Indelicato v Wijethunga Liyana Patabendige - [2020] WADC 35

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   INDELICATO -v- WIJETHUNGA LIYANA PATABENDIGE [2020] WADC 35
CORAM:   REGISTRAR KINGSLEY
HEARD:   11 FEBRUARY 2020
DELIVERED          :   Ex tempore
PUBLISHED           :   20 MARCH 2020
FILE NO/S:   CIVO 11 of 2019
BETWEEN:   MICHELE INDELICATO
First Applicant

ROSANNA RITA INDELICATO
Second Applicant

AND

SAMARASENA WIJETHUNGA LIYANA PATABENDIGE
First Respondent

RUBY ANNA FREDERICKS-WIJETHUNGA
Second Respondent

Catchwords:

Section 103 Civil Judgments Enforcement Act - Application to vary a Property Sale and Seizure Order

Legislation:

Nil

Result:

Application refused

Representation:

Counsel:

First Applicant	:	Ms Luck
Second Applicant	:	Ms Luck
First Respondent	:	Mr Gough
Second Respondent	:	Mr Gough

Solicitors:

First Applicant	:	McAllister Legal
Second Applicant	:	McAllister Legal
First Respondent	:	Mills Oakley
Second Respondent	:	Mills Oakley

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

Capital Finance Australia Ltd v O'Bryan Group Pty Ltd [2003] VSC 355

REGISTRAR KINGSLEY:

[This decision was delivered extemporaneously on 14 February 2020 and edited from the transcript.]

The judgment in this matter arises from an adjudication made under the Construction Contracts Act 2004 (WA) (CCA). The adjudication was certified by a duly authorised officer of the Building Commission and was registered as a judgment in this court on 16 January 2019.
The judgment debtors have brought an application pursuant to s 103 Civil Judgments Enforcement Act 2004 (WA) (CJEA) to amend or cancel an original order. In this case the original order is a property sale and seizure order (PSSO) lodged 5 April 2019.
A number of affidavits have been filed in relation to this application and a previous application for a suspension order pursuant to s 15 CJEA. The affidavits I refer to are:
1.the judgment debtors affidavit filed 7 May 2019;
2.the judgment debtors affidavit filed 28 January 2020;
3.the judgment debtors affidavit filed 4 February 2020; and
4.the affidavit of Mr Vivian, the judgement creditors solicitor, filed 7 February 2020.
The PSSO is over two properties, which I refer to as Golf View and Flinders Street. The judgment debtors brought an application for a suspension order pursuant to s 15 CJEA in May 2019. That application was supported by the judgment debtors' 7 May affidavit. The judgment debtors depose that they dispute the jurisdiction of the arbitrator and have filed an application for judicial review. The application for suspension came before a deputy registrar in May 2019 and was adjourned sine die. In June 2019 the deputy registrar adjourned the suspension application to a special appointment for hearing.
In September 2019 the judgment creditor brought an application for a means enquiry. The summons issued, with a hearing on 17 October 2019, which was adjourned to 21 November 2019, where the judgment debtor was examined. In the meantime, on 30 October 2019, an order was made extending the sale period of the PSSO over Golf View and Flinders Street.
On 28 January 2020, the judgment debtors bring this application under s 103 CJEA to vary the PSSO by removing the Flinders Street property. The reason for the variation is that the Flinders Street property is subject to a contract for sale. There is a condition in the contract that the PSSO over Flinders Street be removed by 30 January 2020. The judgment debtors' application was listed for hearing on 29 January 2020. The judgment creditor sought an adjournment because of short notice. The application was adjourned to 11 February 2020 for hearing.
There are proceedings in other courts, as well as substantive proceedings in this court, involving the parties.
The CCA provides a rapid process, by way of arbitration, for resolving payment disputes under a construction contract, without the parties' ultimate rights under the construction contract being affected. An arbitrator's determination is meant to keep money flowing, and at the end of the day the respective rights of parties may be formally determined.
The judgment debtors' argument is that it is futile to continue the PSSO over Flinders Street as the Commonwealth Bank, which holds security over both Golf View and Flinders Street, will take all the proceeds from the sale of Flinders Street to satisfy its security.
The judgment debtors' affidavit of 4 February 2020 shows that the Commonwealth Bank holds security over Golf View and Flinders Street, totalling approximately $1,410,000. The evidence also suggests that the value of Golf View is at least $1,250,000 (page 26 of the 4 February 2020 affidavit), and Flinders Street is $460,000 (page 13 of the 4 February 2020 affidavit), a total of $1,710,000. There is a surplus of approximately $300,000. The PSSO secures approximately $160,000.
The judgment debtors rely on Capital Finance Australia Ltd v O'Bryan Group Pty Ltd [2003] VSC 355 (Capital Finance) to submit the PSSO over Flinders Street is futile and serves no purpose and therefore should be varied by removal of the PSSO.
Capital Finance involved in a mortgagee in possession. Capital Finance had mortgages totalling slightly over $9 million. The mortgages arose out of a development of strata units by the developer mortgagor. The O'Bryan Group was owed approximately $33,000 by the developer of the units. The O'Bryan Group had obtained a warrant for seizure and sale over a unit in the development. After sale of the units, the evidence in Capital Finance suggested there would be a deficiency of approximately $600,000. Capital Finance sought to remove the warrant on the basis that it was futile.
The starting point for the court in Capital Finance was that this was a case of a secured creditor seeking to deprive an unsecured creditor of an entitlement to pursue a statutory mechanism which provides some prospect of payment for the unsecured creditor. It is telling that the court in Capital Finance noted that, irrespective of whether the judgment debtor has any equity in the property, the court would be reluctant to deprive a judgment creditor of the only enforcement mechanism available, in absence of clear evidence that the judgment debtor is unable to satisfy the judgment creditors' claim from other resources.
The court in Capital Finance stated that the futility of maintaining the warrant depended on the judgement debtor establishing two matters: that there is no reasonable likelihood of the judgment creditor recovering proceeds from the sale, because the security, once satisfied, will leave a nil amount, and secondly, that maintenance of the warrant would not be effective to result in payment of the judgment creditors' claim from other sources, or by others who have an interest in maintaining the judgement debtors' solvency, or even commercial reputation.
I accept on the evidence that it would appear there will be no proceeds available to the judgment creditor under the PSSO on the sale of Flinders Street. But there is no evidence that the judgment debtor cannot pay the judgment creditor from other sources.
The evidence suggests there may be $31,000 in an offset account (page 65, Vivian affidavit sworn 7 February 2020). There is no evidence that this was proffered in partial payment, with the balance payable over time. There is no evidence that the judgment debtor has approached Commonwealth Bank to re-mortgage. It would appear that the bank and the judgment debtor are on good terms, as the repayments appear to be up-to-date and the judgment debtor is not in default (the 4 February 2020 judgment debtor affidavit).
The judgment debtor has proffered an undertaking, which the judgment creditor has declined to accept. In broad terms the undertaking is, firstly, the net proceeds of sale of Flinders Street will be paid to the Commonwealth Bank and secondly, not to increase the underlying loan on Golf View unless it is for the purpose of paying the judgment creditor. Having considered that undertaking, in my opinion there is a suggestion there may be a capacity to increase the underlying principal loan to pay the judgment creditor. But there is no evidence that the judgment debtors intend to take that course, or have taken that course.
Citing Capital Finance, so long as the judgment debtor appears potentially able to pay from other resources, the prospect of such payment should not be discounted. Accordingly, in my opinion, it would be improper to deprive the judgment creditor of its statutory means of enforcement. The application is dismissed.
Finally, there was a suggestion that this application is an abuse, because there was an earlier application for suspension order. The application to suspend was brought under s 15 CJEA. There are different criteria to support a suspension. In my opinion, the bringing of an application for variation is not, in itself, an abuse and I would not have dismissed the application on that basis.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
DH
Court Officer
5 NOVEMBER 2020