Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar (No 7)
[2024] FCA 1068
•17 September 2024
FEDERAL COURT OF AUSTRALIA
Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar (No 7) [2024] FCA 1068
File number: NSD 861 of 2019 Judgment of: MARKOVIC J Date of judgment: 17 September 2024 Catchwords: PRACTICE AND PROCEDURE – interlocutory application for the enforcement of orders and declarations made previously – scope of liberty to apply – where application is within scope of liberty to apply – where equitable right of exoneration applies in applicant’s favour – where defence of laches raised – application granted Cases cited: Abigroup Ltd v Abignano (1992) 39 FCR 74
Australian Hardboards Ltd v Hudson Investment Group Ltd (2007) 70 NSWLR 201
Bendigo & Adelaide Bank Limited v Stolyar [2024] NSWSC 710
Halford v Halford (2020) 58 WAR 254
National Commercial Bank v Wimborne (1978) 5 BPR 11,958
Ogilvie v Ferry [2010] NSWSC 379
Parsons v McBain (2001) 109 FCR 120
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 75 Date of hearing: 22 August 2024 Counsel for the Applicant: Mr S Golledge SC and Mr D Edney Solicitor for the Applicant: Matthews Folbigg Lawyers Counsel for the Respondents: The First Respondent appeared in person. Her son made submissions on her behalf. ORDERS
NSD 861 of 2019 IN THE MATTER OF IAN STOLYAR AND BETH NGOC NGUYEN
BETWEEN: ANDREW SCOTT IN HIS CAPACITY AS THE TRUSTEE OF THE BANKRUPT ESTATES OF IAN STOLYAR AND BETH NGOC NGUYEN
Applicant
AND: FAINA STOLYAR
First Respondent
FANCHEL PTY LTD
Second Respondent
ORDER MADE BY:
MARKOVIC J
DATE OF ORDER:
17 SEPTEMBER 2024
THE COURT DECLARES THAT:
1.The applicant is entitled to be indemnified by the first respondent in respect of all amounts secured by registered mortgage number AJ489024 (Mortgage) in favour of the second respondent to the interlocutory application, Bendigo and Adelaide Bank Limited ACN 068 049 178 (BABL), registered upon the title of the property known as 11/2 Ocean Street North, Bondi, being the land in folio identifier 11/SP9328 (referred to as the Right of Indemnity).
2.The property known as 5/41 Francis Street, Bondi Beach, being the land in folio identifier 5/SP17061, is charged in equity to the applicant as security for the Right of Indemnity.
THE COURT ORDERS THAT:
3.The applicant be appointed as Receiver of 5/41 Francis Street and of any rents payable in respect of its occupation, for the purpose of its sale in aid of the Right of Indemnity, without security.
4.The Receiver is authorised to exercise in respect of 5/41 Francis Street:
(a)all of the powers that a receiver may exercise in respect of the property of a corporation pursuant to s 420(2) of the Corporations Act 2001 (Cth); and
(b)all of the rights and powers of the owner or the first respondent in respect of the use or occupation of 5/41 Francis Street, including the rights and powers of the owner and/or the first respondent pursuant to any residential tenancy agreement or other agreement entered into in respect of the use or occupation of the property.
5.The powers of the Receiver do not prevent the exercise by BABL of any of its rights or powers pursuant to the Mortgage.
6.The Receiver shall conduct the sale of 5/41 Francis Street by auction or private sale, and, having deducted and paid the amounts referred to in Order 7 below, pay the Net Proceeds of the sale, and any rents received by him in respect of the occupation of 5/41 Francis Street, into Court.
7.The Receiver is authorised to deduct and pay from the Net Proceeds the following:
(a)land tax, strata levies, council and water rates, and any other proper charges, deductions, or adjustments on completion of the sale of 5/41 Francis Street;
(b)commission payable to any agent on the sale of 5/41 Francis Street;
(c)marketing, styling, and other like costs incurred in connection with the sale of 5/41 Francis Street;
(d)legal costs (including disbursements) incurred in connection with the sale of 5/41 Francis Street; and
(e)any amounts payable to BABL in order to procure the discharge of the Mortgage.
8.Within 21 days of paying the balance of 5/41 Francis Street’s sale proceeds and any rents received into Court in accordance with Order 6 above, the Receiver is to:
(a)file accounts with respect to the receivership of 5/41 Francis Street; and
(b)seek orders with respect to his remuneration and discharge as receiver.
9.The Receiver shall act at all times in relation to the selling of 5/41 Francis Street in accordance with the duties owed by a mortgagee in exercising a mortgagee’s power of sale.
10.Prior to offering 5/41 Francis Street for sale, the Receiver shall consult with and obtain advice from a real estate agent or valuer before seeking to fix a reserve sale price for 5/41 Francis Street.
11.Liberty is granted to the Receiver to apply, on three days’ notice in writing, for such further or other orders as may be necessary or appropriate concerning the implementation of these Orders or for any necessary or appropriate variation to these Orders.
12.The first respondent be restrained, whether by herself or by her servants or agents, from:
(a)impeding or attempting to impede any agent appointed to sell 5/41 Francis Street or that agent’s staff from accessing 5/41 Francis Street or doing anything related to the sale of the property;
(b)attending any auction or showing of 5/41 Francis Street by the agent;
(c)interfering in the sale of 5/41 Francis Street, including but not limited to by communicating information to any person, posting any signage, or doing any other thing that might reasonably be expected to delay or hinder its sale;
(d)entering into or taking possession of 5/41 Francis Street; or
(e)inducing or encouraging others to do any of the things listed in subparas (a), (c) or (d) above.
13.In the event that the first respondent has taken possession of 5/41 Francis Street prior to the date of these Orders:
(a)the first respondent is to deliver up to the Receiver vacant possession of 5/41 Francis Street and the keys for all buildings and improvements on, or required to access, 5/41 Francis Street; and
(b)a writ of possession be issued in respect of 5/41 Francis Street.
14.The first respondent is to pay the applicant’s costs of his interlocutory application filed on 19 June 2024.
THE COURT NOTES THAT:
15.The object of the appointment in Order 3 is to enable the Receiver to prepare for sale and sell 5/41 Francis Street, give good title (free of all encumbrances) to the purchaser(s) thereof and to enable the discharge of the Mortgage.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MARKOVIC J:
Before me is an interlocutory application filed by the Trustee of the bankrupt estates of Ian Stolyar and Beth Ngoc Nguyen, Mr Stolyar’s wife (Trustee’s IA). The Trustee seeks orders which are, in effect, in aid of enforcement of declarations and orders made on 6 September 2022 (6 September Orders) in this proceeding following a lengthy hearing and the publication of reasons on 16 June 2022: see Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar [2022] FCA 691 (Stolyar (No 1)). The respondents to this proceeding are Faina Stolyar, Mr Stolyar’s mother, and Fanchel Pty Ltd, a company under Mrs Stolyar’s control.
The 6 September Orders include:
(1)declarations that:
(a)the transfer of the property known as 11/2 Ocean Street North, Bondi (Ocean Street Property) from Mr Stolyar to Mrs Stolyar was void against the Trustee; and
(b)Mrs Stolyar holds the legal title of the Ocean Street Property on trust for the Trustee; and
(2)orders:
(a)requiring Mrs Stolyar to transfer the Ocean Street Property to the Trustee, with the Trustee appointed as receiver of its rents in the meantime; and
(b)granting the parties liberty to apply for further orders or directions consequential on or required to give effect to the declarations made including those set out above.
As summarised by the Trustee and further explained below an issue has arisen out of the following facts:
(1)while in control of the Ocean Street Property Mrs Stolyar caused it to be encumbered with a mortgage securing a loan from the Bendigo and Adelaide Bank Limited (BABL Loan);
(2)the BABL Loan is also secured on a second property situated at 5/41 Francis Street, Bondi Beach (Francis Street Property) which is beneficially owned by Mrs Stolyar;
(3)Mrs Stolyar has ceased servicing the BABL Loan and it is now in default; and
(4)according to the Trustee, Mrs Stolyar is seeking that Bendigo and Adelaide Bank sell the Ocean Street Property, rather than the Francis Street Property, and in doing so is, in practical effect, seeking to defeat the relief granted to the Trustee with respect to that property by causing it to be sold and used to discharge her personal indebtedness.
As a result, in the Trustee’s IA the Trustee seeks consequential relief to preserve the value of the declarations and orders made in his favour, principally by causing the Francis Street Property to be used to repay the BABL Loan. More particularly the Trustee seeks:
(1)declarations that:
(a)he is entitled to be indemnified by Mrs Stolyar in respect of all amounts secured by registered mortgage number AJ489024 in favour of Bendigo and Adelaide Bank registered on the title of the Ocean Street Property (Right of Indemnity); and
(b)the Francis Street Property is charged in equity to him as security for the Right of Indemnity; and
(2)orders that he be appointed as receiver of the Francis Street Property and of any rents payable in respect of its occupation for the purpose of its sale in aid of the Right of Indemnity, without security and to effect the sale of that property.
Bendigo and Adelaide Bank was joined as a respondent to the Trustee’s IA. It did not make any submissions at the hearing of the Trustee’s IA. Rather, its appearance was mentioned by the Trustee. Mrs Stolyar was assisted by Mr Stolyar at the hearing of the Trustee’s IA. I granted leave to Mr Stolyar to assist his mother and to make submissions on her behalf to supplement her written submissions.
BACKGROUND
Mrs Stolyar and her late husband purchased the Francis Street Property in 1985 and, upon her late husband’s passing, Mrs Stolyar became and remains its sole registered proprietor: Stolyar (No 1) at [51], [61]. The Trustee makes no proprietary claim to the Francis Street Property.
In about June 1992 Mr Stolyar purchased the Ocean Street Property. On 28 March 2011 Mr Stolyar entered into a home loan contract with the National Australia Bank (NAB) secured by way of, among other things, a first registered mortgage over the Ocean Street Property. The NAB’s mortgage over the Ocean Street Property was discharged in 2012: Stolyar (No 1) at [442], [459]-[460].
On 20 March 2013 Mr Stolyar transferred the Ocean Street Property to Mrs Stolyar for no consideration: Stolyar (No 1) at [291], [305]. It was that transfer that was successfully voided by the Trustee and was the subject of the 6 September Orders as set out above.
Mr Stolyar’s and Ms Nguyen’s bankruptcies commenced on 3 October 2014: Stolyar (No 1) at [1].
On 8 May 2015 Mrs Stolyar entered into the BABL Loan and borrowed $1.48m from Bendigo and Adelaide Bank secured by way of a first registered mortgage over both the Ocean Street Property and the Francis Street Property: Stolyar (No 1) at [527(2)].
The proceeds of the BABL Loan were paid into Mrs Stolyar’s bank account and applied towards the purchase of a property at 2C Dumaresq Road, Rose Bay (Rose Bay Property): Stolyar (No 1) at [529]-[531].
On 23 April 2020, at the time of the sale of the Rose Bay Property, orders were made by consent in this proceeding for the proceeds of sale of the Rose Bay Property to be applied, amongst other things, to discharge the mortgage secured over the Ocean Street Property and the Francis Street Property and, it follows, the BABL Loan (23 April Orders). However, that did not occur. Rather, funds were placed in an offset account linked to the BABL Loan to offset the interest otherwise payable (Offset Account). The mortgage over the Ocean Street Property and the Francis Street Property and the BABL Loan remained in place. The Trustee does not take any point in relation to this non-compliance on the part of Mrs Stolyar and Fanchel with the 23 April 2020 Orders.
On 10 December 2020 the bulk of the funds in the Offset Account were redrawn to partly fund the purchase of the property at 3/10 Longworth Avenue, Point Piper (Point Piper Property). That transaction was recorded in, and in accordance with, consent orders made in this proceeding on 14 December 2020 (14 December Orders). The 14 December Orders also included an Order that:
5.The Court notes the Agreement between the parties that, without altering the effect of the Orders made on 23 April 2020 (as varied on 30 October 2020 and by these Orders):
(a)the applicant will consent to the New Property being encumbered if reasonably required by the first respondent for the following purposes:
(i)the first respondent’s reasonable living expenses up to a maximum figure of $5,000 per month, excluding rent;
(ii)the first respondent’s rent for her residence, including rental bond;
(iii)the payment of school fees for the first respondent’s granddaughter; and
(iv)the payment of reasonable legal costs of this proceeding; and
(b)the applicant will remove his caveat on the title to 5/41 Francis Street, Bondi within seven days of the date of these Orders.
The “New Property” referred to in the 14 December Orders is the Point Piper Property.
On 26 November 2021 the Court made further orders in this proceeding including an Order that the Trustee “shall be entitled to lodge a caveat on the title of the [Francis Street Property] to notify his interest under Order 5(a)” of the 23 April Orders. That order, among others, was made upon the Trustee giving the usual undertaking as to damages.
Events since delivery of reasons in Stolyar (No 1)
Mrs Stolyar has not made any payment in relation to the BABL Loan since 5 July 2022.
On 14 June 2023 Bendigo and Adelaide Bank issued a default notice to Mrs Stolyar under s 88 of the National Credit Code and s 57(2)(b) of the Real Property Act 1900 (NSW).
Mrs Stolyar did not comply with the default notice. Accordingly, Bendigo and Adelaide Bank commenced a proceeding in the Supreme Court of New South Wales (Supreme Court Proceeding) seeking possession of the Ocean Street Property and the Francis Street Property: see Bendigo & Adelaide Bank Limited v Stolyar [2024] NSWSC 710 at [2].
On 28 May 2024 Lonergan J made orders in the Supreme Court Proceeding including an order for judgment in favour of Bendigo and Adelaide Bank for possession of the whole of the Ocean Street Property. At [19] of Bendigo & Adelaide Bank Lonergan J observed that Mrs Stolyar’s defence filed in the proceeding “conceded entitlement to possession and effectively concede that the Ocean Street Property should be sold to repay [Mrs Stolyar’s] liability under the mortgage”. Accordingly, Bendigo and Adelaide Bank sought judgment for possession of the Ocean Street Property.
In Bendigo & Adelaide Bank her Honour said at [22]-[24]:
[22]Faina provided an affidavit affirmed 27 May 2024. She cited her occupation as “Retired.” Amongst other assertions, Faina asserted that the Ocean Street property would be enough to clear the debt due to the Bank, and that if the Bank also took possession of the Francis Street property, it would leave her “homeless”.
[23]At the directions hearing on 28 May 2024, Mr Collins of counsel appeared for the plaintiff and a Mr Edney appeared in the interests of the trustee. Faina appeared with Ian Stolyar who purported to again speak for his mother. Given what I by then understood regarding the background to the matter, I advised Ian Stolyar that he would not be permitted to speak for his mother and that with the assistance of a hearing loop, I would be asking her questions on oath to clarify that she understood the proceedings and her role in them.
[24]I ascertained that she lived at an address in Point Piper which she owned and that her son, daughter-in-law and granddaughter also lived there. Faina confirmed that she was able to hear with a combination of the hearing loop and lip reading. She is 83 years old. She said that her son prepared her affidavit of 27 May, but that she had told him what to say in the affidavit, and she had read it and signed it. She had an understanding that the proceedings concerned the Ocean Street and Francis Street properties and that she really wanted to keep Francis Street. She had said in her affidavit that the trustee was trying to make her “homeless” because she was under the impression that there were steps afoot regarding the Point Piper unit in which she lived and that the trustee was trying to sell that property. She said that she did understand that the current proceedings in the possession list did not involve the Point Piper unit but explained that effectively, Francis Street was the only place she owned that was her “own place, Mr Scott [the trustee] does not claim” and so if that was also taken in these proceedings, she would have nowhere to live.
According to the statement of claim filed in the Supreme Court Proceeding, as at 20 May 2024 the amount owing by Mrs Stolyar under the BABL Loan was $1,687.160.16.
Based on the most recent appraisals obtained by the Trustee the value of:
(1)the Ocean Street Property is between about $1.45m and $1.575m; and
(2)the Francis Street Property is between about $1.75m and $1.925m.
Stephen Keith Mullette, the solicitor for the Trustee, gives evidence that apart from the Francis Street Property the only material asset of which he is aware, and which remains registered in Mrs Stolyar’s name, is the Point Piper Property which is subject to an order for sale by equitable execution made in this proceeding on 1 March 2024: see Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar (No 5)[2024] FCA 37 in relation to which orders were made on 1 March 2024. Mr Mullette gives the following further evidence:
(1)the order for equitable execution was made on the basis of evidence that the Point Piper Property was worth in the order of $11m to $14m;
(2)the debts to be paid by Mrs Stolyar, including from the sale of the Point Piper Property, include:
(a)unsecured money judgments totalling $5,544,782.46 as at 6 September 2022 which, including further post-judgment interest calculated to 18 June 2024, total $6,465,617.82;
(b)a secured monetary entitlement, which at the time of Stolyar (No 5) was the subject of an accounting being taken before Registrar Segal, who has now completed that accounting and by certificate filed in this proceeding on 27 May 2024 certified the Trustee’s entitlement as $6,262,434.44 as at 29 April 2020 which, including pre-judgment interest to 18 June 2024, now totals $7,703,723.83; and
(c)unquantified costs orders (partly on an indemnity basis) of the proceeding the subject of Stolyar (No 1) together with costs of the appeal proceeding against Stolyar (No 1) and an application for special leave to appeal to the High Court, as well as various other costs orders obtained in respect of the enforcement of the 6 September Orders. Mr Mullette estimates the total amount payable by Mrs Stolyar in respect of all of these costs orders will exceed $2m; and
(3)given that the quantified debts total $14,169,341.65, before allowing for any further interest or any costs of selling the Point Piper Property and for the unquantified costs orders obtained against Mrs Stolyar, Mr Mullette considers it extremely unlikely that the sale of the Point Piper Property will discharge those debts in full, let alone leave enough to pay out the BABL Loan (or, if the Ocean Street Property is sold and applied towards the BABL Loan, to compensate the Trustee for the value of the property lost).
On that basis Mr Mullette is of the opinion that there is no practical alternative but for the Francis Street Property to be sold.
THE TRUSTEE’S POSITION
The Trustee brings the Trustee’s IA having regard to the following:
(1)Mrs Stolyar is (and has always been) in a position to repay the BABL Loan by sale of the Francis Street Property;
(2)she has chosen not to do that, instead adopting a strategy to push Bendigo and Adelaide Bank to sell the Ocean Street Property in the apparent hope that the Trustee can be forced to bear the practical burden of the BABL Loan in her place. However, the sale of the Ocean Street Property is unlikely to discharge the BABL Loan, such that Bendigo and Adelaide Bank’s litigation will continue with a commensurate rise in its costs;
(3)given the Francis Street Property’s estimated equity position, if its sale is forced in the near term it is reasonably likely to result in the full exoneration of the Ocean Street Property after realisation of costs (as is the Trustee’s entitlement). However, the longer the matter is delayed (and it follows the higher the costs, including of the BABL Loan) the greater the risk that will not be the case; and
(4)at the very least, it is reasonable to apprehend that, unless the Court intervenes promptly, the Trustee’s property, ie the Ocean Street Property, will be sold, costing him the control over its sale process to which he is entitled.
MRS STOLYAR’S SUBMISSIONS
Mrs Stolyar submits that in Stolyar (No 1) the reasons for finding that the transfer of the Ocean Street Property was void against the Trustee turned, for the most part, on her and Mr Stolyar’s explanation for the transfer of that property, namely that it was transferred “in satisfaction of the debt of $576,000 arising out of the funds drawn by [Mr Stolyar] and [Ms Nguyen] from DFS”: Stolyar (No 1) at [304]. Mrs Stolyar submits that no finding was made in relation to the BABL Loan and mortgage which had been registered against the Ocean Street Property since about May 2015. Mrs Stolyar also submits that there was also a finding that until about 2013 the NAB had a mortgage over the Ocean Street Property: Stolyar (No 1) at [459].
Mrs Stolyar observes that the 6 September Orders include the following orders in relation to the Ocean Street Property:
14.The first respondent take all necessary steps and do all necessary things to enable title to 11/2 Ocean Street to be transferred to the applicant, including by:
(a)executing a transfer without monetary consideration in registrable form, providing for the transfer of the title to 11/2 Ocean Street to the applicant; and
(b)complying within 14 days with all and any request or requirement by or on behalf of the applicant the applicant’s solicitors relating to any PEXA or conveyancing requirement made for the purpose of causing the transfer the title to 11/2 Ocean Street to the applicant, including any request or requirement for the execution of any other documents that the applicant may reasonably require to effect the transfer of the title to 11/2 Ocean Street to the applicant.
15.Upon the application of the applicant, if the first respondent fails to comply with Order 14 above, a Registrar of the Court is to execute such transfer without monetary consideration in registrable form or other documents as the applicant may reasonably require to effect the transfer of the title to 11/2 Ocean Street.
16.The applicant be appointed as receiver in respect of any rents being payable in respect of the occupation of 11/2 Ocean Street.
17.For the purposes of Order 16 above, the applicant have all of the rights and powers of the owner or the first respondent in respect of the use or occupation of 11/2 Ocean Street, including the rights and powers of the owner and/or the first respondent pursuant to any residential tenancy agreement or other agreement entered into in respect of the use or occupation of those properties.
Mrs Stolyar submits that those orders do not specify that she was required to discharge her mortgage over the Ocean Street Property as was the case in Ogilvie v Ferry [2010] NSWSC 379 at [35]. Mrs Stolyar contends that the Trustee relies on Ogilvie in pursuing his new claim in relation to the Francis Street Property but the claim he pursues is not available as there was no order made for her to discharge her mortgage.
Mrs Stolyar observes that in making this application the Trustee relies on Order 40(d) of the 6 September Orders and refers to the principles in Abigroup Ltd v Abignano (1992) 39 FCR 74 at 88 with respect to the usual scope of liberty to apply. She submits that the Trustee “is now seeking to have the Francis Street [P]roperty indemnify him” for the sale of the Ocean Street Property by Bendigo and Adelaide Bank but there are no findings or orders in relation to the former or the loan against the latter in Stolyar (No 1). Mrs Stolyar submits that therefore the Trustee cannot now rely on Order 40(d) of the 6 September Orders granting liberty to apply to seek any kind of indemnity.
Mrs Stolyar also relies on the doctrine of laches in opposing the Trustee’s application. She submits that since about May 2019 the Trustee has known about Bendigo and Adelaide Bank’s mortgage but has remained silent on the issue, that in the hearing of the substantive proceeding he made no claim for possession of the Francis Street Property and that in making submissions in relation to the Ocean Street Property he did not mention the mortgage registered on its title. She contends that the Trustee thereby accepted that if the Court “awarded him” the Ocean Street Property it would “come with a loan”.
Finally, Mrs Stolyar identifies some errors in the Trustee’s submissions concerning the BABL Loan, the mortgage registered on the title of the Ocean Street Property and the Supreme Court Proceeding which are addressed below to the extent necessary.
CONSIDERATION
Is the Trustee permitted to seek the relief in the Trustee’s IA in this proceeding?
The first matter to address is Mrs Stolyar’s contention that Order 40(d) of the 6 September Orders does not permit the Trustee’s IA.
Order 40(d) of the 6 September Orders provides:
The parties have liberty to apply for any further orders or directions:
…
(d)otherwise consequential or required to give effect to these declarations and orders.
Mrs Stolyar relies on Abigroup. In that case the appellant, Abigroup, issued a bankruptcy notice to Mr Abignano relying on orders made by the Supreme Court of New South Wales. Those orders included an order for liberty to apply on 24 hours’ notice. The primary judge set aside the bankruptcy notice. The questions which arose on the appeal before a Full Court of this Court (Lockhart, Morling and Gummow JJ) were whether, for the purposes of s 40(1)(g) of the Bankruptcy Act 1966 (Cth), the appellant, Abigroup, was a creditor; and whether there was a final judgment or order on which the appellant could rely to issue the bankruptcy notice to Mr Abignano. In considering whether the Supreme Court’s orders were final for the purpose of s 40(1)(g) of the Bankruptcy Act, the Full Court addressed the order for liberty to apply at 88:
The reservation of liberty to all parties to apply to a court is a provision directed essentially to questions of machinery which may arise from the implementation of a court’s orders. They include cases where a court may need to supervise the enforcement of orders after they have been made. They relate essentially to orders (not often to declarations) in practice in our experience. We agree with the submission of counsel for the appellant that orders of this kind relate to enforcement and not to statements of the rights of the parties. Historically orders reserving liberty to apply are for limited purposes. They arise, for example, upon a decree for specific performance where the unsuccessful defendant declines to sign all documents and do whatever is necessary to ensure that the contract the subject of the suit is performed. The reservation of liberty to apply ensures that the court may then make orders to secure that the relevant contract is enforced by the defendant by, for example, appointing the appropriate officer of the court to execute the necessary documents of conveyance so as to give title to the successful plaintiff. Historically the reservation by the Court of Chancery of further consideration of a decree was intended to cover the circumstance where following the pronouncement of the decree (a final decree) a further hearing was necessary for the court to deal with some outstanding issue sometimes requiring taking further evidence and making further declarations or orders. But this did not detract from the initial orders as being final orders. Rather it was a mechanism designed by the Court of Chancery to obviate the necessity of a further suit being instituted to deal with matters that were essentially consequential upon the making of the initial final decree. This demonstrates that there is no inconsistency between the making of final decrees, judgments or orders or declarations and subsequent orders of the court. It all depends upon the circumstances of the case and the particular orders or decrees formulated by the court. See generally the discussion with respect to liberty to apply and further consideration in A V Ritchie’s Supreme Court Procedure (NSW), pars 42.12.2 and 42.12.3.
In Australian Hardboards Ltd v Hudson Investment Group Ltd (2007) 70 NSWLR 201 there were two sets of proceedings on foot in the Supreme Court which related to the same transaction between the parties: one was filed in the Commercial List in 2004 and the other was filed in the “ordinary Equity list” in 2006. Two notices of motion were filed: Australian Hardboards Ltd filed a notice of motion in the Commercial List proceeding seeking a stay of that proceeding pending the outcome of the Equity Division proceeding; and Hudson Investment Group Ltd filed a notice of motion in the Equity Division proceeding seeking a stay of that proceeding. Those notices of motion came before the same judge who granted the relief sought by Hudson and refused the relief sought by Hardboards.
At the time the notices of motion came before the Supreme Court for hearing, judgment had been delivered in the Commercial List proceeding and an appeal from that judgment dismissed. Relevantly the trial judge in disposing of the proceeding made orders for specific performance of a deed between the parties, for payment of a deposit payable pursuant to that deed and the following further orders:
12.Reserve liberty to apply to an Associate Justice for the purpose of dealing with a matter involved in or arising in the course of working out the order.
13.Order reserving to an Associate Justice for further consideration further orders to give effect to the above orders for specific performance.
The Equity Division proceeding was commenced after judgment was delivered and orders made in the Commercial List proceeding and, following the filing of a notice of motion by Hudson in the Commercial List proceeding pursuant to the liberty granted to it to apply. Hardboards sought leave to appeal from the decision of the primary judge staying the Equity Division proceeding.
In determining Hardboards’ application Campbell JA (with whom Tobias JA agreed) considered the effect of the inclusion in final orders of an order granting liberty to apply. His Honour observed (at [50]) that when final relief has been granted in a proceeding, an order granting liberty to apply “enables further orders to be made which are necessary for the purpose of implementing and giving effect to the principal relief already pronounced”. After referring to Abigroup at 88 (see [33] above) and other relevant authorities his Honour relevantly said at [55]-[56]:
55There are some judicial statements to the effect that what can be done under liberty to apply is quite limited: for example, Wentworth v Woollahra Municipal Council (Court of Appeal, 31 March 1983, unreported) at 4, per Hutley JA; Kraft v Kupferwasser (at 243). However, those statements are of a degree of generality that is difficult to apply as an aid to deciding any particular case, and, like all generalisations in judgments, need to be read secundum subjectam materiam: Leaway Pty Ltd v Newcastle City Council (No 2) (2005) 220 ALR 757 at 773 [75]–[82]. …
56Rather, what can be done under a reservation of liberty to apply depends on what needs to be done, in the particular case, to work out the particular orders that have been made. If an order is one the working out of which of its nature involves deciding complex questions, or questions that were not specifically raised at the time that the order was made, those questions can be raised and decided in the original suit pursuant to liberty to apply.
At [58] Campbell JA said that “there was no difficulty about exercising a liberty to apply for the purpose of dealing with facts that have arisen only since the original order was made”, referring to Wentworth v Woollahra Municipal Council (unreported, New South Wales Court of Appeal, Hutley, Glass and Mahoney JJ, 31 March 1983) at 5. His Honour also expressed the view (at [63]-[64]) that under the applicable procedures of the Supreme Court there was no need for applications under liberty to apply to be confined to pure matters of machinery or to be made in a summary way as had been determined in earlier decisions. By way of example his Honour continued at [64]-[65]:
64… Bonnici v Ku-ring-gai Municipal Council (2001) 121 LGERA 1 is an example of an application that occupied 14 hearing days being brought pursuant to liberty to apply. Orders had been made on 11 November 1986, and entered on 6 February 1987, restraining the defendant from, in broad terms, permitting or causing the flow of water from a certain street and footpath onto the plaintiff’s land so as to create a nuisance, ordering the defendant to carry out a particular scheme of abatement work, and reserving liberty to apply (at 8 [38], 9 [45]). Although that abatement work was carried out, the plaintiffs asserted that it had not prevented the water nuisance from continuing. The plaintiffs filed an application seeking (at 13 [78]):
“… a declaration that there was a continuing nuisance, an order that the defendant cease to cause that nuisance, an order for specified new drainage work to be carried out in the street, a declaration that water flowing in and over the drainage line situated on uphill neighbouring properties was causing a nuisance, an order that the defendant cease to use that line and install a new line directing water on those properties to the rear of the properties, and an order for a retaining wall as specified to be built on the boundary of Nos 46 and 48. The document also included a claim for special and general damages.”
65That application was filed in the suit in which the orders had previously been made. The defendant sought summary dismissal of the application. Sperling J held that the plaintiff’s application was within the scope of the liberty to apply. …
At [69] Campbell JA expressed the view that a reservation of liberty to apply “by a 21st century judge” needed to be understood in the context of the particular practice and procedures of, relevantly, the Supreme Court. His Honour referred to s 56 of that court’s civil procedure Act which sets out the overriding purpose of the Act and of the rules of court to “facilitate the just, quick and cheap resolution of the real issues in the proceedings” and the requirement for the court to effect that purpose when exercising any power given to it by the Act or by the rules. His Honour continued at [70]:
If there is a question that needs to be decided in working out an order for specific performance, but it is too complex to be decided by a summary procedure, the Court should, in application of s 56, give whatever procedural directions are needed to enable it to be decided.
As set out above, Order 40(d) of the 6 September Orders provides that the parties have “liberty to apply for any further orders or directions… otherwise consequential or required to give effect to these declarations and orders”. That is, the liberty to apply extends expressly to orders that are consequential or required to give effect to, among other things, the declaration that the transfer of the Ocean Street Property to Mrs Stolyar was void and that she held the property on trust for the Trustee and the orders requiring Mrs Stolyar transfer the Ocean Street Property to the Trustee.
As the Trustee submits, and as further explained below, a consequence of Mrs Stolyar holding the Ocean Street Property on trust for him is that she is under an obligation to exonerate the Trustee with respect to Bendigo and Adelaide Bank’s mortgage. It follows that the Trustee’s IA, which concerns an application for that relief, is within the terms of the liberty to apply granted by Order 40(d) of the 6 September Orders.
The Trustee’s IA application is also, in my view, consequential upon the making of the 6 September Orders insofar as they concern the Ocean Street Property. The application arises out of developments that postdate the making of the 6 September Orders, namely Mrs Stolyar’s default under the BABL Loan and the Supreme Court Proceeding in which Bendigo and Adelaide Bank sought and obtained an order for possession of the Ocean Street Property in priority to obtaining such an order in relation to the Francis Street Property. Those facts raise an issue that must now be “worked out” vis-à-vis the 6 September Orders.
As Campbell JA explained in Australian Hardboards (at [54]) the application raises for resolution a matter that requires a decision of the Court for the purpose of working out the actual terms of the 6 September Orders insofar as they relate to the Ocean Street Property so as to make those orders “more efficacious in matters of detail”. Given the events which have transpired, the 6 September Orders now require supervision, with the potential consequence of further or supplementary orders, in order to enable them to achieve their purpose.
Mrs Stolyar urges on me a narrow interpretation of Order 40(d) of the 6 September Orders. However, such an interpretation is not consistent with s 37M of the Federal Court of Australia Act 1976 (Cth) and the overarching purpose as stated therein of the civil practice and procedure provisions, namely to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Nor does it have regard to the applicable principles which recognise that what can be done under a reservation of liberty to apply depends on what needs to be done in the particular case to work out the orders that have been made. In this case, having regard to the events which have transpired in relation to the Ocean Street Property, the Trustee’s application is appropriate and seeks to resolve an issue in relation to the relevant orders affecting the declaration and orders made in relation to that property.
I am satisfied that the Trustee’s IA is properly brought pursuant to Order 40(d) of the 6 September Orders.
Is the Trustee entitled to the relief sought in the Trustee’s IA?
I turn then to consider the relief sought by the Trustee in the Trustee’s IA and whether it should be granted.
The first question to determine is whether the Trustee is entitled to the Right of Indemnity.
The authorities establish that where a person stands as surety for a principal debtor’s debts, that person is, absent agreement to the contrary, entitled to be indemnified by the principal debtor for that liability. The relevant principles were explained in Parsons v McBain (2001) 109 FCR 120.
In that case the appellants, Bronwyn Parsons and Cathryn Parsons, were each the registered proprietor of one of two properties. The respondent was the trustee of the bankrupt estates of their respective husbands who, in that capacity, claimed the two properties. Each of Bronwyn and Cathryn took a transfer of their properties from their husbands, respectively Peter and Geoffrey. The primary judge declared each transfer to be void and ordered the properties to be transferred to the trustee.
The husbands acquired their respective properties in their own names. In the case of Peter, he acquired the property in 1977 and married Bronwyn in 1987 from which time it became their matrimonial home. From that time Bronwyn made contributions to the loan taken out to purchase the property as well as payments of principal. The trial judge found that a common intention constructive trust in favour of Bronwyn came into existence. In the case of Geoffrey, he purchased a vacant block of land in 1977 and at about the same time purchased a house at 22 Simpson Avenue, Smithton. Geoffrey and Cathryn married in 1979 and at the time agreed that Simpson Avenue would be their matrimonial home to be equally owned. Before they moved into the property, they decided to build a house on the vacant block where they would live. Cathryn’s father built the house and both Cathryn and Geoffrey contributed towards its cost. The trial judge found that property was subject to a common intention constructive trust in favour of Cathryn.
In 1992 Peter and Geoffrey mortgaged the properties to raise funds to support the family transport business which was trading unprofitably. The business ultimately failed, and Peter and Geoffrey became bankrupt. Before their bankruptcies Peter and Geoffrey each transferred their respective properties to their wives. It was these transfers that the primary judge found were void. Bronwyn and Cathryn appealed the orders made by the primary judge.
A Full Court of this Court (Black CJ, Kiefel and Finkelstein JJ) upheld the appeals. The Full Court first considered the time at which an interest in property under a constructive trust founded on common intention arises and held that it does not first arise when the Court declares that it exists. The Full Court found that the transfer of the legal estate of the half interest beneficially owned by Bronwyn and Cathryn respectively was not void against the trustee under s 120 or s 121 of the Bankruptcy Act.
The Full Court then moved on to consider Bronwyn and Cathryn’s contention that they had “an equity of exoneration” in respect of the 1992 mortgages that entitled them to cast the burden of the debt upon their respective husband’s interest. They argued that since the amount of the loan secured by the mortgage exceeded the value in each case of the husband’s interest, that interest had been extinguished.
In addressing that contention the Full Court said at [18]-[21] and [25]:
18… The equity of exoneration is summarised in Fisher & Lightwood’s Law of Mortgage (Aust ed, 1995), par 30.7:
“It is a well established principle that a person who has mortgaged his property to secure the debt of another stands only in the position of a surety and is entitled to be exonerated by the principal debtor. In this position is a wife who has mortgaged her property to secure money raised for the benefit of her husband. There is a similar equity in favour of a husband.
Where the property of the wife, or property over which she has a power of appointment, is mortgaged, and the money is paid to her and her husband, or to him alone, it is considered prima facie that it was borrowed for his benefit, and his property is first applied, as for payment of his own debt, unless the presumption is rebutted by proof on the part of the husband, that the whole or some part of the money did not come to his hands. If the debt was not originally incurred for the benefit of the husband, this equity of exoneration does not arise by reason of his giving a covenant as additional security. The result will be the same, where the husband has paid off the mortgage, and has taken an assignment of it in trust for himself.”
The authorities go back three centuries: Huntington v Huntington (1702) 2 Vern 438; 23 ER 881; Taite v Austin (1714) 1 P Wms 284; 24 ER 382; Parteriche v Powlet (1742) 2 Atk 383; 26 ER 632; Clinton v Hooper (1791) 3 Bro CC 201; 29 ER 490.
19It was once thought that this doctrine was limited to husband and wife. This appeared to be the view of Ashburner in his Principles of Equity (2nd ed, 1933) at p 170. In Halsbury’s Laws of England (4th ed, 1979), exoneration is discussed only under the title concerned with husband and wife (Vol 22, pars 1071-1076). However, the authorities show that the doctrine is not so limited, and will apply in other cases. That is what occurred in Gee v Liddell [1913] 2 Ch 62 and Caldwell v Bridge Wholesale Acceptance Corporation (Australia) Limited (1993) 6 BPR 13,539.
20The equity of exoneration is an incident of the relationship between surety and principal debtor. It usually arises where a person has mortgaged his property to secure the debt of another, whether or not that other has covenanted to pay the debt. However, it will also arise in a case where, although not an actual suretyship, the relationship is treated as one of suretyship. This is Lord Selbourne’s third class of suretyship mentioned in Duncan, Fox & Co v North and South Wales Bank (1880) 6 App Cas 1 at 10. For the doctrine to apply in this class, the following facts will usually exist. First, a person must charge his property. Where the person is the beneficial owner of the property it will be sufficient if the charge is by his trustee. Secondly, the charge must be for the purpose of raising money to pay the debts of another person or to otherwise benefit that other person. Thirdly, the money so borrowed must be applied for that purpose. See generally Re Berry (a Bankrupt) [1978] 2 NZLR 373.
21An equity of exoneration operates in the nature of “a charge upon the estate of the principal debtor by way of indemnity for the purpose of enforcing against that estate the right which [the beneficiary] has, as between [the beneficiary] and the principal debtor, to have that estate resorted to first for the payment of the debt”: Gee v Liddell at 72. Thus, where co-owners mortgage their property so that money can be borrowed for the benefit of one mortgagor, the other has an interest in the property of the co-mortgagor whose property is to be regarded as primarily liable to pay the debt.
…
25Although each appellant is entitled to exoneration, that does not give her ownership of her husband’s property, but merely a charge over it. It will therefore be necessary for each appellant to transfer a one half interest in the property to the trustee. He will then hold it subject to each appellant’s charge. In any event, each appellant has the right to be subrogated to the mortgage over her husband’s interest in accordance with cases such as Banque Financiere de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221.
The question of when a person is in fact acting as surety in the way described above was considered in Ogilvie. In that case Hamilton AJ considered whether the plaintiffs were entitled to be subrogated to the rights of a mortgagee under a registered mortgage. The facts of the case were complicated. In summary:
(1)in 2003 the plaintiffs sold a block of land to Salfa Pty Ltd which was to form part of a larger parcel of land (project property) on which Salfa proposed to construct 36 residential units;
(2)on the same day the plaintiffs as purchaser and Salfa as vendor entered into a contract for purchase of unit 36 in the proposed development. Settlement of the home unit contract was conditional on the registration of the strata plan for the residential unit development;
(3)in November 2003 Salfa entered into a loan agreement with Capital Finance Australia Limited (CFA) pursuant to the terms of which CFA provided a loan facility to Salfa. The loan facility was secured by, among other things, a charge granted by Salfa over all of its present and future property and a registered mortgage over the project property;
(4)the contract for purchase of unit 36 was varied on a number of occasions;
(5)on 16 May 2006 Salfa transferred some of its shares in the project property to three individuals, one of which was Mr Ferry. Those interests were registered on the title of the property;
(6)on 16 June 2006 the strata plan was registered with the project property becoming lots 1 to 36 in SP 76969 and unit 36 becoming lot 36 in SP 76969;
(7)the contract for the purchase of unit 36 became unconditional. By that time the plaintiffs had paid the whole of the purchase price for unit 36;
(8)on or about 25 July 2006, although the contract for sale of unit 36 had not yet completed, the plaintiffs took possession of unit 36 and subsequently began living there;
(9)on 20 July 2007 the plaintiffs commenced a proceeding in the Supreme Court for specific performance of the contract for sale of unit 36 and on 30 September 2007 the Supreme Court made an order that the contract be specifically performed and ordered Salfa to do all things necessary, in effect, to transfer clear title to the plaintiffs. The time for compliance by Salfa with those orders was extended on a number of occasions;
(10)on 28 March 2008 CFA transferred all of its rights, title and interest in the loan facility, the charge granted by Salfa and the mortgage over the project property, among other things, to Ferry Asset Holdings Pty Ltd (FAH);
(11)on 10 June 2008 on the application of Dr Ferry, Salfa was wound up and on 27 June 2009 receivers and managers were appointed pursuant to the charge over the assets of Salfa;
(12)on 8 September 2008 Salfa acting through its receivers and managers gave the plaintiffs a transfer of unit 36 but did not give them a discharge of the mortgage insofar as it was registered over unit 36 to secure Salfa’s indebtedness. This was because the secured debt was still outstanding to FAH; and
(13)on 23 July 2009 the plaintiffs were notified by FAH and the remaining receiver, the second of the jointly and severally appointed receivers having resigned by this time, among other things, that FAH proposed to engage in an orderly sale of the remaining unsold units which included unit 36.
The question to be determined as identified by Hamilton AJ was whether the plaintiffs were entitled to be subrogated to the rights of FAH if unit 36 was sold pursuant to the mortgage. His Honour observed (at [73]) that the plaintiffs claimed subrogation could arise from the plaintiffs’ position as co-sureties with the guarantors or it could arise from the fact that, co‑sureties or not, the plaintiffs would have paid out the principal debt. The defendants argued that the plaintiffs were not to be regarded as co-sureties because they had no interest to be bound when the mortgage was granted.
In considering whether the plaintiffs were co-sureties Hamilton AJ said at [75]:
In order to determine whether the plaintiffs are to be regarded as co-sureties, in my view what is required is not some complicated inquiry into the history of the matter but an examination of the realities of the present situation. Unit 36 is subject to the Mortgage. The plaintiffs are the beneficial owners of Unit 36, albeit the title remains in the name of Salfa. Their beneficial interest will in effect be taken and sold upon exercise of the power of sale under the Mortgage. The proceeds of sale, to which they are beneficially entitled, will be taken by the mortgagee in satisfaction of the Secured Debt. Suretyship can undoubtedly arise from the subjection of property to the principal obligation, as well as from a promise to pay it: Re Conley (trading as Caplan & Conley) Ex parte The Trustee v Barclays Bank Ltd [1938] 2 All ER 127. Despite the defendants’ contention to the contrary, the plaintiffs had an interest in the mortgaged property at the time the Mortgage was given: Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140; Forder v Cemcorp Pty Ltd (2001) 51 NSWLR 486. In my view they are at the present time co-sureties with the Guarantors in relation to the Secured Debt.
See too Padovan v MGG Group Pty Ltd [2011] NSWSC 1080 at [26]-[28].
It follows from the principles set out above that:
(1)as the Ocean Street Property is subject to a mortgage securing Mrs Stolyar’s obligations under the BABL Loan, the Trustee is a surety for that loan. The Trustee had an interest in the Ocean Street Property at the time the mortgage over it was given to Bendigo and Adelaide Bank. That is, the property in which he has a beneficial interest by reason of the 6 September Orders is mortgaged as security for the BABL Loan;
(2)Mrs Stolyar is the principal debtor under the BABL Loan. The Trustee is entitled to be indemnified by her in respect of that loan; and
(3)the right of indemnity is secured by way of a charge over the Francis Street Property and the Trustee also had an entitlement to be subrogated to Bendigo and Adelaide Bank’s mortgage over that property if it is paid out: see Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at [4].
Mrs Stolyar submits that this case is different to Ogilvie because there the Supreme Court made orders for specific performance including that Salfa hand over a discharge of mortgage in relation to unit 36. In contrast the 6 September Orders did not require Mrs Stolyar to provide a discharge of the mortgage in favour of Bendigo and Adelaide Bank. But it was not the discharge of mortgage that rendered the plaintiffs a surety for the debt in Ogilvie. It was the fact that the plaintiffs’ beneficial interest was to be taken and sold upon exercise of the power of sale by FAH under the mortgage and that the proceeds of sale, to which the plaintiffs were beneficially entitled, taken by the mortgagee in satisfaction of its debt. That is what will occur here. The Trustee’s beneficial interest will be taken and sold by Bendigo and Adelaide Bank upon the exercise of its power of sale under its mortgage and the proceeds of that sale will be applied by Bendigo and Adelaide Bank in satisfaction of the BABL Loan.
The next question that arises is when the Trustee as surety can enforce his right of indemnification. In Abigroup at 81-82 the Full Court said:
Where a liability from a guarantor to the principal creditor has accrued, the guarantor has a right in equity to require the principal debtor to exonerate him from his liability by paying off the creditor: …
This equitable right to mitigate the hardship which the common law imposed upon a guarantor by requiring him to pay the principal debt before pursuing his right of indemnity against the principal debtor is a quia timet action in equity, the rationale for which is that the guarantor should be able to remove “the cloud hanging over his head before it starts to rain”. This metaphor was first used by Lord Keeper in Ranelaugh (Earl) v Hayes (1683) 1 Vern 189; 23 ER 405. … Quia timet relief is intended to protect the guarantor from first having to pay the debt. It requires the principal debtor to take appropriate steps to ensure that the debt will be discharged or the guarantor relieved of the liability he might incur in consequence of the debtor’s default: National Commercial Bank v Wimborne (No 2) (unreported, Holland J, 28 April 1978). It is based on the principal debtor’s duty to indemnify and save harmless the guarantor.
…
Whilst at common law a surety could not maintain an action for contribution or money paid until he had actually paid more than his just proportion of the principal debt, the authorities referred to by Starke J in McLean v Discount and Finance Limited (1939) 64 CLR 312 at 341 support the view that in equity the right to contribution can be declared before actual payment is made or loss sustained provided that the payment or loss is imminent. As his Honour said:
“A judgment against a surety for the whole amount of the principal debt justifies such a declaration, as does the allowance of a claim by the principal creditor against the estate of a deceased surety ... The apprehended loss or over‑payment thus appears sufficiently imminent, and the court acts quia timet ...”
The Court continued at 83:
It is well and long established in equity that a person entitled to an indemnity may obtain relief from the indemnifying party as soon as the person’s liability to the third person arises and before he has made payment himself, except where the contract otherwise provides or certain exceptional circumstances exist: see Re National Financial Co; Ex parte Oriental Commercial Bank (1868) 3 Ch App 791; Wooldridge v Norris (1868) LR 6 Eq 410; Wolmershausen v Gullick [1893] 2 Ch 514 and other cases conveniently collected in Halsbury’s Laws of England (4th ed), Vol 20, par 315. …
Mrs Stolyar’s liability to Bendigo and Adelaide Bank has clearly arisen. Bendigo and Adelaide Bank has issued a demand for the amount owing under the BABL Loan, has obtained an order for possession of the Ocean Street Property and has notified the Trustee of its intention to sell. To adopt the phrase used by the Full Court in Abigroup, “the cloud” is hanging over the Trustee’s head and he should be able to remove it before it starts to rain.
Laches
It is next necessary to address Mrs Stolyar’s reliance on the doctrine of laches which she raises as a defence to the equitable relief sought by the Trustee.
In Halford v Halford (2020) 58 WAR 254 the West Australian Court of Appeal (Quinlan CJ, Murphy JA and Tottle J) considered the defence of laches. The Court summarised the principles including as follows at [145]-[146]:
145In Fysh v Page, Dixon CJ, Webb and Kitto JJ said:
If a plaintiff establishes prima-facie grounds for relief the question whether he is defeated by delay must itself be governed by the kind of considerations upon which the principles of equity proceed. If the delay means that to grant relief would place the party whose title might otherwise be voidable on equitable grounds in an unreasonable situation, or if, because of change of circumstances, it would give the party claiming relief an unjust advantage or would impose an unfair prejudice on the opposite party, these are matters which may suffice to answer the prima-facie grounds for relief. See Lindsay Petroleum Co v Hurd and the observation in Lord Blackburn’s speech in Erlanger v New Sombrero Phosphate Co.
146The equitable doctrine of laches comprehends two themes: one is delay implying not just quiescence, but, rather, acquiescence and assent, and the other is delay involving prejudicial change of circumstances. In the former sense, involving acquiescence, the plaintiff’s conduct may fairly be regarded as equivalent to the waiver of his or her remedy or right, or the release of the claim in equity. There is force in the suggestion, with respect, that greater clarity of exposition might be served by confining the term ‘laches’ to the latter sense.
(Footnotes omitted, emphasis in original).
Mrs Stolyar bears the onus of proof in relation to the defence of laches. However, she has failed to discharge it. That is for the following reasons.
First, it cannot be said that the Trustee has unduly delayed his application nor otherwise acted inconsistently with his entitlement to be indemnified by Mrs Stolyar for her liability under the BABL Loan. It was not until such time as Bendigo and Adelaide Bank determined that it would first seek to enforce its mortgage against the Ocean Street Property, as opposed to the Francis Street Property (which I note at least on the Trustee’s evidence is more valuable and more likely to discharge the whole of Mrs Stolyar’s liability under the BABL Loan), that the issue the subject of the present application arose. Upon the Trustee learning of the way in which Bendigo and Adelaide Bank intended to proceed, and did proceed by obtaining an order for possession only over the Ocean Street Property, he acted promptly.
Secondly, Mrs Stolyar has not demonstrated that she has suffered any prejudice or prejudicial change in circumstances. In that regard she refers to two matters.
First, she says that she would not be able “to provide evidence of any repayment of [Mr Stolyar’s] mortgage to National Australia Bank in 2011-2013, that resulted in [the Ocean Street Property] being discharged”. That has nothing to do with the present application. Rather, it appears to be an attempt to re-litigate the merits of the issues considered in Stolyar (No 1) in relation to the Ocean Street Property.
Secondly, Mrs Stolyar says that she additionally “would not be able to provide the circumstances in which she secured that mortgage as that might prejudice her claims against Bendigo and Adelaide Bank”. Exactly what Mrs Stolyar intends by this submission is unclear. The Trustee speculates that it may amount to a concern on the part of Mrs Stolyar that acknowledging the truth of the BABL Loan may limit her ability to raise disputes in future to defeat Bendigo and Adelaide Bank’s claims against her. If that is correct, then once again it is a matter that has no bearing on the Trustee’s conduct and could not support a defence of laches.
Relief
The Trustee seeks equitable relief to enforce his right of exoneration. In National Commercial Bank v Wimborne (1978) 5 BPR 11,958 at 11,978 Holland J observed in relation to remedies, among other things, that:
… the object of Equity in requiring an indemnity of the guarantor or surety plaintiff was to ensure that he should never himself be called upon to pay. If that be the object then it would seem to follow that, as in so many other cases in Equity, the form of the relief will be moulded according to the circumstances of the case to give effect to the particular equity, the equity here being the right to an order preventing the guarantor from being required to pay.
Both Mrs Stolyar, as principal debtor, and the Trustee, as surety, have given security for Mrs Stolyar’s debt. Thus, the Trustee’s right to be exonerated is treated as charged on Mrs Stolyar’s property given as security: see Parsons v McBain at [21] and [25] (at [54] above). As the Trustee submits, a chargee’s usual method of enforcement of its charge will be to have the charged property sold either by way of judicial sale or the appointment of a receiver without the need for the chargee to show special circumstances: see Scott (Trustee) v Stolyar, in the Matter of Stolyar [2023] FCA 1671 at [13].
Here, the Trustee seeks declaratory relief and an order for sale of the Francis Street Property by way of a receivership so as to enable repayment of any balance of the BABL Loan. As the Trustee submits, that relief is appropriate given that:
(1)it reflects the usual relief to be granted to the Trustee given his status as a chargee entitled to enforce his charge. In that regard I note that the Trustee is not only a chargee by reason of his right of exoneration but also pursuant to orders made by the Court (see [12] above);
(2)putting to one side the Trustee’s status as a chargee, the Francis Street Property is the only asset held by Mrs Stolyar from which the BABL Loan can be paid. Thus its sale is the only way in which the Trustee’s right of exoneration can be satisfied;
(3)there is no suggestion that Mrs Stolyar will voluntarily sell the Francis Street Property. Her conduct to date vis-à-vis the Supreme Court Proceeding commenced by Bendigo and Adelaide Bank evinces a clear intention to the contrary. Further, in submissions made by Mr Stolyar on Mrs Stolyar’s behalf, she pointed out that the Francis Street Property was the only property she had left in which she might live. That is unfortunate and puts Mrs Stolyar in a difficult position. But, it is, in any event, inevitable that the Francis Street Property will be sold, either by Bendigo and Adelaide Bank under its mortgage to recover any shortfall after it sells the Ocean Street Property, by the Trustee subrogated to the Bendigo and Adelaide Bank mortgage or pursuant to the Trustee’s charge referred to at [12] above; and
(4)finally, the only effect of a delay in sale of the Francis Street Property will be to cause further loss to the Trustee by allowing interest and costs to continue to accrue.
I am satisfied that the orders sought by the Trustee are therefore appropriate.
CONCLUSION
It follows from the above that the orders sought by the Trustee in the Trustee’s IA should be made. As Mrs Stolyar has been unsuccessful in her defence of the Trustee’s IA, she should pay the Trustee’s costs.
I will make orders accordingly.
I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic. Associate:
Dated: 17 September 2024
3
16
0