the alleged lease.  The defendants do not contend in the pleadings, and nor did Mr Raccuia claim in his evidence, that the plaintiffs personally consented.  They contend, and Mr Raccuia gave evidence, that Mr Bill Harmer of Clifton Partners, orally consented to the grant of the lease, and that Mr Harmer did so as the agent of the plaintiffs.  The defendants allege that by letter dated 11 July 1999 Mr Raccuia, on behalf of Zaratell, sent a letter to Mr Harmer, confirming that Mr Harmer gave consent to the lease.  The plaintiffs deny that Mr Harmer gave consent and plead that if I find that he did give consent, then Mr Harmer had no authority from the plaintiffs to do so.

4. The law in relation to this issue is as follows. A mortgagor may lease the land the subject of the mortgage: see s 91 of the Transfer of Land Act 1893.  However, the rights of the lessee are subject to the general law rule that a lease entered into without the mortgagee's consent does not bind the mortgagee.  The result is that if the plaintiffs did not consent to the lease by Zaratell Pty Ltd to Mrs Difranco, then the plaintiffs will be entitled to an order for possession of the land.  If the plaintiffs did consent to the lease before it was signed, then Mrs Difranco would be entitled to remain in possession of the land: see Maher v Commonwealth Bank of Australia [2004] FCA 248 at [24]. If the plaintiffs did not consent to the lease, the third defendant cannot maintain her caveat and the plaintiffs are entitled to an order removing the caveat: see Alliance Acceptance Co Ltd v Ellison (1986) 5 NSWLR 102 and see also Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589.

5. The evidence in relation to this issue is as follows.

6. Mr Raccuia and the third defendant Mrs Difranco gave evidence that the lease dated 28 July 1999 was signed on that date by Mrs Difranco as the lessee and sealed on that day by Zaratell Pty Ltd in the presence of Mr and Mrs Raccuia who both witnessed the affixing of the seal.  The lease was in the terms pleaded by Mrs Difranco.  The lease also contains an option for renewal.  The plaintiffs were sceptical about the evidence of Mr Raccuia and Mrs Difranco concerning the date when this lease was signed.  The plaintiffs point to the fact that no caveat was lodged to protect the lease until 2002 and the fact that the lease was not stamped until 2002.  They point to the close relationship between Mr Raccuia and Mrs Difranco.  Mrs Difranco is Mr Raccuia's sister‑in‑law.  They point to the fact that the land was vacant and that there appeared to be no activity on the land before 2002.  There is therefore, foundation for the plaintiffs' scepticism.  However, the doubts about the evidence of Mr Raccuia and Mrs Difranco are not sufficient to lead me to a conclusion that, in effect, Mr Raccuia and Mrs Difranco committed perjury and had conspired to commit perjury concerning the date of execution of the lease.  I therefore find that a lease was entered into by Zaratell Pty Ltd and the third defendant on 28 July 1999.

7. Mr Raccuia gave evidence that negotiations with the third defendant concerning the lease commenced sometime before 28 July 1999.  He said that the negotiations commenced before the telephone conversation he alleges he had with Mr Harmer in the early part of July 1999.  Mr Raccuia gave evidence that he telephoned Mr Harmer and that in the course of the telephone conversation, Mr Raccuia said that the property was to be leased.  Mr Raccuia said that Mr Harmer said that he had no "problem" with that.  Mr Raccuia does not claim to have disclosed particulars about the amount of rent or that the lease was to contain an option.  Mr Harmer denied that any such conversation took place.

8. Mr Raccuia says that following the conversation he prepared and signed a letter dated 11 July 1999 which he then placed in a post box.  The copy letter that he produced in evidence was addressed to Clifton Partners Finance for the attention of "Mr Bill Hammer" (sic).

9. The letter read:

   "Dear Sir,

   REPERIODICAL LEASE/TENANT

   As requested by yourself, I am writing to Confirm our recent telephone discussion in regards to the above matter and that some of the properties would be subject to Periodical Lease or Tenanted from time to time.

   As explained, when the loan was taken out with Cliftons', six of the properties were already subject to either Periodical Leases or Tenancy Agreements.

   You indicated that you saw no objection in Leasing Lot 719 Marriott Street, as Zaratell's portfolio consisted of rental properties and this would be an addition to that portfolio.

   Zaratell will therefore be entering into a Lease Agreement as soon as practicable.   Should there be any changes, please inform me.

   Thank you for you assistance in the matter."

   It was signed by Mr Raccuia as a director of Zaratell Pty Ltd.  Mr Harmer denied receiving the letter.  Mr Raccuia said that he did not have any conversation with Mr Harmer about the letter or its contents after sending it.

10. I must therefore choose between the evidence of Mr Raccuia and Mr Harmer.  Mr Raccuia gave different accounts of the alleged conversation as the questioning proceeded through examination‑in‑chief and cross‑examination.  At one stage, his account was that Mr Harmer said that he saw no objection to the property being leased, even though there was no discussion about the terms and conditions of the lease (see t/s 438 and 439).  I find it unbelievable that Mr Harmer would have said there was "no objection" to, or no "problem" with, the lease (t/s 418) without being provided with any details about it.  Later, Mr Raccuia said (t/s 439) that he told Mr Harmer there "was going to be a lease agreement etcetera, etcetera and that the lease - wanted it to be probably a 5 year term, words to that effect." and then a little later at 439:

    "Well, whatever I said, I mean, I'm not 150% sure but I'm quite sure that it was in the discussion that took place that a term would have been specified in the general conversation."

1. I was wholly unconvinced by Mr Raccuia's evidence.  I prefer the evidence of Mr Harmer.  I accept Mr Harmer's evidence that he had no conversation with Mr Raccuia about a proposed lease of the property; I also accept Mr Harmer's evidence that, if he had received a request that the plaintiffs consent to a lease, he would have referred the request to the plaintiffs for them to decide.  My finding that there was no conversation as deposed to by Mr Raccuia is a finding which is based first upon Mr Raccuia's inability to give a consistent account of what was said in the conversation; secondly, the unlikelihood that a man in Mr Harmer's position would say that there was no problem or objection to a lease about which he had no details; and thirdly, because I believe Mr Harmer when he said that he did not have any discussion with Mr Raccuia concerning a lease of the property.

2. In any event, I find that Mr Harmer had no authority on behalf of the plaintiffs to give consent to a lease.  Mr Harmer was working with Clifton Partners.  Clifton Partners was a mortgage broker managing the plaintiffs' mortgages and Mr Harmer had no authority from the plaintiffs to consent to a lease of the property.  According to Mr Raccuia (even if he were to be believed) Mr Harmer did not say that the plaintiff's consented to the grant of the lease but only that he, Mr Harmer, saw no "problem" with, or no "objection" to the proposed lease.  Even if Mr Raccuia's evidence had been accepted, Mr Harmer did not say that the plaintiffs consented to the grant of the lease.

3. I also accept Mr Harmer's evidence that he never saw the letter dated 11 July 1999.

4. There was vague evidence from a Mr Bratovich, a real estate agent who advised Mr Raccuia, that on an unspecified date in 2000 at 163 Stirling Highway, Nedlands, "one of the mortgagors" (a person he had not met before) asked a question referring to rent the mortgagor was obtaining for the property.  If by this evidence the defendants meant me to infer that a plaintiff learned of the lease via Mr Harmer, then I decline to draw such inference.  I draw no such inference in the face of Mr Harmer's denial that there was any conversation about, or consent given by him concerning, the lease.  In any event, even if by 2000 one of the plaintiffs had heard about the lease this fact, on its own, would not benefit the defendants.  The issue in the case is whether, before entering into the lease on 28 July 1999, Zaratell Pty Ltd obtained the consent of the plaintiffs.  I find that the plaintiffs did not consent to the lease before 28 July 1999 or indeed at all.  The existence of the lease is therefore no impediment to the plaintiffs' claim for possession. 

5. I am also satisfied that the plaintiffs have established their claim for moneys due under the mortgage.  The principal due under the mortgage was $600,000.00.  I find that payments totalling $284,960.68 were made by the first and second defendants on 10 March 2002, as set out above.  That left the balance of principal due under the mortgage of $315,039.32.  From 7 July 2000 (ie seven days after service of the notice of demand) interest began to accrue at the standard rate of 12.25 per cent per annum.  The interest which has accrued up to and including 26 May 2004, (taking into account the payment in reduction of the claim), amounts to $257,943.56. 

6. I find that outstanding water rates payable pursuant to the terms of the mortgage amounted to $3,374.95.  City of Canning rates amounting to $4,942.95 were also payable.  Legal costs amounting to $6,500.00, and a valuation fee of $1,500.00, were also incurred and were payable under the terms of the mortgage.  These amounts are recoverable from the first and second defendants.  For the reasons set out above, the plaintiffs are entitled to judgment against the first and second defendants for:

   1.      Balance of principal due under mortgage              $315,039.32

   2.      Interest to 26 May 2004   $257,943.56

   3.      Outstanding water rates      $3,374.95

   4.      City of Canning rates    $4,942.95

   5.      Legal Costs      $6,500.00

   6.      Valuation fee     $1,500.00

   Total          $589,300.78

7. The plaintiffs are entitled to an order for possession of the land.  The plaintiffs are also entitled to an order that the third defendant's caveat be removed forthwith. 

8. The plaintiffs, in closing, put forward a claim for damages for stress and loss of amenity flowing from the wrongful lodgement of the caveat.  There was evidence given by some of the elderly plaintiffs about the stress that they suffered and at the end of the case, during the plaintiffs' closing submissions, I was handed a decision of Carroll v Azolia Pty Ltd [2000] WASC 95, a decision of Master Bredmeyer who held, in relation to a claim for compensation under s 140 of the Transfer of Land Act 1893, that compensation should be awarded for stress suffered by the plaintiff.  No other authority was cited.  The two decisions relied upon by the Master were Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR 40‑490 and Zoneff v Elcom Credit Union Ltd (1990) ATPR 41‑058. They were not claims for compensation under s 140. They were both claims for damages under the Trade Practices Act 1974. There is a different approach to the award of damages for mental distress, depending on whether the claim is for damages for breach of contract, damages for tort, or for a contravention of s 52 of the Trade Practices Act 1974.  In relation to damages for breach of contract, the general rule is that damages are not awarded for distress.  See the cases cited in Cheshire & Fifoot's "Law of Contract", 8th ed, 23.18.  In the case of negligence causes of action, normal emotions such as grief or distress are not compensable (Frost v Chief Constable of South Yorkshire Police [1998] QB 254 at 469; Tame v New South Wales (2002) 211 CLR 317 at 329) unless there is a resulting recognised psychiatric illness (Tame's case ibid 329). The court's power under s 140 of the Transfer of Land Act 1893 is to award compensation as the court deems just. In my opinion the pragmatic approach of the common law which results in the exclusion of liability in negligence for mere distress should apply also in the case of claims under s 140. The compensation is for the lodgement of the caveat without reasonable cause. In this case it seems arguable that the lodgement of the caveat has had the result of keeping the plaintiffs from recovering $85,000 (less expenses) since the caveat was lodged. That would result in a loss of interest. However interest on the whole amount owing under the mortgage has been claimed against the first and second defendants. There is no evidence before me that the first and second defendants will not pay the interest. However, I need not concern myself further with this aspect. Section 140 of the Transfer of Land Act 1893 provides that compensation, if it is to be claimed, should be assessed by a Judge on a summons in chambers. I need not consider whether such a claim may be made in an action because the statement of claim contained no prayer for relief for compensation under s 140 of the Transfer of Land Act 1893.

Counterclaim by first and second defendants

1. The first and second defendants counterclaim seeking an account from the plaintiff for:

   "… interest, charges and costs levied to Zaratell in relation to the mortgages over the properties referred to in paragraph 13 of the Defence; and … receipts from the sale of the said mortgaged properties."

2. Paragraph 13 of the defence alleges that the plaintiffs recovered "$1.501 million and estimated as follows …"  There followed a list of other properties over which I assume the plaintiffs held mortgages.  Moneys were set out beside each of those properties.  No evidence was led by the defendants in support of those particulars.   

3. A mortgagor is normally only entitled to demand accounts be taken where the mortgagor is claiming redemption or is claiming the surplus proceeds of sale: see "Sykes: The Law of Security", 5th Ed, 142.  In this case I find that the balance due to the plaintiffs will considerably exceed the value of the property being sold.  There would only be surplus proceeds if the defendant had made payments on account leaving less than $85,000 outstanding before the sale to the Walls.  The pleading by the first and second defendants that $1.501 million has been paid has not been proved - indeed, no attempt was made to prove it.

4. The court always has jurisdiction to order an account between mortgagor and mortgagee, but where the amount owing exceeds the proceeds of sale, the court would not usually order an account unless the mortgagor provided security to meet the costs of the account: see Taylor v Mostyn (1883) 34 Ch D 583 and Exchange  & Hop Warehouses Ltd v Association of Land Financiers (1886) 34 Ch D 195. As was said by North J in the Exchange & Hop Warehouses case, while the plaintiffs may not be entitled to stop the defendants from having an account, the plaintiffs do have the right "to say that the accounts shall not be taken at their risk and expense".

5. The counterclaims will be dismissed at 4 pm on 17 June 2004 if by that time the first and second defendants have not paid into court $10,000 on account of the plaintiffs' costs to be incurred in providing an account.  If the sum of $10,000 is paid into court, then I will hear the plaintiffs as to any further amount which they may require the first and second defendants to pay into court by way of security for costs.  I will also hear the parties about the orders which should be made to facilitate the accounting process.

Summary

1. The plaintiffs are entitled to judgment against the first and second defendants:

   (a)for the moneys due to them under the mortgage namely $589,300.78 plus interest from 26 May 2004 until judgment;

   (b)possession of the property.

2. The plaintiffs are entitled to judgment against the third defendant:

   (a)for possession of the property;

   (b)that the third defendant do forthwith remove caveat I028627;

   (c)that the third defendant do forthwith remove any personalty from the property.

3. The first and second defendants' counterclaim will be dismissed if the condition referred to above is not met.