Ivory Lane Developments v Goorigubba
[2015] NSWSC 224
•12 March 2015
|
New South Wales |
Case Name: | Ivory Lane Developments v Goorigubba |
Medium Neutral Citation: | [2015] NSWSC 224 |
Hearing Date(s): | 12 March 2015 |
Decision Date: | 12 March 2015 |
Jurisdiction: | Common Law |
Before: | McDougall J |
Decision: | Plaintiff entitled to declarations as to existence of charge and debt, and order for payment of debt with interest. Plaintiff to bring in draft orders. |
Catchwords: | CONTRACT - construction - whether deed granted an equitable charge and mortgage over property - relevance of that intention being expressed primarily in the recitals rather than the provisions of the deed - clear intention that recitals were intended to have present effect |
Legislation Cited: | Real Property Act 1900 (NSW) |
Category: | Principal judgment |
Parties: | Ivory Lane Developments Pty Limited (Plaintiff) |
Representation: | Counsel: |
File Number(s): | 2014/304395 |
JUDGMENT (EX TEMPORE – REVISED 12 MARCH 2015)
HIS HONOUR: In June 2012, the plaintiff (Ivory Lane) arranged finance for the defendant (Goorigubba) to assist with the purchase of a property, 74 Courallie Avenue, West Homebush (the property). Not surprisingly, Ivory Lane was to be paid a fee for that service.
On 15 August 2013, Ivory Lane, Goorigubba and Goorigubba's principal, Mr Barnes, entered into a deed under which they formalised (or restated) their agreement. The deed recited the matters to which I have referred. It recited that an offer of finance acceptable to Ivory Lane had been procured, from a lender known as Eclipse Prudent Finance. It recited an agreement for a charge (in recital J):
J. The parties hereto agree and acknowledge that this agreement constitutes an equitable charge and mortgage for the sum of $50,000 and the sum due as a brokerage fee, over the property at 74 Courallie Road which is owned by the Company and the assets of the Company and the Lexicon may register a caveat over the 74 Courallie Avenue and if settled 72 Courallie Avenue as security for the abovementioned sums immediately and that Lexicon may also register a charge over the Company.
The brokerage fee was to be 2% of the amount of the loan; that is to say, in the events that have happened, $58,000 in total was payable. $50,000 was the separate sum referred to in recital J. $8,000 represents the brokerage.
Clauses 2 and 3 of the deed are of significance:
2. ACKNOWLEDGMENT
The company acknowledges and agrees with the Recitals and agrees to perform its obligations in this deed.
3. FAILURE TO PROCEED WITH LOAN
In the event for whatever reason the Company does not proceed with the mortgage loan set out in the Recitals, or does not draw down the loan funds, then the amount of $58,800 is immediately due and payable by the Company to Lexicon.
Goorigubba has gone into liquidation. I do not know what has happened to Mr Barnes.
The mortgagee, Eclipse Prudent Finance, is preparing to sell the property by public auction. The Court has been informed that the auction is scheduled for 21 March 2015.
The application today is for declaratory and other relief relating to the effect of the deed and to the indebtedness of Goorigubba to Ivory Lane. The relief sought went further. I shall return to this.
On the hearing today, Mr Raphael of counsel appeared for Ivory Lane. Mr Stomo of counsel also appeared. He informed the Court that he had been instructed for a Mr and Mrs Schuster. Mr and Mrs Schuster have lodged a caveat against the title to the property. As I understand it from Mr Stomo, they say that they were the predecessors in title of Goorigubba, and that they were cheated out of their interest as proprietors.
I have not seen the caveat lodged by Mr and Mrs Schuster. Nor have I seen any affidavit evidence seeking to vindicate the claim that is the subject of their caveat.
In those circumstances, Mr Stomo acknowledged that I should proceed with the hearing. I have decided to do so to the extent that will appear from what follows.
Having said that, it is obvious that there will be complications in the future. One arises from the fact that the mortgagee wishes to sell the land. No doubt, it will cause a lapsing notice to be served on Mr and Mrs Schuster. Mr and Mrs Schuster will then need to commence proceedings to vindicate the interest that they have sought to protect. Of necessity, if that is to happen, Ivory Lane will be dragged in.
I understand that the mortgagee has indicated that, assuming the property is sold, it proposes on completion to discharge the debt owing to itself, and to pay the balance into Court (of course, after allowing for all proper costs and expenses), so that those who claim to be interested to it can fight over it.
I should mention that the liquidator of Goorigubba has been given notice at all stages of what is being done by Ivory Lane in these proceedings. Not unnaturally, the liquidator, although apprised of the hearing today, has not sought to intervene. I should mention also that White J has given leave to proceed against the company in liquidation, I assume on the usual conditions.
The first relief sought is a declaration that the deed constituted a charge over the subject land. I am satisfied that it did. There are at least two reasons for coming to that view.
The first is that although the deed is divided, in the conventional way, into recitals on the one hand and operative provisions on the other, it is crystal clear that some of the so-called recitals are in fact covenants intended to have present effect. For example, recital F constitutes an agreement by Goorigubba that Lexicon should have its brokerage fee of 2%, and is entitled to the further sum of $50,000. Recital H contains an acknowledgement of present effect by Goorigubba that it is satisfied with the advance proposed to be made by Eclipse Prudent Finance. Recital I constitutes a present and binding direction on the part of Goorigubba for the total of $58,000 to be paid out of settlement of the mortgage advanced. Recital K contains an acknowledgement (again, clearly of present effect) that a caveat and charge may be registered.
Were it necessary to do so, I would conclude, as I have indicated, that the recitals to which I have referred, and specifically recital J, were intended to be more than mere recitals of what has happened in the past or of what the parties hope to achieve by their deed. In terms, they operate (and specifically, recital J operates) as presently binding covenants.
In any event, one may have recourse to the provisions of cl 2. By that clause, Goorigubba acknowledged and agreed with the recitals and agreed to perform its obligations under the deed. In my view, cl 2 is intended to make it clear, beyond doubt, that those recitals that are expressed in terms of present agreement or covenant do indeed have effect accordingly.
I am therefore satisfied that, as recital J says, Goorigubba has agreed to give an equitable charge and mortgage over the property to secure, in total, $58,000.
The charge may not be a charge for the purposes of the Real Property Act 1900 (NSW), because the definition of that expression in s 3(1) expressly excludes charges to secure payment of a debt. However, equally, I am satisfied that it is a "charge" for the purposes of the definition of mortgage in s 3(1). Whether that has any particular significance in the present case is open to question, because recital J also says in express terms that an equitable mortgage is created.
Thus, I am satisfied that Ivory Lane is entitled to a declaration that by the deed, Goorigubba granted an equitable charge and mortgage over the land in question.
I am satisfied, equally, from the terms of the deed (and from the other evidence) that Goorigubba is indebted to Ivory Lane in the sum of $58,000. There is a question as to whether that indebtedness should extend to interest. The deed did not specifically provide for interest. That was so, no doubt, because if the loan was settled the full amount was to be paid out of the advance, and if the loan was not settled, it was to become due and payable immediately.
The general principle is that where money is owing but unpaid, the person owing the money is obliged to pay not just the amount owing but also interest. Interest in this context represents both compensation to the creditor for being kept out of its money and recognition of the benefit obtained by the debtor from having the use of the money. I am satisfied in this case that it is appropriate to include a declaration that interest runs on the sum, probably from some due date which is at present not clear but which can be made clear from the detail of the evidence, at the interest rate from time to time applicable to claims in this Court.
I should note that I have been referring to the sum of $58,000. The precise sum claimed is $58,800. As I understand it, that includes the amount of $8,000 for the brokerage plus $800 for GST. What I have said should be understood as extending to the full amount, inclusive of GST.
The next orders sought related to vesting the charge in Ivory Lane (s 58(3) of the Real Property Act). It is there that I begin to have some difficulty. That is because although the deed is cast in the language of charge, and is undoubtedly intended to create a charge in the ordinary meaning of that word, it is not a charge as defined by s 3(1). Thus, as at present advised, I am not satisfied that I can make the declaration sought.
Equally, since I am not satisfied of that fact, I am not satisfied that it is appropriate to grant the next relief sought, an order that the Registrar General record the vesting order.
It may well be that the effect of what I have said is to leave to another day the fight over who is entitled to the proceeds of sale once the costs of sale and the amount secured by the first mortgage have been paid out. That is unfortunate. However, as I see it at present, it is a necessary consequence of the language chosen by the parties in their deed, together with the absence of any prayer seeking the grant of a second mortgage.
When I raised those issues in the course of hearing, Mr Raphael suggested that I could make an order by way of specific performance directing Goorigubba to execute a mortgage in registrable form. Undoubtedly, I could do so. That would follow either from the wording of the recital itself or from the implied covenant for further assurance. However, even accepting that the liquidator has to date shown no interest in disputing Ivory Lane's claim, I do not think that it would be proper to do so without giving him an opportunity to be heard.
The next relief sought relates to the present obligation to pay the amount of $58,800, and an order that it be paid. I see no difficulty in making the declaration (which may include the amount of interest) and the order. However, whether or not that order could be enforced would depend on the conditions of the leave to proceed that White J granted.
Ivory Lane seeks costs. I see no reason why it should not have an order for costs. Again, enforcement of any such order would depend upon the terms of the leave that has been granted.
Against the event that Ivory Lane may wish to amend its summons, I think that the better course, having indicated these conclusions, is to stand the matter over for a short while so that the plaintiff, Ivory Lane, can prepare orders to give effect to what I have said, and can consider its position in relation to any further amendment of the summons.
[Counsel addressed.]
I stand the matter over for directions at 10am on Tuesday, 17 March 2015 before me.
**********
Amendments
05 July 2016 - Amendment to case name
0
0
1