Secured Lending 1 Pty Ltd v Luvnlife Consulting Pty Ltd

[2020] NSWSC 637

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Secured Lending 1 Pty Ltd v Luvnlife Consulting Pty Ltd [2020] NSWSC 637
Hearing dates:	26 May 2020
Decision date:	27 May 2020
Jurisdiction:	Common Law
Before:	Ierace J
Decision:	(1)   Set aside the orders made on 6 February 2020 dismissing the proceedings. (2)   List the matter for further directions before the Common Law Registrar on Monday 1 June 2020. (3)   The plaintiff to bear its own costs of the notice of motion.
Catchwords:	REAL PROPERTY – possession of land – no activity for more than nine months after statement of claim filed – orders made by Court dismissing proceedings pursuant to r 12.8(7) of the Uniform Civil Procedure Rules 2005 (NSW) – orders set aside   CIVIL PROCEDURE – claim for possession of real property – mortgage default by company – ex parte application – whether signed consent judgment should be entered in the defendant’s absence – judgment not entered in the interests of fairness to the defendant – matter listed for further directions
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 56 Uniform Civil Procedure Rules 2005 (NSW), rr 12.8, 36.16
Cases Cited:	Commonwealth Bank of Australia v Kingston Bake Pty Ltd ACN 074 482 134 [2016] NSWSC 131
Category:	Procedural and other rulings
Parties:	Secured Lending 1 Pty Ltd (First Plaintiff) Longevity Property Pty Ltd (Second Plaintiff) Luvnlife Consulting Pty Ltd (Defendant)
Representation:	Counsel: A Smith (First and Second Plaintiff)   Solicitors: Summer Lawyers (First and Second Plaintiff)
File Number(s):	2019/138347

Judgment

1. HIS HONOUR: On 14 April 2020, the first and second plaintiffs, being Secured Lending 1 Pty Ltd and Longevity Property Pty Ltd (“the plaintiffs”), filed a notice of motion seeking orders that the Court set aside the orders of 6 February 2020, which had dismissed the plaintiffs’ statement of claim filed on 3 May 2019 pursuant to r 12.8(7) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). The notice of motion also seeks judgment for the plaintiffs for possession of a certain piece of land in Glenhaven, being one of the orders sought in the original statement of claim filed by the plaintiffs on 3 May 2019.

2. This application was brought ex parte by the plaintiffs, with no appearance submitted by the defendant. An affidavit affirmed on 22 May 2020 by the plaintiffs’ solicitor, Russell Nevell (“Mr Nevell’s second affidavit”), refers to a copy of the notice of motion and supporting affidavit being served on the defendant company on 22 May 2020 by means of copies being left at the defendant’s registered address, which is that of the land subject of the proceedings.

Background and evidence

3. On 3 May 2019, the plaintiffs filed a statement of claim in the Supreme Court seeking orders for possession of an identified piece of land in Glenhaven (“the land”), and seeking leave to issue a writ of possession in respect of that land. The statement of claim also sought costs on a full indemnity basis.

4. The statement of claim pleaded that on 31 May 2018, the plaintiffs agreed to lend the defendant the amount of $415,000.00 pursuant to a loan agreement (“the agreement”), secured by a mortgage on the land. The agreement was wholly in writing. The “Final Repayment Date” under the agreement, by which date all secured money was due, was 30 November 2018. The agreement was varied on 7 December 2018 by a deed of forbearance (“the first deed”), with the secured money increasing to $533,418.03, and the “Final Repayment Date” being amended to 31 December 2018. The plaintiffs pleaded that the defendant failed to make all the requisite repayments by 31 December 2018, thereby constituting an “Event of Default” under the agreement, the first deed, and the mortgage. On 2 January 2019, the plaintiffs issued the defendant a “combined notice of default and demand” demanding payment of the debt within 31 days pursuant to s 57 of the Real Property Act 1900 (NSW) and s 111(2)(b) of the Conveyancing Act 1919 (NSW). This was not complied with, and accordingly, the plaintiffs sought possession of the land.

5. According to an affidavit of Mr Nevell affirmed on 9 April 2020 (“Mr Nevell’s first affidavit”), the statement of claim was personally served on the director and secretary of the defendant, Stephanie Ruiz-Diaz, on 18 May 2019. A copy of the statement of claim was affixed to the land subject of the proceedings, along with a notice to the occupier. The defendant did not file a defence within 28 days after service of the statement of claim pursuant to r 14.3 of the UCPR, and has not, to date, filed any defence.

6. On 5 June 2019, the plaintiff appointed two persons as joint and several receivers and managers of the land (“the receivers and managers”). The plaintiffs and the defendant entered into another deed of forbearance (“the second deed”), with Ms Ruiz-Diaz as guarantor, allegedly on 13 June 2019. The second deed annexed to Mr Nevell’s first affidavit is not dated, and I am unable to ascertain whether the second deed was in fact executed on that date.

7. The second deed made provision for the manner in which the defendant could satisfy the debt owed to the plaintiffs, including paying $200,000 on or before 13 June 2019, and effecting a bona fide arm’s length sale of the land by way of an auction which was to occur no later than 10 August 2019, with settlement to occur no later than 28 September 2019 (“the end date”). Otherwise, the defendant was required to provide the plaintiffs with vacant possession of the land by the end date. A term of the second deed was that the plaintiffs agreed to retire the receivers and managers from their appointment and allow the defendant to proceed with the sale of the land upon execution of the second deed and receipt of the $200,000. The plaintiffs further agreed to release any security interests over the land and deliver executed discharges of security to the defendant when the settlement amount was paid by the end date. The defendant was entitled to request an extension of the forbearance period for up to three months under the deed.

8. Significantly, under the second deed, the plaintiffs agreed to forbear from taking enforcement action against the defendant and the guarantor, including taking action on the statement of claim, if the defendant complied with its obligations under the deed. A consent judgment was annexed to the second deed, signed by Ms Ruiz-Diaz for the defendant and dated 13 June 2019, consenting to the orders sought in the statement of claim if there was a “Fresh Event of Default” in accordance with the deed (“the consent judgment”).

9. In conformity with the deed, the defendants paid $200,000 to the plaintiffs on 16 June 2019 and the plaintiffs retired the receivers and managers on 25 June 2019.

10. On 20 September 2019, the former solicitor for the defendant sent an email communication stating, in part:

“I am instructed to request an extension of the three months as per the deed.

I am instructed my client is close to securing the sale of the property and in that case proposes to pay the interest monthly in advance every month for the next three months.”

11. On 25 September 2019, the plaintiffs agreed to extend the end date of the deed to 28 December 2019, and provided a “Letter of Extension” to the defendant and Ms Ruiz-Diaz stating the same.

12. On 28 November 2019, the defendant failed to make an interest payment in accordance with the varied terms of the deed. On 28 December 2019, the defendant again failed to make an interest payment, which the plaintiffs allege, together with the earlier failure to make payment, constituted a “Fresh Event of Default” that entitled them to possession of the land.

13. On 6 February 2020, orders were made by the Court dismissing the proceedings pursuant to r 12.8(7) of the UCPR. As is permitted by r 12.8(7), the orders were made by the Supreme Court Registry in the absence of a hearing and without notice to the parties. The Court had not been notified by the parties that they had attempted to resolve the matter privately through the second deed. According to Mr Nevell’s first affidavit, the plaintiffs were unaware that the Court had made such orders dismissing proceedings at the time.

14. On 4 March 2020, the plaintiffs again appointed the receivers and managers. On 20 March 2020, an email communication from an employee of the receivers and managers was sent to Mr Nevell, outlining a lack of cooperation by Ms Ruiz-Diaz in providing a report on company activities and property (“ROCAP”) or in selling the land. The email stated that Ms Ruiz-Diaz was “currently residing on the property” and “did not provide any timeframe on when she anticipates vacating the property”.

15. On 26 March 2020, Mr Nevell conducted a search of the NSW Online Registry to determine the status of the proceedings, and at that point became aware that the proceedings had been dismissed. The plaintiffs subsequently filed a notice of motion seeking to have those orders set aside.

Contact made from person purporting to act for the defendant

16. In an affidavit affirmed on 26 May 2020 by Mr Nevell and filed in court at the hearing (“Mr Nevell’s third affidavit”), Mr Nevell stated that, the day before, being 25 May 2020, he received a telephone call from Tomas Lee, an employee of the receivers and managers. Mr Lee informed Mr Nevell that he had received a telephone call from a person named Athena Madormo, and that she had supplied him with an authority to act on behalf of the defendant. Mr Lee emailed Ms Madormo a copy of the plaintiffs’ notice of motion, copying in Mr Nevell, and provided Mr Nevell’s contact details. Mr Nevell then received a telephone call from Ms Madormo. He deposed:

“[Ms Madormo said that] she was authorised to acted [sic] on behalf of Ms Stephanie Ruiz-Diaz, director of the Defendant … I made enquiries as to her involvement in the matter, and if she was a legal practitioner or a financial adviser. Ms Madormo informed me that she was neither of those and that she was retained to assist in re-financing Ms Ruiz-Diaz’s debts … Ms Madormo further informed me that no lenders have provided any offer of finance [to] the defendant.”

17. At 9:29am on the morning of the hearing, which was listed to commence at 10:30am, Mr Nevell emailed Ms Madormo, stating in part:

“Further to our discussion last night, we confirm this matter is listed at 10.30am today in court room 10C at the Supreme Court of NSW.

Due to COVID-19 restrictions, all court appearances are being conducted by way of telephone. Do not attend in person.

Please use the following number to dial into court, which will be opened at around 10.20am: [court dial-in details listed].”

18. At approximately 9:42am on the morning of the hearing, Mr Nevell received an email from Mr Lee that included an email he had received at 9:01am, addressed to Mr Lee and “Russell” (presumably a reference to Mr Nevell, although the only email address it was addressed to was Mr Lee’s email address), in which Ms Madormo asked the plaintiffs for an adjournment. Ms Madormo said:

“… otherwise we need to move in fast and appoint somebody to represent the very appalling behaviour that has occurred and will be going full force to claim damages.”

The email ended with these words:

“Please confirm consent orders to adjourn. We will be ready for a hearing any time from October onwards. That gives me time to have the funds and finance for them.”

19. At approximately 9:55am on the morning of the hearing, Mr Nevell received a telephone call from Ms Madormo, in which she stated that she wanted an adjournment. Mr Nevell responded that the plaintiffs did not consent to an adjournment. This was confirmed in an email sent by Mr Nevell to Ms Madormo at 10:01am, which also is annexed to Mr Nevell’s third affidavit. At 10:13am, Mr Nevell forwarded a copy of the plaintiffs’ written submissions to Ms Madormo by email.

The relevant law

20. Rule 12.8 of the UCPR relevantly provides:

“12.8   Additional grounds for dismissal of proceedings by Supreme Court or Land and Environment Court

(1)   This rule applies to proceedings in the Supreme Court or the Land and Environment Court.

(2)   The court may, of its own motion, make an order dismissing the proceedings if it appears from the court’s records that, for over 5 months, no party to the proceedings has taken any step in the proceedings.

(3)   Such an order may not be made—

(a)   if the proceedings, or any part of the proceedings, are listed for a future date, or

(b)   if there are any notices of motion or other applications in the proceedings that are yet to be determined, or

(c)   if a party satisfies the court that such an order should not be made.

(4)   Before such an order is made, notice of the proposed order is to be given to the plaintiff and to each other active party, being a notice that gives each of them a reasonable opportunity to be heard in relation to the proposal.

(5)   A notice under subrule (4) may be served on a person—

(a)   if the person has provided an email address to the court, by sending it to that email address, or

(b)   if the person has not provided an email address or the email has been returned undelivered, by sending it by post, addressed to the person—

(i)   at the person’s address for service, or

(ii)   if the person has no address for service, at the person’s last known address,

in an envelope marked with the court’s return address.

(6)   A notice, posted as referred to in subrule (5)(b), is taken to have been received by the person to whom it was addressed even if it is returned to the court as having not been delivered to the addressee.

(7)   Despite subrule (4), the court may make an order under subrule (2) without notice being given under subrule (4) if—

(a)   the proceedings the subject of the order are proceedings that are entered in the Possession List, and

(b)   it appears from the court’s records that, for over 9 months, no party to the proceedings has taken any step in the proceedings.”

21. As is apparent in subs (7), the principles of procedural fairness that afford the parties a reasonable opportunity to be heard in respect of a proposed order for dismissal of proceedings (subs (4)) have been excluded by express provision for possession list matters in which no party to the proceedings has taken any step for over nine months.

22. Rule 36.16(2)(b) of the UCPR provides:

“36.16   Further power to set aside or vary judgment or order

…

(2)   The court may set aside or vary a judgment or order after it has been entered if—

…

(b)   it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order.”

23. The terms of r 36.16(2)(b) imply that a “relevant hearing” took place following an “application” for a judgment or order. However, as Rothman J noted in Commonwealth Bank of Australia v Kingston Bake Pty Ltd ACN 074 482 134 [2016] NSWSC 131 at [12]-[13], it is recognised in common law that an order not made in court, such as one made in chambers, may be set aside, and there is no impediment to the operation of r 36.16 giving the court powers to set aside such orders made under r 12.8(7).

24. Section 56 of the Civil Procedure Act 2005 (NSW) is also relevant, in terms of the overall aim for the resolution of civil proceedings. As that section provides, the overriding purpose of the Civil Procedure Act is to “facilitate the just, quick and cheap resolution of the real issues in the proceedings”.

The plaintiffs’ submissions

25. The plaintiffs do not contend that the Court’s orders dismissing proceedings were made erroneously, or that notice ought to have been given when the proceedings were dismissed. I take that to mean that the plaintiffs concede that the orders of 6 February 2020 were appropriately made, where the circumstances of r 12.8(7) of the UCPR were satisfied.

26. The plaintiffs submit that the reason for the inaction in proceedings leading to the orders being made was that the parties had attempted to resolve the issues outside the court system, “without resort to curial intervention”. However, these attempts were not fruitful, and because of the “ongoing non-compliance of the defendant with its obligations pursuant to the Deed” and “absence of the determination of the proceeding on the merits prior to its dismissal”, they would be entitled to commence fresh proceedings to seek orders for possession of the land.

27. The plaintiffs request that the Court exercise its power to set aside the order pursuant to r 36.16(2)(b) of the UCPR, submitting that it would be costlier to commence fresh proceedings seeking the same relief, and consequently would be contrary to the efficient administration of justice in civil matters.

28. The plaintiffs further contend that, where the defendant has consented to judgment being entered for possession of the land in the event of non-compliance with the terms of the deed, and where “by the operation of the terms of the Deed, the Defendant has agreed not to oppose the entry of judgment in favour of the Plaintiffs”, the consent judgment should be entered for the plaintiffs.

Consideration

29. The plaintiffs do not dispute that r 12.8(7) of the UCPR was appropriately applied to dismiss the proceedings. The question is, therefore, whether there are sufficient bases for those orders to now be set aside, and for the proceedings to be restored.

30. The plaintiffs and the defendant attempted to resolve the matter outside the court system, which sufficiently explains the absence of steps taken in respect of the proceedings for over nine months. It is clear that, given the failure of the parties to reach an agreeable resolution, the plaintiffs intend to resume court action against the defendant, which may be by way of either restored proceedings on the statement of claim filed 3 May 2019 if their orders sought on this application are granted, or the institution of fresh proceedings. The plaintiffs would incur additional costs and face further delays if fresh proceedings are instituted, which is contrary to the overall aim for the conduct of civil proceedings. In the interests of maintaining the efficient operation of the courts and reducing costs for litigants, I find that it is appropriate to grant the orders restoring proceedings.

31. However, I am not prepared to grant orders in favour of the plaintiff in respect of the substantive possession matter, in the interests of fairness to the defendant, given the absence of the defendant in this ex parte application and the attempts on its behalf to seek an adjournment. I do entertain a degree of scepticism as to the bona fide nature of those efforts. There was no telephone contact made with the Court at the time of the hearing and, in an email purportedly from Ms Ruiz-Diaz (but sent from the email address of “Provent Pty Ltd”) to the Registrar later that same morning, there was no mention of any matter that had prevented Ms Ruiz-Diaz or Ms Madormo from appearing by telephone in court. It is appropriate in my view that an opportunity be afforded to the defendant, by way of a reasonable but tight timetable, to seek to contest judgment for the plaintiffs for possession of the land.

Orders

32. I make the following orders:

(1)   Set aside the orders made on 6 February 2020 dismissing the proceedings.

(2)   List the matter for further directions before the Common Law Registrar on Monday 1 June 2020.

(3)   The plaintiff to bear its own costs of the notice of motion.

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Amendments

28 May 2020 - Typographical error corrected at [31]

Decision last updated: 28 May 2020