HSBC Bank Australia Limited v The Trustee of the Property of Rui Yu, a Bankrupt (No 2)

[2024] NSWSC 301

Supreme Court

New South Wales

Medium Neutral Citation:

HSBC Bank Australia Limited v The Trustee of the Property of Rui Yu, a Bankrupt (No 2) [2024] NSWSC 301

Hearing dates:

25 March 2024

Date of orders:

25 March 2024

Decision date:

25 March 2024

Jurisdiction:

Common Law

Before:

Davies J

Decision:

1. The amended defence filed 20 February 2024 is struck out pursuant to r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW).

2. Judgment pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW) for the plaintiff, for possession of the whole of the land known as 43/42-48 Waverley Street, Bondi Junction, NSW, 2022, which is the land contained in lot 43 in strata plan 85814, being the whole of the land comprising certificate of title, folio identifier 43/SP85814.

3. The plaintiff has leave to issue a writ of possession in respect of the property, such writ not to be executed before 20 May 2024.

4. Judgment for the plaintiff against the second defendant for the amount of $977,608.26, inclusive of interest at the rates prescribed under the loan agreement up to the date of this order.

5. An order pursuant to s 101 of the Civil Procedure Act 2005 (NSW) that interest is payable by the second defendant to the plaintiff on the debt at the rate prescribed under the loan agreement that apply to the amount due and payable by the second defendant.

6. An order that the second defendant pay the plaintiff’s costs of an incidental to these proceedings, on an indemnity basis as specified in paragraph 8 of the affidavit of Michael Lockie affirmed 21 March 2024, pursuant to the terms of the loan agreement.

Catchwords:

LAND LAW – possession of land – default under loan agreement and mortgage – where second defendant had been bankrupted but bankruptcy annulled – where trustee held funds of bankrupt – where second defendant intended to use funds held by trustee to satisfy debt to mortgagee – where no arrangements made for application of funds - where no defence to mortgagee’s claim – summary judgment given

Legislation Cited:

Bankruptcy Act 1966 (Cth) s 58

Civil Procedure Act 2005 (NSW) s 101

Real Property Act 1900 (NSW) ss 57, 90

Uniform Civil Procedure Rules 2005 (NSW) rr 31.1, 14.28

Cases Cited:

HSBC Bank Australia Limited v The Trustee of the Property of Rui Yu, a Bankrupt [2024] NSWSC 69

Texts Cited:

Nil

Category:

Principal judgment

Parties:

HSBC Bank Australia Limited (Plaintiff)
The Trustee of the Property of Rui Yu, a Bankrupt (First Defendant)
Rui Yu (Second Defendant)

File Number(s):

2023/167485

Publication restriction:

Nil

Judgment

1. These proceedings commenced on 25 May 2023 seeking possession of a property known as 43/42-48 Waverley Street, Bondi Junction. The first defendant at the time the proceedings commenced was the trustee in bankruptcy of the second defendant as a result of a sequestration order made against the second defendant on 31 March 2020. Pursuant to s 58 of the Bankruptcy Act 1966 (Cth), the property vested in the Trustee subject to the first registered mortgage to the plaintiff which is the subject of the present claim. On 2 November 2020 the trustee was recorded as the registered proprietor pursuant to s 90 of the Real Property Act 1900 (NSW).

2. On 25 February 2022, judgment was given in favour of the trustee in bankruptcy for possession of the land against Jin Yu, also known as Eric Yu, who is the son of the present second defendant: Mellos in his capacity as trustee of the bankrupt estate of Rui Yu v Jin Yu [2022] NSWSC 169. Subsequent to that time, the second defendant’s bankruptcy was annulled and he is now again the registered proprietor of the property. It appears that Jin Yu is also in occupation of the property.

3. On 10 March 2015 the second defendant entered into a loan agreement with the plaintiff whereby the plaintiff loaned to the second defendant an amount of $869,255.26. On 15 May 2017 the loan agreement was varied so that the loan was changed to owner occupied, with the indicator rate of interest being changed. A mortgage given by the second defendant on 8 November 2011 was security for the loan agreement.

4. Default occurred under the loan agreement on 9 August 2019 and continued thereafter. A notice under s 57 of the Real Property Act was issued and served on the second defendant on 7 December 2022, and was not complied with. A demand for the full amount owing under the loan agreement was made on 23 February 2023 but was not complied with. That led to the commencement of the proceedings.

5. On 19 October 2023 a defence was purportedly filed. I say “purportedly” because it was not signed, there was no affidavit attesting to the truth of the matters contained in it, and it was prepared and filed by Jin Yu, purportedly acting for the second defendant.

6. On 7 February 2024 I struck out that defence: HSBC Bank Australia Limited v The Trustee of the Property of Rui Yu, a Bankrupt [2024] NSWSC 69.

7. Pursuant to leave granted, an amended defence was filed on 20 February 2024. That defence is not signed by the second defendant but by Jin Yu. Further, the affidavit is not sworn by the second defendant but by Jin Yu “on behalf of Rui Yu”. This was despite the fact that whenever Jin Yu has appeared in Court, purportedly on behalf of the second defendant, I have informed him that he is not able to act for the second defendant.

8. When the proceedings were before me for directions on 7 March 2024 the second defendant appeared for the first time. Jin Yu sought leave to speak for the second defendant, and the second defendant informed me that Jin Yu could speak English much better than he could and he wanted Jin Yu to represent him.

9. As I noted in my earlier judgment striking out the defence, the substance of that defence was that the second defendant’s trustee in bankruptcy was in possession of funds from the sale of another property, being unit 42 in the same block as the present property, and that the funds held by the trustee should be transferred to satisfy the plaintiff’s debt. I noted that there was some evidence from the trustee that he remained in possession of funds totalling approximately $61,000.00 which were available to satisfy part of the claim being made by the plaintiff.

10. The amended defence reiterates in a little greater detail, the same point, namely, that the trustee is in possession of funds which ought to be applied to satisfy the plaintiff’s debt. Complaint is also made in the amended defence about the body corporate which administers the building in which the property is located, and the fact that the second defendant was bankrupted for non-payment of strata fees.

11. In court this morning, Mr Jin Yu on behalf of the second defendant has also alleged that there has been some form of collusion between the plaintiff and the trustee in bankruptcy, in relation to setting the trustee’s remuneration, with the result that there are not sufficient funds from the sale of unit 42 to satisfy the debt owing to the plaintiff in respect of the present property, unit 43. There is no evidence of any such collusion.

12. As I have explained to Jin Yu and the second defendant, claims in respect of the trustee’s remuneration and failure on the part of the trustee for carrying out his job properly are complaints which must be made in another jurisdiction, and do not provide a defence to the present claim being made.

13. Nothing in the amended defence provides any defence to the claim the plaintiff makes for possession and for judgment for the amount outstanding as a result of the default by the second defendant from August 2019 to the present time. Issues about the application of funds held by the trustee are matters to be resolved between the second defendant and the trustee. They do not provide any defence to the plaintiff’s claim.

14. Both the loan agreement and the mortgage identify as a default event the failure to pay any amount due under the loan agreement or the mortgage. Both the loan agreement and the mortgage entitle the plaintiff on a default event to seek possession of the property.

15. I am satisfied from the affidavits of Michael Lockey sworn 6 March 2024 and 21 March 2024 that default has occurred under the loan agreement and the mortgage and that the default has not been remedied to the present time. I am satisfied from the affidavits of service that the first defendant, the second defendant and Jin Yu have been all been served personally with the statement of claim and, in the case of Jin Yu, a notice to occupier. The first defendant has taken no part in the proceedings. Jin YU has never sought to be added as a defendant.

16. During the course of the directions hearings on 7 February 2024 and 7 March 2024 I endeavoured to explain to Jin Yu that the matters raised in the original defence and the amended defence did not constitute a defence to the plaintiff’s claim. It was apparent from what Jin Yu said, and what was contained in a great deal of correspondence from him, both to the plaintiff and to my associate, that the main complaint by the second defendant was that the remuneration paid to the trustee in bankruptcy was too high with the result that the amount available from the sale of unit 42 was not sufficient to satisfy the plaintiff’s present debt.

17. It was also clear from what Jin Yu has said to me on a number of occasions and what the second defendant also said at the directions hearing on 7 March 2024 that they acknowledged the indebtedness to the plaintiff, but they needed to deal with the trustee in bankruptcy so that the plaintiff’s debt could be satisfied. These proceedings have now been on foot for ten months and there is nothing in the evidence to indicate any further adjournments are likely to bring about the result that the plaintiff’s debt will be satisfied.

18. The amended defence filed 20 February 2024 is not the defence of the second defendant. However, for present purposes, I am prepared to accept that it is the defence that he makes to the claim so that the issues are not decided on technical and pleading issues. Nevertheless, nothing contained in that defence does provide any defence to the plaintiff’s claim.

19. I am satisfied from the affidavit of Michael Lockey affirmed 21 March 2024 that the amount outstanding under the loan agreement and mortgage is $977,608.26. Both the loan agreement and the mortgage entitle the plaintiff to recover enforcement expenses on an indemnity basis.

20. Accordingly, I make the following orders:

1. The amended defence filed 20 February 2024 is struck out pursuant to r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW).

2. Judgment pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW) for the plaintiff, for possession of the whole of the land known as 43/42-48 Waverley Street, Bondi Junction, NSW, 2022, which is the land contained in lot 43 in strata plan 85814, being the whole of the land comprising certificate of title, folio identifier 43/SP85814.

3.   The plaintiff has leave to issue a writ of possession in respect of the property, such writ not to be executed before 20 May 2024.

4.   Judgment for the plaintiff against the second defendant for the amount of $977,608.26, inclusive of interest at the rates prescribed under the loan agreement up to the date of this order.

5. An order pursuant to s 101 of the Civil Procedure Act 2005 (NSW) that interest is payable by the second defendant to the plaintiff on the debt at the rate prescribed under the loan agreement that apply to the amount due and payable by the second defendant.

6.   An order that the second defendant pay the plaintiff’s costs of an incidental to these proceedings, on an indemnity basis as specified in paragraph 8 of the affidavit of Michael Lockie affirmed 21 March 2024, pursuant to the terms of the loan agreement.

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Decision last updated: 27 March 2024