Permanent Custodians Ltd v Fullston - [2011] SASC 170

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
PERMANENT CUSTODIANS LTD v FULLSTON & ANOR
[2011] SASC 170
Judgment of Judge Lunn a Master of the Supreme Court
11 October 2011
PROCEDURE
Order for possession of land made against defendants and stay of it had lapsed – request by plaintiff under 6R 204A for permission to issue a warrant of possession – applications by defendants for a further stay on the order or relief under s 55A(3) of Law of Property Act – held “good and sufficient” reasons under 6R 204(6) usually needs to be based on some act or knowing acquiesence of the plaintiff – circumstances in favour of the plaintiff existing before the making of the order could be taken into account – defendants could not rely on prejudice of their own making – hence no good and sufficient reason established not to issue the warrant and no proper basis for the stay of the order for relief under s 55A(3) – application by defendant dismissed and warrant to issue.

PROCEDURE
Application under 6R 89 by occupier to intervene in proceedings for stay of possession order – occupier was company in which the first defendant and his wife were the directors – intervention refused as application made too late, the defendants and the proposed intervener were closely related, the relevant issues had been addressed by the defendants and the costs and delay resulting from intervention would not be justified.

PERMANENT CUSTODIANS LTD v FULLSTON & ANOR
[2011] SASC 170
JUDGE LUNN:
Reasons on defendants’ applications for stay of possession order
Background

The defendants, who are son and mother, are the registered proprietors of the land comprised in Certificates of Title 5210/519, 5989/65 and 5978/298 (referred to as “Cloverland”). Cosproh Pty Ltd (“Cosproh”) is a company in which the first defendant and his wife are the directors. It has a share farming agreement with the defendants in respect of Cloverland.
The defendants gave a registered first mortgage over Cloverland to the plaintiff to secure repayment of large sums of money. On 31 July 2007 the plaintiff instituted this action seeking possession of Cloverland and judgment for the amount owing by the defendants. The action was defended by the defendants with a Counterclaim for relief against the plaintiff.
Shortly after a trial of the action had been adjourned because of health problems of the first defendant, a settlement was negotiated between the parties. At this time no solicitors were on the file as representing the defendants, but the defendants were receiving some legal advice. A deed dated 11 December 2009 was entered into between the parties (“the Deed”). It provided, inter alia, that as at 31 December 2009 the sum of $1,577,047 would be owing by the defendants to the plaintiff. The defendants would pay $12,000 a month to the plaintiff until 28 February 2011 when the balance of the monies would be payable to the plaintiff. It was agreed that if this sum had not been paid by 28 February 2011, the defendants would immediately give vacant possession of Cloverland to the plaintiff. The Deed also acknowledged that the plaintiff’s mortgage was valid and enforceable and that if the defendants breached any of the terms of the Deed, they would not interfere with any attempt by the plaintiff to enforce its right to possession of Cloverland. Clause 14 of the Deed precluded any party from pleading in any court any claim which was inconsistent with the terms of the Deed. Pursuant to the terms of the Deed, on 11 December 2009 a consent judgment in the action was entered for the plaintiff for $1,577,047 and that the defendants give possession of Cloverland to the plaintiff, but it be stayed until 28 February 2011.
The defendants made the monthly payments of $12,000 as required by the Deed, but did not discharge the balance of the moneys owing under the Deed on or before 28 February 2011. As at that date the outstanding balance was $1,631,560. Nothing further has been paid.
The plaintiff is unable to issue a warrant of possession without first complying with 6R 204A. On 15 July 2011 its solicitors posted to the defendants notices under that Rule. It also posted a similar notice addressed to the occupiers of Cloverland, but that was returned undelivered.
On 25 July 2011 new solicitors acting for the defendants issued an application (FDN 62) seeking to set aside or stay the consent judgment. On 23 September 2011 the defendants issued a further application (FDN67) in which they sought relief under s 55A(3) of the Law of Property Act 1936 (“the LPA”).
FDN 62 first came on for hearing before another Master on 19 August 2011. The relevant part of his fiat was as follows:
Remarks
This is an application by the defts to set aside what appears from the file to be a consent order. Behind the consent order is a deed which the defts impugn on the grounds among other things of misrepresentation. The application has been precipitated by the desire on the part of the pltf to have a warrant for possession issued in respect of the property owned by the defts. I have indicated to the parties that it presently appears to me that the application to set aside the consent judgment may have to be the subject of separate proceedings, including interlocutory injunctive relief to restrain the plaintiff from proceeding to obtain a warrant for possession. I put that view tentatively because it has not been argued before me, but I have indicated to the parties that I am not prepared to set down for hearing the defts' interlocutory application to set aside the judgment at this stage. In the circumstances of urgency, I am prepared to set down for argument the question of whether or not the pltf should be granted leave to issue a warrant for possession. The defts' application is FDN62. The Court will hear submissions as to whether the judgment of 11.12.09 or any part thereof be stayed or whether the pltf should be permitted to have a warrant of possession issued and to enforce that warrant.
Order
1. Costs reserved.
2.Permission to the pltf to file and serve affidavits in opposition by 2.9.11 and to the defts affidavits in reply by 16.9.11.
3. Adjourned to 27.9.11 at 10.00am for argument.
Some aspects of the argument before me on 27 September were unsatisfactory in that counsel seemed to be addressing somewhat different issues. The defendants’ counsel confined his submissions principally to obtaining an order for a stay until 9 December 2011 either pursuant to 6R 204A(6) or under s 55A(3) of the LPA. The plaintiff’s counsel focussed his submissions on the defendants not being entitled to a stay of the consent order pursuant to s 17 of the Enforcement of Judgments Act 1991 or 6R 192.
Although the defendants’ counsel sought to invoke 6R 204A(6), the defendants had not followed the correct procedure to invoke this sub-rule. It is not necessary to take out any application under 6R 131 for the purpose, but merely under 6R 204A(4) to return to the Registrar the request for a hearing which was attached to the notice given to the defendants under 6R 204A(3). Strictly speaking, 6R 204A(6) is not directed to a stay of the possession order, but to whether the Court will give permission for a warrant of possession to be issued on it.
A further problem was that the defendants’ counsel seemed to interpret the remarks of the Master on 19 August 2011 as meaning that paragraph 1 of FDN 62 seeking to set aside the consent judgment was not to be addressed on the hearing on 27 September. The plaintiff’s counsel made submissions that no arguable case for the setting aside of that judgment was contained in the defendants’ affidavits and the Court therefore should refuse any stay.
The most expeditious course is for me to not address these issues, but to resolve the application on the bases on which they were put to the Court. In view of my ultimate conclusion, that course does not prejudice the plaintiff.
The defendants have not taken any proceedings seeking to set aside the Deed. That is a separate issue from setting aside the consent judgment, although the two are closely related. As was emphasised by the plaintiff’s counsel, the Deed stands unimpeached and its terms are a major bar to the defendants succeeding on their present application.
Operation of 6R 204A
6R 204A provides:
204AWarrants of possession to be executed more than six months after the possession order.
(1)This rule applies to any warrant of possession which is to be executed more than six months after the making of the order for possession on which it is based.
(2)The plaintiff must not cause a warrant to which this rule applies to be executed unless:
(a)it was issued by permission of the Court under this rule; or
(b)it was issued under subrule (8).
(3)At least 20 days before applying for the issue of a warrant to which this rule applies, a plaintiff is to send, by ordinary prepaid post, a notice in an approved form to:
(a)each defendant at their last known address; and
(b)the occupiers of the premises which are to be the subject of the warrant.
(4)A defendant or occupier who wishes to oppose the issue of the warrant, must, within 10 days of the date of the notice sent to them, file in the Court a request, in an approved form, for a hearing together with any affidavits deposing to facts on which they seek to rely.
(5)If a request under subrule (4) is filed the Registrar will, before issuing a warrant of possession, convene an urgent hearing by the Court and will send a notice of it to all plaintiffs and defendants and to all persons identified in the application for the issue of the warrant or in the request for a hearing as an occupier of the premises.
(6)Upon a hearing under subrule (5) the Court will consider whether, having regard to the circumstances which have occurred since the making of the order for possession, there is any good and sufficient reason why permission for the warrant to issue should not then be granted and, unless satisfied that such reason exists, will order the issue of the warrant.
(7)The plaintiff may prove compliance with subrule (3) by filing a certificate in the approved form.
(8)When a certificate has been filed under subrule (7), and no request has been received under subrule (4), the Registrar may issue the warrant of possession.
In sub-r (6) the onus is on the defendants to show that there is “good and sufficient reason” why permission should not be given for the warrant of possession to issue. The inquiry of the Court under sub-r (6) is limited to “the circumstances which have occurred since the making of the order for possession”. This is to prevent any parties reagitating issues which were determined on the making of the possession order, or which were available at that time but which were not then pursued. However, it does not mean that circumstance existing prior to the making of the order cannot be taken into account in determining whether subsequent circumstances amount to a “good and sufficient reason”. “Sufficient reason” means that on the evidence then before the Court the justice of the case requires that a warrant should not issue.[1] Whether the reasons put forward by the defendants that the warrant should not issue are sufficient will require a balancing against any other reasons available on the evidence for why the warrant should then issue.[2]
[1] I need not enter into whether “good” adds anything to “sufficient” in this phrase.
[2] I do not accept the defendants’ tentative submission that “good and sufficient reason” here is confined to the circumstances of the defendants. Factors in favour of the plaintiff, including those which existed before the order was made, are to be taken into account.
In most instances the defendants will need to rely on some act or knowing acquiescence of the plaintiff or its agents to show “good reason”. The defendants and their privies cannot ignore the existence of the possession order and then claim prejudice from its enforcement because after its making they have created their own circumstances of prejudice. Historically, the reason for the introduction of 6R 204A as from 1 April 2009 was that the Court had encountered a number of instances where after obtaining orders for possession mortgagees allowed the mortgagors to remain in possession upon conditions such as making payments on account of arrears or the like, but then unilaterally sought to enforce the order at a later time for ulterior motives. The object of the Rule was to give mortgagors who had been allowed to remain in possession an expeditious way of challenging the issue of a warrant for possession where they claimed that the mortgagee was estopped, or in breach of contract, in seeking to enforce the warrant. There were also instances of the occupiers of the premises having changed since the order for possession was made and they having had no ability to be heard on the terms on which the order could be enforced.
Is there good and sufficient reason?
It was contended that the plaintiff had not properly complied with 6R 204A because notice of the application for the warrant had not been served on Cosproh and the first defendant’s wife as occupiers of Cloverland. I reject this submission. The evidence is that the plaintiff did comply with sub-r (3)(b), but the notice was returned undelivered. It was only necessary that it be addressed to the occupiers as a class and not to them individually by name. In any event, as the first defendant is a director of Cosproh, I infer that the company had notice of the application for the warrant through the notice given to him, even though it was not addressed to him in his capacity as a director of Cosproh.
I now canvass the submissions made on behalf of the defendants in support of “good and sufficient reason” being established.[3]
[3] For the reasons given in the addendum, the affidavit of Kathryn Fullston filed on 30 September 2011 (FDN 71) has not been used in determining the defendants’ applications.
Although it is not entirely consistent with the terms of the Deed, I act on the assertion of the first defendant that part of the purpose of the Deed was so that the defendants could make their monthly payments of interest to establish a payment record in order to be able to obtain refinance for the principal debt.[4] However, the defendants did not commence applying for alternative finance until in or about October 2010. To avoid the operation of the possession order, settlement on the refinancing had to occur by no later than 28 February 2011. There is no explanation for why they did not pursue it much earlier.
[4] The affidavit of the first defendant of 25 July 2011, paragraph 17.
The defendants claim that they had difficulties in obtaining copies of their bank statements from the plaintiff’s manager, which was a necessary element of their application for refinance. They apparently did not seek such statements until January 2011 at the earliest, and did not receive them until 1 June 2011. I accept that the delay in receiving the statements was substantially the responsibility of the plaintiff, but it was under no legal obligation to supply them.[5] Nor did the defendants put to the plaintiff that its delay in supplying the statements meant that it could not enforce the possession order. Furthermore, there is no evidence to show that if the defendants had been supplied with the bank statements in January 2011, they would have been able to pay out the plaintiff by now. This delay in obtaining the bank statements for the interest payments up until February 2011 is the only act of the plaintiff which is part of the defendants’ reason why the warrant should not issue.
[5] Section 55B of the LPA required the plaintiff to give reasonable particulars of the debt, but not to supply copies of documents.
The defendants make a number of complaints that they or Cosproh will be seriously prejudiced in their current farming operations on Cloverland if they now have to give up possession of it. They did not suggest that the plaintiff knew of and acquiesced in these activities. However, they have always known that the stay of the possession order under the Deed and the consent judgment expired on 28 February 2011. If they planted crops and ran stock on the land after that date, without the consent of the plaintiff to do so, they ran the risk that they would be prejudiced if the possession order was enforced. Similarly, they had no right after 11 December 2009 to enter into any share-farming arrangement[6] with Cosproh, which was not subject to the plaintiff’s immediate right to possession of Cloverland after 28 February 2011. In any event the legal effect of any share-farming agreement was always subject to the rights of the mortgagee.
[6] The nature of their share-farming arrangement is not disclosed.
The defendants have sold Cloverland to Cosproh for an amount more than sufficient to pay out the plaintiff. However, Cosproh is still to arrange its finance to be able to settle on its purchase before 9 December 2011. It has arranged to obtain the necessary finance from the Sursum Investment Trust, but there is no evidence that Cosproh has paid the non-refundable acceptance fee of $27,500 required by the loan agreement and/or that Sursum has the ability to provide the loan by 9 December 2011. The making of the loan is subject to a satisfactory valuation which has not yet been done.
In favour of the plaintiff there is, on the evidence, some doubt whether the $1,744,394 now outstanding can be obtained on a forced sale of the property and thus there is some risk that the debt may not be paid in full. Overarching all of these factors are the terms of the Deed which give the plaintiff an explicit legal right now to obtain possession of Cloverland.
For these reasons I find the defendants have not established any good and sufficient reason why the warrant of possession should not now issue. The reasons given above also mean that there should be no further stay of the order under s 17 of the Enforcement of Judgments Act 1991, 6R 192 or the inherent jurisdiction of the Court.
Application under s 55A(3) of the LPA
This section provides:[7]
(3)In any proceedings brought by a mortgagee for the recovery of a mortgage debt or for the enforcement of a mortgage, or in proceedings instituted by a mortgagor within twenty-one days after service of a notice under this section, a court may, upon such fair and equitable terms as it may determine, grant relief to a mortgagor against the enforcement of rights of a kind referred to in subsection (1) of this section, and may reinstate the position of the mortgagor in all respects as if no breach of a covenant or condition of the mortgage had occurred.
[7] There was no dispute that s 55A applied to the plaintiff’s mortgage.
The relevant factors to consider on an application under sub-s (3) are those set out by the Full Court in Barker v Perpetual Trustees Australia Ltd (2003) 85 SASR 263.
Insufficient evidence has been put forward by the defendants to satisfy me that it has the means to pay the interest accrued, but unpaid, since February 2011 and to be able either to refinance the whole debt to the plaintiff or to sell the property for an amount sufficient to pay out the plaintiff. I repeat what I have said above about the weakness of the case based on the proposed sale to Cosproh and its ability to obtain the necessary finance. As the adequacy of the plaintiff’s security is deteriorating as interest continues to accrue, it is necessary that any refinancing or sale of the property occur in the near future.[8] Here, a reinstatement of the defendants’ position under sub-s (3) involves more than merely ordering that the acceleration provision for the repayment of the principal under the mortgage should not apply. It involves setting aside the Deed which made the whole principal due on 28 February 2011. The Deed does not purport to be a variation of the mortgage, but a new contractual relationship between the parties to supersede the terms of the mortgage. There is not sufficient evidence to show that the defendants have any real prospect of being able to set aside the Deed. Accordingly, relief under s 55A(3) is refused.
[8] The defendants impliedly conceded that this will need to occur by 9 December 2011.

I make the following orders:
1.     Relief sought in para 2 of FDN 62 and in FDN 67 is refused.
2.     Permission to the plaintiff to issue a warrant of possession for Cloverland.
3.     Questions of costs reserved.
Addendum on application for intervention
At the hearing on 27 September 2011 a lawyer, Mr Bellman, attended for Cosproh. The plaintiff opposed him making any submissions on the defendants’ applications. Although I then reserved my decision on the defendants’ applications FDN 62 and FDN 67, I indicated I would hear any application by Cosproh on 5 October 2011.
On 30 September 2011 Cosproh issued an application (FDN 70) for permission to intervene. It was supported by an affidavit of Kathryn Fullston (FDN 71) who is the co-director of Cosproh with her husband, the first defendant. On 5 October the plaintiff objected to the use of this affidavit of Kathryn Fullston and gave notice it wished to cross-examine her on its contents. However, its counsel agreed that the affidavit could be used on the application for intervention provided that he could renew his objections and application for cross‑examination if intervention was to be allowed and Cosproh sought to use the affidavit in support of the defendants’ application for a stay of the possession order.
On the contents of the affidavit of Kathryn Fullston it was not disputed that Cosproh was an occupier of Cloverland within the criteria which I had stated in JP Morgan Trust Australia Ltd v Lees.[9]However, Cosproh has not sought to exercise any rights which it had under 6R 204A as an occupier. Although it did not receive the 6R 204A(3) notice in its own right, it was not disputed that it was aware of the plaintiff’s request to issue a warrant of possession by reason of that notice having been given to the first defendant. Cosproh could have requested a hearing under 6R 204A(4) within 10 days of 15 July 2011, but it did not do so. That would have put it, and any affidavit on which it relied, before the Court at an appropriate time. However, for the reasons given below it would not have been given the status of an occupier to be heard separately from the registered proprietors.
[9] 4 November 2009, [2009] SASC 339.
Cosproh seeks permission to intervene under 6R 89. It is a matter of judicial discretion whether such intervention will be allowed. It is relevant whether such intervention would be apt to assist the Court and whether it would unnecessarily occupy time and inappropriately add to the costs of the action.[10] On 5 October 2011 I dismissed FDN 70. My reasons for doing so were as follows.
[10] Jeavons v Chapman, Gray J, 19 September 2008 [2008] SASC 249.
The application was made far too late. Mr Bellman said that he was only instructed on 23 September and had not by 27 September had sufficient time to produce an affidavit on behalf of Cosproh. However, in the affidavit of Kathryn Fullston there was no suggestion that Cosproh through its director, the first defendant, did not know of the defendants’ applications when they were made and there was no explanation of why it did not instruct its solicitors until 23 September.
Any further delay in having the warrant issued may prejudice the plaintiff in recovering the whole of its debt, interest and costs. This Court will not allow its processes to be used by the defendants or Cosproh to buy time to endeavour to satisfy the plaintiff’s debt where it is not in the interests of justice that the plaintiff should be so delayed. If Cosproh was allowed to intervene, it would mean rearguing most of the matters which were dealt with on 27 September. There would then need to be two hearings when all the issues could have been dealt with at the one hearing on 27 September if Cosproh had acted with reasonable expedition. In his submissions, counsel for the plaintiff laid a proper foundation for at least some cross-examination of Kathryn Fullston being allowed on her affidavit if it was to be used in support of the defendants’ application for a stay. However, counsel for Cosproh informed the Court that Kathryn Fullston was at present overseas and could not be made available for cross-examination until at least 24 October. If I reserved my judgment after hearing such cross-examination and the further argument, it would be likely that the plaintiff, if successful, would not be able to issue its warrant before about mid November. It would probably take the Sheriff a further week or two to execute it which would give the defendants and Cosproh almost the time which they were seeking until 9 December to pay out the plaintiff. It is not in the interests of justice that the Court’s processes should be used in this way to achieve such a result.
There is a very close identity between the defendants and Cosproh. In applications for possession of land it has not been the practice of this Court to allow occupiers who are closely identified with the registered proprietors to be given separate status as occupiers and thus to be allowed to mount their own separate defences to the orders sought.[11]
[11] JP Morgan Trust Australia Ltd v Lees above. For this reason children have not been given the status of occupiers where a parent is the registered proprietor and likewise a spouse has not been given the status of an occupier where the partner is the registered proprietor. Similar results should apply for a company where one director is a registered proprietor and the other director is his wife.
All of the significant factors to the exercise of the discretion about a stay which are dealt with in the affidavit of Kathryn Fullston had been referred to in the affidavits of the first defendant and in the submissions of counsel for the defendants on 27 September. However, a number of these topics were dealt with in more detail in the affidavit of Kathryn Fullston. There was no suggestion that she was deposing to anything which could not also have been deposed to by the first defendant, or which she could not have deposed to in an affidavit filed by the defendants within the time limits set on 19 August 2011. If at the close of the plaintiff’s submissions on 27 September the defendants had applied for an adjournment to file further affidavit material to answer the points made by the plaintiff, it would have been likely to have been refused.
If intervention by Cosproh is permitted, it will substantially increase the costs of the proceedings. There is no certainty that these costs would be ultimately recovered by the plaintiff. Hence it was not in the interests of justice that intervention by Cosproh should be permitted.