Rees v Ahmaed
[2010] VCC 208
•30 March 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
COMMERCIAL LIST
BANKING AND FINANCE DIVISION
Case No. CI-09-04219
| JENNIFER JOY REES | Plaintiff |
| v | |
| MOHAMAD AHMAED | Defendant |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 19 March 2010 |
| DATE OF JUDGMENT: | 30 March 2010 |
| CASE MAY BE CITED AS: | Rees v Ahmaed |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 0208 |
REASONS FOR JUDGMENT
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Catchwords: Application to set aside default judgment under Rule 21.07 of the County Court Civil Procedure Rules - whether defence on the merits where previous claim in the Magistrates’ Court based on loan of 13 May 2005 - judgment in the Magistrates’ Court for monies owing following non-compliance with terms of settlement - subsequent proceeding in County Court resulting in default judgment for possession and for monies owed on basis of agreement of 13 May 2005 - concession that judgment should be set aside insofar as it relates to money claim - whether judgment should also be set aside insofar as it relates to possession- whether defence exists on basis of principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 - whether otherwise appropriate to set aside default judgment
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A. P. Downie | T.F. Grundy Lawyers |
| For the Defendant | Mr J.P. Snow | Michael Rafter |
| HER HONOUR: |
1 This is a return of a summons dated 13 January 2010 to set aside a default judgment regularly entered on 6 November 2009. There are two affidavits in support of the summons to set aside the judgment, both of Michael Joseph Rafter of 13 January 2010 and 22 January 2010. There is no affidavit in support sworn by the defendant himself.
2 A number of affidavits have also been sworn on behalf of the plaintiff:
• an affidavit of Lionel Worth of 14 January 2010; • an affidavit of Terrence Grundy of 2 February 2010; • an affidavit of Robert Conn of 2 February 2010; and • an affidavit of Lionel Worth of 5 March 2010.
Background
3 In May 2005 Ms Rees allegedly lent an amount of $32,000 to Mr Ahmaed. On or about 13 May 2005 Mr Ahmaed executed a mortgage in favour of Ms Rees to secure the amount loaned. The mortgage was over a property situated at 7 Bianchi Court, Keilor Downs (“the property”). The property was at that time already subject to a registered mortgage to the Commonwealth Bank.
4 On 17 May 2005 and subsequently, Mr Conn, mortgage manager acting on behalf of Ms Rees, sought consent to the registration of the second mortgage on behalf of Ms Rees from the Commonwealth Bank. This was not forthcoming.[1]
[1] Affidavit of Robert Conn of 2 February 2010 at paragraphs 16-19
5 Because of the defendant’s default in payment of the loan, Mr Conn instructed solicitors to issue and serve a complaint in the Magistrates’ Court of Victoria. He instructed his lawyers to sue on the loan and not seek possession of the premises “as the mortgage was not registered as a result of the first mortgagee’s refusal to consent to the second mortgage.”[2] A Magistrates’ Court complaint was consequently filed by Ms Rees on 18 October 2006. It sought monies due pursuant to the “loan agreement dated 13 May 2005.”
[2] Affidavit of Robert Conn of 2 February 2010 at paragraph 24
6 On 16 February 2007, because of the ongoing denial of consent by the first mortgagee to registration of the second mortgage, the plaintiff could still not be registered as a second mortgagee over the property. However, on 16 February 2007, a caveat was lodged instead.
7 Following a pre-hearing conference, Terms of Settlement were signed by the representatives of the parties on 3 August 2007. In those Terms of Settlement, the parties agreed that the claim be struck out with a right of reinstatement. Mr Ahmaed also agreed to pay Ms Rees the sum of $25,000 which sum was to be paid in instalments (clauses 2 and 3). In default, the plaintiff was entitled to have the Magistrates’ Court proceeding reinstated and to obtain judgment (clause 4). Pursuant to clause 7 the parties also agreed to “mutually abandon any rights, entitlements or liabilities arising from this action”.
8 Following non-compliance with the Terms of Settlement Ms Rees obtained a judgment in the Magistrates’ Court for $25,000 plus interest and costs on 31 January 2008. In the meantime, on 13 November 2007, the mortgage was registered following consent from the first mortgagee.
9 On 7 September 2009 the proceeding in this court was issued wherein Ms Rees seeks possession pursuant to the provisions of s78(1)(b) of the Transfer of Land Act 1958 (TLA) in reliance on the mortgage of 13 May 2005. She also seeks the monetary amount of $50,135.50.
10 On 30 September 2009 Mr Ahmaed filed a Notice of Appearance. However, following his failure to file and serve a defence, the default judgment, the subject of this application, was entered on 6 November 2009 for both possession and for an amount of $53,961.47.
11 A Warrant of Possession was then issued on 17 November 2009, the execution of which has been stayed pending the hearing and determination of this summons (which, as indicated above, was filed on 13 January 2010).
[3] (1981) 147 CLR 589
[4] See e.g. Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34 and also other cases referred to in Williams Civil Procedure at [21.07.20]
Issues 12
On the basis of the Magistrates’ Court judgment, Mr Downie, who appeared as Counsel for Ms Rees, accepted that the default judgment insofar as it sought monetary relief in the amount of $53,961.47 should be set aside. However, he maintained that the default judgment, insofar as it ordered that Ms Rees recover possession of the Keilor Downs property, should remain.
13
Counsel who appeared for the defendant, Mr Snow, submitted that the entire default judgment should be set aside. He claimed that Ms Rees is unable to bring the possession claim (which he says derives from the same dispute litigated in the Magistrates’ Court) by reason of the application of the principles in Port of Melbourne Authority v Anshun Pty Ltd [3] (Anshun). In this way the defendant said it had a defence on the merits which need only be an “arguable” defence.
14
I accept that Mr Ahmaed need only demonstrate an “arguable” defence.[4] The primary issue was thereby whether the Anshun principles provided an arguable defence; no other defence being raised.
15
In terms of the other matters relevant to the Court’s discretion to set aside a judgment under Rule 21.07 of the County Court Civil Procedure Rules 2008 the relevant matters include:
•
the reason for the default of the defendant in consequence of which the judgment was obtained;
• whether the application was made promptly; and •
whether, if the judgment was set aside, the plaintiff would be prejudiced in any respect which could not be adequately compensated for by a suitable award of costs or security.
16
Mr Snow submitted that these factors favoured an exercise of discretion in his client’s favour.
17
In opposing the application, Counsel for Ms Rees submitted that the Anshun principles could not operate on the facts since, as Ms Rees was not a registered mortgagee, her right to statutory ejectment under section 78 of the Transfer of Land Act 1958 was not available at the time the Magistrates’ Court proceeding was issued.
18
In the alternative, he also submitted that the principles of Anshun do not apply to actions by mortgagees.
19
Finally, Mr Downie submitted that there had been no explanation for the default provided by Mr Ahmaed himself. Further that the explanation that was provided by his solicitor was not satisfactory.
20 Accordingly, the issues are: (a) whether the Anshun principles provided an arguable defence; and (b) whether the application of all relevant factors suggested that the default
judgment should be set aside.Whether good defence on basis of Anshun principles
Whether arguable on the facts
21 The case of Anshun involved a worker who was injured when he was struck by a metal girder suspended from a crane. In the first proceeding, the worker sued both his employer, Anshun, and also the owner of the crane, the Port Authority, who had hired the crane to Anshun.
22 The Port Authority and Anshun sought contribution from each other pursuant to the Wrongs Act 1958 (Vic). The jury found that it was just and equitable that Anshun should recover contribution from the Authority to the extent of 90%.
23 Subsequently, the Port Authority brought a further action for indemnity pursuant to the contractual arrangements under the hire agreement. The second action was stayed because the High Court considered that the indemnity should have been pleaded as part of the first action.
24 The joint judgment (Gibbs CJ, Mason and Aickin JJ) states that the critical issue was whether the case fell within the extended principle expressed by Sir James Wigram VC in Henderson v Henderson[5] wherein the Vice Chancellor expressed the principle in these terms:
“…where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.” (emphasis added)[6]
[5] (1843) 3 Hare 100 at p115 (67 ER 313 at p319)
[6] (1981) 147 CLR 589 at [22]
25 The majority went on to expound the importance of taking into account whether any omission will contribute to the existence of conflicting judgments[7] and found that it was “unreasonable” for the Authority to refrain from raising its case of indemnity for disposition in the first proceeding.[8]
[7] (1981) 147 CLR 589 at [40]
[8] (1981) 147 CLR 589 at [44]
26 Whilst the other members of the Court agreed in the result, Murphy J appeared to base his decision on the potential for inconsistency which would arise if the second proceeding was to continue. Brennan J concluded that the relevant cause of action had “merged” in the orders made in the first proceeding.
27 In my view the principles of Anshun cannot be applicable to this case.
28 The orthodox view (which was not challenged by the defendant) is that statutory remedies are not available to equitable mortgagees of Torrens title land.[9] This accords with the scheme of the TLA and in particular, s74, which provides that a mortgage shall only “when registered” have effect as a security and be an interest in land.
[9] See generally paragraph 19.11 of “Fisher and Lightwood’s The Law of Mortgage”, 2nd Australian Edition, 2005
29 It follows that, as an unregistered mortgagee, Ms Rees was unable to bring her claim for ejectment under s78 of the TLA at the time she commenced the Magistrates’ Court proceeding. This situation also continued to apply right up until the time that the Magistrates’ Court proceeding was finalised by entry into the Terms of Settlement in August, 2007.
30 In these circumstances the statutory claim for ejectment does not constitute a “matter which might have been brought forward” in the Magistrates’ Court and it cannot be said that Ms Rees was unreasonable in not bringing a claim for possession at that time. This is apart from any issue as to whether the Magistrates’ Court had jurisdiction to even entertain such a claim which was not the subject of submissions before me.
31 Counsel for Mr Ahmaed emphasized that Ms Rees could have taken some alternative strategy to avoid this result, including delaying the initiation of proceedings until after she had registered her mortgage.
32 However, I do not accept this submission. The principles in Anshun do not require the deferral of an immediate right simply because some additional right might later come into existence. Rather, the principles of Anshun operate where there may have been “negligence, inadvertence or even accident” in omitting part of a case. Such considerations are not operative in circumstances where there is no such omission because the right does not yet exist.
33 Unlike Anshun, there is also nothing inconsistent between the order of the Magistrates’ Court (following breach of the Terms of Settlement) and the later County Court judgment for possession. The entitlement to pursue the loan and the entitlement to pursue statutory ejectment are independent rights which do not conflict with each other.[10] Moreover, pursuant to s78, the statutory rights to possession actually permit the mortgagee to receive rents and profits in order to repay the debt owing.
[10] See generally Alliance v Slayford (2000) 33 HLR 743 at [20]
34 Further, although clause 7 of the Terms provides that the parties agree to abandon certain rights and entitlements, this clause only has application to rights and entitlements arising from “this action” [in the Magistrates’ Court on the loan]. There can be no suggestion that Ms Rees has abandoned or elected not to pursue her security in circumstances where no statutory claim based on the security was made, or able to be made, in the Magistrates’ Court.
35 However, Counsel for Mr Ahmaed also relied on the cases of Fink v Robertson[11], Williams v Hunt[12] and Gibbs v Kinna[13].
[11] (1907) 4 CLR 864
[12] [1905] 1 KB 513
[13] Bill Gibbs & McAllion Lloyd Pty Ltd v John Kinna [1999] 2 VR 19
36 The 1907 case of Fink was concerned with whether debt proceedings could be brought in relation to a mortgage debt when the land the subject of the mortgage was foreclosed and the mortgagee had title to the land. The court construed the provisions of the TLA in 1890 as meaning that personal covenants for payment of a debt are extinguished once foreclosure has occurred and the mortgagee had become the registered proprietor of the land. The case, being concerned with previous provisions related to the remedy of foreclosure, is readily distinguishable.
37 The case of Williams involved two proceedings: in one proceeding a mortgagee sought an account of principal and interest due under a mortgage; in the second she sought to recover principal and interest. In finding that the bringing of the second action was improper Collins MR (in the leading judgment) emphasised that where two remedies “are possible” and “a start [has] been made by putting in force one of those remedies”, a person cannot by deliberately leaving that out of that claim reserve his right to ask for it in another proceeding[14]. However, the case has no application to the circumstances pertaining in this case where the statutory remedy of ejectment “was not possible.”
[14] Williams v Hunt [1905] 1 KB 512 at 514
38 The case of Gibbs concerned an employee who first lodged an application with the Industrial Relations Commission under section 170EA(1) of the Industrial Relations Act 1988 (Cth) (IRA) for relief in respect of the termination of his employment. He later commenced a proceeding in the Magistrates’ Court claiming damages for breach of his contract of employment and for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) and Fair Trading Act 1985 (Vic).
39 The Magistrates’ Court initially found that the plaintiff should not be entitled to pursue his claims in the Magistrates’ Court given he could have pursued the matters sought to be raised in the Industrial Relations Court. An appeal from this decision was allowed by a single judge in the Supreme Court and a further appeal to the Court of Appeal against this decision was dismissed by all members of the Court.
40 In the leading judgment, Kenny JA accepted that, before it could be said that the failure to raise a cause of action earlier might be said to have been unreasonable within Anshun there are two matters which must be established:
(a) that the cause of action must be one that could have been raised in the
previous proceeding; and(b) it must appear that the same or substantially the same facts will arise for consideration in the second as in the first proceeding.[15][15] [1999] 2 VR 19 at [23]
41 Moreover, despite that fact that the necessary conditions existed for the application of Anshun, Her Honour concluded that it was not unreasonable for the worker to decide to pursue his statutory claim for relief under the IRA without also seeking the claims which he later sought to bring in the Magistrates’ Court. She also noted that the Anshun principles should apply “only in the clearest of cases.”[16]
[16] [1999] 2 VR 19 at [33]
42 The cases relied upon by the defendant do not assist him. Further, the “necessary conditions” for the operation of the Anshun principles are not present on the analysis of Kenny JA in Gibbs. As indicated already, the statutory claim for ejectment could not have been raised in the earlier proceeding.
43 No arguable defence arises on the basis of Anshun.
Whether principles of Anshun applicable to mortgagees in any event
44 As indicated already, Ms Rees also says that the principles of Anshun do not apply to actions by mortgagees.
45 Counsel cited Fisher & Lightwood’s Law of Mortgage[17] wherein the authors state their support for such a principle with an extract from the judgment of the English Court of Appeal in Alliance & Leicester v Slayford [18] as follows :
“It would not help mortgagors, mortgagees or the courts if mortgagees had to claim and pursue to judgment all their possible claims at one and the same time. Mortgagees usually only go for possession initially and pursue other remedies later if they have to, and that practice is entirely sensible and to the advantage of all concerned.”[19]
[17] E L G Tyler, P W Young & C E Croft, “Fisher & Lightwood’s Law of Mortgage”, 2nd Australian Edition, Lexis Nexis Butterworths, 2005.
[18] (2000) 33 HLR 743
[19] (2000) 33 HLR 743 at [20]
46 In the Alliance case, the court was concerned with a situation wherein a possession claim was brought firstly and separately from a later action in debt. As indicated in the above passage, the court rejected a suggestion that this constituted an abuse of process.
47 Counsel for the plaintiff also cited the case of Securum Finance Ltd v Ashton & Anor[20] which was more closely aligned to the current factual situation in that the mortgagee first sought recovery on the debt which was struck out for delay. An assignee of the debt then sought possession in a subsequent proceeding. The court found that the claim to enforce the security could not be classified as an abuse of process. Chadwick LJ stated that it could not be argued “that a secured creditor who chooses, in the first place, to sue for payment alone, is thereafter precluded from seeking to enforce his security in a separate action on the grounds that that was a claim that could have been advanced in the first action.”[21]
[20] [2001] Ch 291
[21] [2001] Ch 291 at 302
48 There appears much to recommend an approach wherein Anshun has no application to mortgagees. Nevertheless, the issue has not been tested in Australia and Sykes appears to have a contrary view.[22] Further, as observed by Kenny JA in Gibbs, absent any inconsistent judgments, the question of whether it is unreasonable for a plaintiff not to litigate an issue in an earlier proceeding requires consideration of all the relevant facts.[23] Although the better view appears to be that nothing should ordinarily prevent a mortgagee from issuing on the personal covenant separately from possession, I am not prepared to find that Anshun could never apply to mortgagees.
[22] Sykes & Walker, “Law of Securities”, 5th Edition, 1993, at 138; although this passage appears to be dealing with the foreclosure remedy where different considerations apply
[23] Gibbs v Kinna [1999] 2 VR 19 at [28]
49 Suffice to say that I am not satisfied that the “failure” to claim possession in the earlier proceeding could be said to be unreasonable on the facts of this case.
Other factors
50 In terms of other relevant factors, there appeared to be no knowledge of the judgment until 22 December 2009.[24] When this is taken with the interposing of the vacation period, I am satisfied that the application was made relatively promptly.
[24] Affidavit of Michael Joseph Rafter of 22 January 2010 at paragraph 2
51 I also accept that some of the prejudice that the plaintiff would suffer might be adequately compensated by a suitable award of costs or security.
52 However, the only explanation for the default in this case is provided by the defendant’s solicitor to the effect that:
“prior to the 5th January due to the defendant’s lack of skill in the English language and his lack of understanding of our legal system I had not received any instructions which would justify the filing of a defence.”[25]
[25] Affidavit of Michael Joseph Rafter of 22 January 2010 at paragraph 5
53 This is an inadequate explanation. Thus, although I am prepared to accept that there may be language difficulties, there appears to be no reason why the instructions ultimately obtained could not have been obtained more promptly. This is particularly so given the defence does not depend on complex factual matters.
54 More significantly, however, there is no arguable defence raised on the materials before me. Setting aside the default judgment for possession in these circumstances serves no useful purpose.
55 After taking into account the circumstances in this case, then, and particularly the absence of an arguable defence, the default judgment, insofar as it orders recovery of possession, should not be set aside.
Conclusion
56 The default judgment dated 6 November 2009 is set aside insofar as it contains an order that the defendant pay the amount of $53,961.47 to the plaintiff. The default judgment otherwise remains.
57 I will hear further from the parties on the question of costs and also as to the future conduct of the proceeding.
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