Tainton v Raftery Creek Pty Ltd (in liq)
[2021] VSC 676
•19 October 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
MORTGAGE RECOVERY LIST
S ECI 2020 04647
| LORRAINE TAINTON | Plaintiff |
| v | |
| RAFTERY CREEK PTY LTD (IN LIQUIDATION) (ACN 145 766 650) | Defendant |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 September 2021 |
DATE OF JUDGMENT: | 19 October 2021 |
CASE MAY BE CITED AS: | Tainton v Raftery Creek Pty Ltd (in liq) |
MEDIUM NEUTRAL CITATION: | [2021] VSC 676 |
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PRACTICE AND PROCEDURE – Application for leave for director to appear on behalf of company – Application for lengthy adjournment at short notice – Where affidavit material and submissions on behalf of company filed - Not satisfied Court would be assisted if leave granted – Leave refused - Supreme Court (General Civil Procedure) Rules2015 (Vic) r 1.17(1) – Rossi Homes Pty Ltd v Victorian Civil and Administrative Tribunal [2018] VSC 95.
PRACTICE AND PROCEDURE – Joinder – Application by new trustee to join proceedings to determine question of how much owed under mortgage – Where debt owing under mortgage admitted – Where application sought possession only – Joinder refused - Supreme Court (General Civil Procedure) Rules2015 (Vic) r 9.06.
PRACTICE AND PROCEDURE – Summary judgment - Application for possession as mortgagee – Where land claimed to be held on bare trust – Trustee replaced on insolvency - Where defendant says land now held by new trustee – Where defendant’s defence does not have any real prospects of success - Civil Procedure Act 2019 (Vic) Pt 4.4, ss 61-64 – Bendigo and Adelaide Bank Limited v Grahame [2020] VSC 86 – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S W Stuckey QC | Dawes & Vary Riordan |
| For the Defendant | Mr C Davis of counsel | Doherty & Colleagues Solicitors |
HIS HONOUR:
Introduction
The plaintiff commenced a proceeding by writ and statement of claim filed 17 December 2020 seeking, among other things, recovery of the land situated at 335 Raftery Road, Kialla, in the State of Victoria (‘land’). The plaintiff sues on her own account and as legal personal representative of her now deceased husband, Ross William Tainton.[1]
[1]Mr Tainton died on 9 September 2015. The plaintiff was named executor and trustee by Mr Tainton in his Will. The plaintiff obtained probate on 20 February 2017. Under the terms of the Will, the plaintiff was gifted the whole of her husband’s estate. A copy of the grant of probate was exhibited to the affidavit of Lorraine Tainton sworn 7 September 2021.
The plaintiff brings her application for possession as mortgagee pursuant to a registered mortgage over the land with dealing number AH788974A (‘mortgage’).
On 31 March 2021, the defendant, Raftery Creek Pty Ltd (‘Raftery Creek’) filed a defence which, although admitting much of the allegations in the claim, including the mortgage over the land and default under the mortgage, said further that it had held the land on trust for Raftery Creek Unit Trust, up until its removal as trustee. Broadly speaking, the crux of Raftery Creek’s defence is that due to the change in trustee, it was not the proper defendant. Rather, the incoming trustee was.
On 20 July 2021, the plaintiff filed a summons seeking summary judgment under Order 22 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) and s 61 of the Civil Procedure Act 2010 (Vic) (‘CPA’). Her application seeks three orders, namely:
(a) an order for judgment for the plaintiff against the defendant;
(b) possession of the land (being land more particularly described in Certificate of Title Volume 8992 Folio 786); and
(c) a declaration that the sum secured under the mortgage was $1,169,559.95 as at 8 July 2021.[2]
[2]Whereas the originating motion filed 17 December 2020 sought the sum of $1,106,525.49 as at 1 December 2020.
In support of her application, the plaintiff filed submissions dated 12 August 2021 and 20 August 2021, along with affidavits she swore on 7 September 2021 and 21 September 2021. By the plaintiff’s submissions, she indicates she no longer presses for the declaration of the sum outstanding under the mortgage.
On 20 August 2021, the defendant filed submissions and affidavit material in response to the plaintiff’s application.
On 23 August 2021, a company named 290 High Street Pty Ltd (ACN 149 810 168) (‘High Street‘) filed a summons and supporting affidavit seeking a stay of the proceeding. High Street is the current trustee of Raftery Creek Unit Trust.
On 24 August 2021, the two applications were called on for directions before me, during which:
(a) the plaintiff pressed her application for summary judgment and opposed the joinder of High Street, whether on the Court’s own motion or by application of the defendant and/or High Street;
(b) High Street sought an opportunity to file an application to join the proceedings as second defendant and sought to press its application for a stay; and
(c) Raftery Creek maintained its opposition to the plaintiff’s summary judgment application and neither opposed not consented to any joinder of High Street.
As High Street’s stay application relied upon matters pleaded in Raftery Creek’s defence,[3] I determined that it was proper that the joinder application and summary judgment applications be heard together. Accordingly, I ordered that:
(a) the plaintiff file any further affidavit material in support of her application for summary judgment and, if either the defendant or High Street (subject to its joinder) opposed that application, they file material in opposition; and
(b) High Street file any application to join the proceedings as a second defendant and for the plaintiff or the defendant, if opposing that application, file material in opposition.
[3]Namely, the proposition that the land had been, but is no longer, held by the defendant as ‘bare trustee’ only and that the plaintiff had refused to join High Street as the proper defendant.
On 7 September 2021, the plaintiff filed further affidavit material in support of her application.
On 14 September 2021, High Street filed a summons seeking joinder, the affidavit of Nejat Mackali sworn 14 September 2021 and short written submissions.
On 21 September 2021, the plaintiff filed an affidavit she had sworn on 21 September 2021 in opposition to High Street’s joinder application and short written submissions.
At 4:15pm on 27 September 2021 (the day before the hearing of the summonses), High Street’s legal representatives informed the Court they were no longer acting in the matter and had attempted to file a notice of ceasing to act.[4]
[4]The notice of ceasing to act was rejected as no notice of appearance had been filed and High Street was otherwise not yet a party to the proceeding.
On 28 September 2021, less than three hours before the hearing, Mr Nejat Mackali, as director of High Street, emailed the Court to foreshadow his application to adjourn the hearing of the plaintiff’s summary judgment application to a date after April 2022, to give him time to present a ‘proper legal defence’.
This is the procedural context in which the two applications came before the Court for hearing.
Factual background
It is convenient to lay out the factual background to the proceeding, about which the parties are in fairly limited disagreement (save where stated otherwise).
The plaintiff and her late husband, Ross Tainton (collectively, ‘the Taintons’) purchased the land on 12 November 1979.
In 2006, Mr Mackali was retained by Mr Terry Molloy to act as Mr Molloy’s property consultant. In that capacity, he approached the Taintons to enquire whether they would be interesting in selling the land. On 18 December 2006, the Taintons as vendors and Mr Molloy as purchaser entered into a contract for the sale and purchase of the land (‘contract’). The purchase price was $1,400,000. The settlement date was 1 November 2007.
Mr Molloy encountered financial difficulties. As a result, Mr Mackali assisted Mr Molloy to find replacement investors and to negotiate variations to the contract. Between December 2006 and late 2010, the Taintons and Mr Molloy agreed to four variations of the contract. The effect of the variations was to extend the settlement date and to vary the purchase price and the nominated purchaser.
The Further Variation of Contract dated 15 February 2008 (‘Fourth Variation’) records that:
(a) Mr Molloy nominated 335 Raftery Road Pty Ltd as substitute purchaser to take the transfer of the land in lieu of Mr Molloy;
(b) 335 Raftery Road Pty Ltd had entered into a contract to sell the land to a further subsequent purchaser, Raftery Creek;
(c) settlement was extended to 1 December 2010; and
(d) at settlement, 335 Raftery Road Pty Ltd would pay the Taintons $700,000 and Raftery Creek would grant the Taintons a second mortgage over the land securing an amount of $800,000.
According to the Fourth Variation, the second mortgage was to provide for the payment of the sum of $800,000 on or before 31 October 2011. That sum would be interest free if repaid by 30 April 2011, but if not repaid by that date, would attract a rate of 10% interest per annum from the date of settlement until the date of repayment.
Finally, the Fourth Variation agreed that the Taintons were entitled to remain in occupation of the land for one year from the settlement date ‘rent and outgoings free’.
Settlement occurred in or around December 2010. The Taintons received $700,000 at settlement and signed the transfer and mortgage documents. According to Mr Mackali, Raftery Creek entered into and settled the contract of sale in its capacity as the trustee of the Raftery Creek Unit Trust. The Raftery Creek Unit Trust was established by deed on 17 August 2010, with Raftery Creek as trustee. Initially, there were six unit holders representing investors who had purchased units in the trust in order to participate in a long term real estate development of the land.
Mr Mackali says the amount secured by the mortgage at settlement was $600,000 and believes the amounts claimed by the plaintiff under the mortgage includes capitalised interest of $200,000. In contrast, the plaintiff says that by the time the sale contract settled in 2011 the ‘interest’ owing on the sale price was over $400,000, but that she and her husband had agreed to limit the interest owed to $200,000, so that the mortgage ‘was registered in 2011 for the outstanding balance of the purchase price, being $600,000, and the accrued interest of $200,000’.[5]
[5]Affidavit of Lorraine Tainton sworn 21 September 2021, [5].
Mr Mackali says there was a verbal agreement between the Taintons and the then director of Raftery Creek that the Taintons ‘would continue to farm the Land on a rent‑free basis moving forward’[6] and that interest would not be charged under the mortgage. The plaintiff confirms there was an agreement to remain in possession of the land until such time as they purchased a house to move into, but denies there was any discussion about rent, outgoings or waiving interest under the mortgage while the Taintons remained in possession.
[6]Affidavit of Nejat Mackali sworn on 14 September 2021, [8].
Between 1 July 2011 and 31 March 2015, Raftery Creek made payments totalling $410,000. During this time, Mr Mackali says the Taintons did not pay rent or contribute towards outgoings. The plaintiff says these payments were applied first against interest payable by Raftery Creek but not yet capitalised and then in reduction of the principal sum secured by the mortgage, including capitalised interest, in accordance with the memorandum of common provisions.
It is unclear when the Taintons vacated the land. Mr Mackali says the Taintons remained in occupation of the land until 2015 when Mr Tainton became ill. The plaintiff says she and her husband moved off the land in or around August 2014 when they purchased a house in Kialla Central, a small village on the outskirts of Shepparton.
A mortgage dated 21 January 2011 between Raftery Creek as mortgagor and Mr Tainton as mortgagee with dealing number AH788974A was registered with Victorian Land Titles Office. While the first page of the mortgage records only Mr Tainton as mortgagee, the ‘annexure page’ contains signature blocks and the signatures of both Mr and Mrs Tainton. This page also notes the parties as Raftery Creek and Ross William Tainton and Lorraine Jean Tainton. The Taintons’ signatures on this document were witnessed by Mr Mackali.
The memorandum of common provisions applying to the mortgage include that:
(a) the defendant would pay to the mortgagee the moneys secured by the mortgage at such time as agreed or in the absence of express agreement upon demand (clause l(l)(a));
(b) if an event of default occurred under the terms of the mortgage the defendant would, at the option of the mortgagee, pay all of the secured moneys to the mortgagee immediately (clause 1(2));
(c) for the purposes of the mortgage the following were events of default:
(i) the defendant failing to pay when payable any secured money and such default continued for seven days (clause 1(2)(a));
(ii) the defendant defaulting in the performance or observance of any other covenant (clause 1(2)(b));
(iii) the defendant going into liquidation (clause 1(2)(c));
(d) the defendant would pay to the mortgagee interest at the rate of 10% per annum (clause 4(2));
(e) if the defendant did not pay the interest required by the mortgage the mortgagee may treat such unpaid interest as having been capitalised and in that event the unpaid interest is added to the sum secured and shall bear interest (clause 6(2));
(f) the defendant would pay to the mortgagee all costs (including legal costs as between a solicitor and his own client) incurred by the mortgagee of and incidental to the exercise or attempted exercise of any right or remedy conferred on it by the mortgage or by statute or on account of any default on the part of the mortgagor in performance or observance of any covenant (clause 11);
(g) the period for which a default must continue was fixed for the purposes of s 76(1) of the Transfer of Land Act 1958 (Vic) (‘TLA’) at seven days (clause 15(2)(a));
(h) the period fixed for non-compliance for the purposes of s 77(1) of the TLA was seven days (clause 15(2)(b)); and
(i) upon giving the defendant seven days’ notice of default the mortgagee may enter upon and take possession of the land, and exercise any of the powers conferred by the mortgage, the TLA, the Property Law Act 1958 (Vic) or other legislation (clause 15(3)).
The title search of the land produced on 6 July 2021 records:
(a) the registered proprietor of the land as Raftery Creek Pty Ltd;
(b) a mortgage with dealing number AH788974A dated 15 February 2011 in the name of Lorraine Jean Tainton, legal personal representative of Ross William Tainton; and
(c) a large number of caveats.
Mr Mackali says that after the Taintons left the land, Mr Mackali made various attempts to raise the funds owing under the mortgage but was ultimately unsuccessful due to the number of caveats that had been lodged on the title by some of the investors.
On 31 May 2019, on the application of the Deputy Commissioner of Taxation, Raftery Creek was wound up by order of the Federal Court of Australia (‘Federal Court’). David Mutton of RSM Australia Partners was appointed liquidator. Mr Mutton is recorded as a caveator on the title to the land claiming an interest as former trustee’s right of indemnity in trust assets.
On 1 September 2020, by order of the Federal Court in Mutton (Liquidator), in the matter of Raftery Creek Pty Ltd (In Liquidation) v Rural Intention Pty Ltd [2020] FCA 1217, High Street replaced Raftery Creek as trustee of the Raftery Creek Unit Trust (‘Federal Court Proceeding’).
By letters addressed to Mr Mutton dated 7 October 2020, the plaintiff served notices[7] to Raftery Creek notifying it that it was in default of the mortgage because it had been placed into liquidation and had not paid the principal sum of $800,000 or the interest reserved. The plaintiff demanded payment of $1,085,294.41, said to be the full amount due. Service of the default notices is evidenced by the affidavit of Janet Gantcheff affirmed 6 September 2021.
[7]Default notice 1 gave notice on behalf of Mrs Tainton as executor of the estate of Mr Tainton. Default notice 2 gave notice on behalf of Mrs Tainton in her personal capacity.
The plaintiff alleges the defendant has failed to repay the secured moneys and is in default under the terms of the mortgage. The plaintiff alleges she is entitled to possession of the land pursuant to the terms of the mortgage and s 78(1) and s 81(1) of the TLA.
On 22 October 2020, Raftery Creek’s solicitors sent an email to the plaintiff’s solicitor advising that Raftery Creek is no longer the trustee of the Raftery Creek Unit Trust and that High Street is the new trustee.
On 4 February 2021, Raftery Creek’s solicitor sent a further email to the plaintiff’s solicitor advising that Raftery Creek did not have possession of the land or authority to lease the land.
On 16 March 2021, Raftery Creek’s solicitor sent an email to the solicitor who had acted for High Street in the Federal Court Proceeding attaching a copy of the plaintiff’s writ and statement of claim in this proceeding and advising that Raftery Creek had advised the plaintiff that High Street was the proper defendant to be named in the proceeding.
Also on 16 March 2021, Raftery Creek’s solicitor sent a further email to the plaintiff’s solicitor reiterating that Raftery Creek was no longer in possession of the land and that High Street was the proper defendant to the proceeding. Raftery Creek’s solicitor followed this up the next day by forwarding the plaintiff’s solicitor a copy of the Trust Deed for the Raftery Creek Unit Trust.
On 19 March 2021, Raftery Creek’s solicitor emailed the solicitor who had acted for High Street in the Federal Court Proceeding with the details of the first directions hearing date scheduled in this proceeding.
The plaintiff says that she has never had any dealing with High Street.
The plaintiff says she believes that Raftery Creek’s defence has no real prospect of success.
Mr Mackali’s application to represent High Street
At the commencement of the hearing on 28 September 2021, Mr Mackali sought leave to represent High Street.[8] It is relevant to note the roles Mr Mackali has occupied in the context of this dispute:
[8]Rule 1.17 of the Rules provides that except where otherwise provided by or under any act of these Rules, a corporation, whether or not a party, shall not take any step in a proceeding save by a solicitor.
(a) Mr Mackali was the property consultant for the initial purchaser, Mr Molloy;
(b) there is evidence before the Court that Mr Mackali approached the Taintons to sell the land;
(c) Mr Mackali was a director of Raftery Creek from 30 March 2017 until the date the liquidator was appointed; and
(d) Mr Mackali is also the sole director and shareholder of High Street.
In response to questions raised by this Court regarding the adjournment request and its length, Mr Mackali indicated that he was impecunious and could not afford to pay for High Street’s continued legal representation. Mr Mackali stated that if he was allowed to represent High Street, he intended to seek an adjournment in order to prepare High Street’s further defence to the plaintiff’s summary judgment application.
The plaintiff opposed the Court granting Mr Mackali leave to represent High Street on the basis there was no evidence that Mr Mackali would be able to assist the Court in the efficient conduct of the matter on behalf of High Street. When given the opportunity to reply, Mr Mackali amended his adjournment request down to four weeks, saying that he had lost confidence in his former legal representatives.
In Rossi Homes Pty Ltd v Victorian Civil and Administrative Tribunal,[9] Derham AsJ examined the principles relevant to granting a company leave to appear without a solicitor:
[9][2018] VSC 95, [7]-[9].
Pursuant to r 1.17(1) the starting point must be that a company will not usually be permitted to appear without a legal representative. It will require leave to do so.[10] In Scotts Head Developments,[11] Mahoney AP explained the reasons behind the rule:
[10]Worldwide Enterprises Pty Ltd v Silberman (2010) 26 VR 595 [40].
[11]Scotts Heads Developments (Unreported, New South Wales Court of Appeal, 6 September 1994, Mahoney AP, Powell JA, O’Keefe AJA). This decision is cited with approval by the Victorian Court of Appeal in Worldwide Enterprises Pty Ltd v Silberman (2010) 26 VR 595, 601.
The rule of practice which the Court has adopted whereby appearance is limited to persons admitted to practise before the Court is not based on technicalities. It has long been regarded as based on considerations central to the proper administration of justice and the protection of the parties in the litigation. First, the Court has emphasised the importance, for the administration of justice, of the fact, that those permitted to appear before it owe a responsibility to the Court to ensure that the Court is properly informed and not misled: see Meek v Fleming (1961) 2 QB 366 . In Ex parte Browne: at 597; Pring J referred to the importance of having, as the party before the Court, a person “who was responsible to the Court, responsible to his client and responsible to the other party to the litigation”. See also Ex parte WA Grubb Pty Ltd Re Johnstone at 226, Tritonia Ltd v Equity and Law Life Assurance Society.
Second, the Court has regard to the possibility of unqualified or untrained advocates interfering with the course of a proceeding before the Court and causing loss to the parties involved. Reference was made to considerations of this kind in Hubbard Association of Scientologists International v Anderson and in Abse v Smith. Experience has shown that a proceeding conducted by a person unskilled in advocacy tends to last longer and to cost more. In determining whether to allow such an advocate to appear, the Court must have regard not merely to the position of the party for whom he seeks to appear, but also to that of the other party. The interest of the defendant in having the proceeding dealt with without unnecessary delay and cost is one which, in my opinion, is to be borne in mind.
Third, there remains the public interest in the effective, efficient and timeous disposal of litigation. The administration of justice requires that full assistance be available to the Court in determining the issues of fact and law which come before it. The isolation of issues and the presentation of the consideration which support one answer rather than another are things best done by a person experienced in such matters.[12]
[12]Ibid.
In Worldwide Enterprises Pty,[13] Forrest J confirmed that in appropriate circumstances the Court may be persuaded to exercise its discretion under r 2.04 to dispense with the requirement of r 1.17(1). Forrest J identified the following circumstances as relevant to the exercise of that discretion:
[13][2009] VSC 165, affirmed in Worldwide Enterprises Pty Ltd v Silberman (2010) 26 VR 595.
a)the manner in which the case has progressed at the time that the application is made;
b)the manner in which the case can proceed in the future without a solicitor;
c)the complexity of the issues involved in the case;
d)whether the lack of disciplinary measures in relation to the person seeking to represent the company will affect the administration of justice;
e) whether the case can be conducted in an orderly and responsible fashion without a solicitor;
f)whether there are financial considerations which would inhibit a company from obtaining legal representation;
g)the stage which the case has reached;
h)whether the defendant is likely to expend more funds in defending the claim absent a solicitor acting for the company; and
i)what effect, if any, permitting a company to appear without a solicitor will have on court resources and, particularly, the effect upon other litigants in the Court List.[14]
The financial considerations which inhibit a company from obtaining legal representation may be of particular importance in providing the reason for the application, as is apparent in this case. If that is the case, it is important that the company produce evidence of its financial capacity or lack of capacity and of those standing behind it, the effect of diverting company resources to paying legal expenses, the nature of the company’s undertaking, its financial structure, its ability to retain and pay its staff and the identity and spread of its shareholders.[15]
[14]Ibid [20].
[15]Termi-Mesh Australia Pty Limited v Josu Manufacturing Pty Limited [1999] FCA 1241 [13] (‘Termi-Mesh’); Enviro-Pak Pty Ltd v New Horticulture Pty Ltd [2013] FCA 306 [16].
I declined to grant Mr Mackali leave to represent High Street. I did so because I was not satisfied that Mr Mackali would be able to assist the Court to isolate the real issues in dispute between the parties on High Street’s joinder application or the plaintiff’s application for possession without unnecessary delay and cost to the other parties.
Mr Mackali indicated his intention, if leave was granted, to apply for an adjournment of the proceeding so that he could organise High Street’s defence to the proceeding. Mr Mackali did not appear to distinguish between High Street’s joinder application and High Street’s position, if joined, on the plaintiff’s application for possession.
Mr Mackali’s affidavit, filed in support of High Street’s joinder application, contains details of Mr Mackali’s role in purchase of the land, the creation of the Raftery Creek Unit Trust, the identification of potential investors for development of the land, payments made by Raftery Creek to the Taintons at settlement, the amount Mr Mackali believes is outstanding under the mortgage.
In my view, Mr Mackali’s former capacity as a director of Raftery Creek and current capacity as director of High Street increases the likelihood that if Mr Mackali represented High Street, he would have difficulty identifying and prosecuting the interests of High Street rather than those of Raftery Creek.
I was also satisfied that High Street had been afforded an opportunity to advance its position and had filed affidavits and written submissions on the question of its joinder. Having read that material, I was content that High Street had sufficiently articulated the basis upon which it sought to be joined to the proceeding.
Upon reflection, I am also not satisfied that High Street is impecunious. Mr Mackali’s affidavit evidence was that he was arranging for $750,000 to be placed in the trust account of High Street’s solicitors pending determination of the sum outstanding under the mortgage.
High Street’s joinder application
Having refused leave to allow Mr Mackali to represent High Street, I considered High Street’s joinder application on the basis of the material filed by High Street and the plaintiff. The defendant did not file material on the joinder application and did not seek to make submissions at the hearing.
Rule 9.06 of the Rules provides:
At any stage of a proceeding the Court may order that –
(a) any person who is not a proper or necessary party, whether or not that person was one originally, cease to be a party;
(b) any of the following persons be added as a party -
(i)a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or
(ii) a person between whom and any party to the proceeding there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding;
(c)a person to whom paragraph (b) applies be substituted for one to whom paragraph (a) applies.
High Street sought to be joined as a defendant to the proceeding or alternatively, to be substituted as a defendant in place of Raftery Creek on the basis that:
(a) Raftery Creek is no longer the trustee of the Raftery Road Unit Trust and High Street is now the trustee;
(b) joinder of High Street is necessary in order to effectually and completely determine and adjudicate the issue of the amounts actually owing under the mortgage; and
(c) there is a question between High Street and the plaintiff in relation to the amount owing under the mortgage which it is just and convenient to determine in these proceedings.
In support of its joinder application, High Street relied on the affidavit of Mr Mackali sworn 14 September 2021 and the affidavit Bronwyn Goddard sworn 23 August 2021.
In addition to the factual matters referred to above, Mr Mackali’s evidence is that he accepts that the plaintiff is entitled to receive payment of money which is owing to her and which is secured under the mortgage. He does not, however, know exactly what this amount is and he says he has been unsuccessful in obtaining this information from the plaintiff despite various requests. In particular, Mr Mackali says he does not understand how the amount claimed in the ‘purported notices of default’ of $1,085,294.41 has been calculated. He believes the amount secured by the mortgage is approximately $750,000.
Mr Mackali says that he is making arrangements for $750,000 to be placed into the trust account of Raftery Creek’s solicitor’s trust account so that once the payout figure is correctly determined, High Street will be in a position to ensure payment to the plaintiff under the mortgage can be made in full.
Ms Goddard says that she was retained to legally represent High Street in late July 2021 to protect its rights in relation to the land. She was instructed by Mr Mackali that he became aware of this proceeding in January 2021 when he received a letter from the plaintiff’s solicitors dated 23 December 2020. Mr Mackali told Ms Goddard that he has not received any other communication from the plaintiff’s solicitors other than that letter but that he had heard ‘on the grapevine’ that the plaintiff was moving to sell the land. Mr Mackali told Ms Goddard that he did not understand that he should do anything in response to the plaintiff’s letter, believing that High Street’s interest in the land was protected by the order of 1 September 2020 appointing High Street as trustee of the Raftery Road Unit Trust.
On 4 August 2021, the Court provided Ms Goddard with the results of her request to search the Court file in this proceeding. Ms Goddard says that she did not view the material provided by the Court until 9 August 2021, when she became aware that the plaintiff’s summary judgment application was listed for hearing on 11 August 2021.
On 9 August 2021, Ms Goddard contacted the plaintiff’s solicitor seeking agreement to adjourn the plaintiff’s summary judgment application to allow High Street to join as a defendant to the proceeding. Ms Goddard informed the plaintiff’s solicitor that High Street believed the amount the plaintiff claimed as owing under the mortgage had been significantly overstated and requested the plaintiff’s solicitor provide the spreadsheet referred to in the plaintiff’s material filed in the proceeding. There ensued correspondence between Ms Goddard and the plaintiff’s solicitors in which the plaintiff’s solicitor indicated the plaintiff would not press for the declaration of the sum secured by the mortgage but would continue to seek an order for possession. The plaintiff’s solicitor declined to provide the spreadsheet that had been filed in the proceeding. Ms Goddard then invited the plaintiff’s solicitor to apply to join High Street, failing which, High Street would apply to stay the entire proceeding. The plaintiff’s solicitor stated that she would oppose any late application by High Street to be joined to the proceeding as, in addition to the letter dated 23 December 2021, the plaintiff had informed High Street of the proceeding by emails to its then solicitors sent on 16 March 2021 and 19 April 2021.
On its joinder application, High Street submits that the land ‘is registered in the name of Raftery Road [sic] Unit Trust’ and that by virtue of the order made by the Federal Court on 1 September 2020 appointing High Street as the replacement trustee, High Street is now in possession of the land. High Street submits that Raftery Creek was recorded as the owner of the land on the title because a trust cannot be recorded as the registered owner of the land. Raftery Creek’s only interest in the land was as trustee. According to High Street, following the Federal Court’s order, Raftery Creek no longer has any claim to the land and cannot properly be understood to be in possession of the land.
In relation to the timing of the joinder application, High Street submits that Mr Mackali, the sole director of High Street, became aware of this proceeding in January 2021 but believed at that time the Federal Court’s order protected High Street’s rights in the land and that High Street had no role to play in the proceeding.
On the joinder application, the plaintiff submits that its action for possession depends on its proprietary interest in the land as mortgagee of a registered mortgage and the specific rights granted to it by the terms of the mortgage entered into between the plaintiff and Raftery Creek. The plaintiff submits that Raftery Creek Pty Ltd is the registered proprietor of the land. It is the party that granted the mortgage. Conversely, the Raftery Creek Unit Trust is not mentioned in the parties’ contractual arrangements or in the mortgage, and neither is there reference to Raftery Creek’s capacity as trustee.
The plaintiff says Raftery Creek’s status as trustee is irrelevant to the plaintiff’s claim and is not a defence to her claim for possession. According to the plaintiff, the mortgage documents entitle the plaintiff as mortgagee to exercise her remedies as though there were no trust, if one existed. The plaintiff’s action could not be brought against a party that is not the registered proprietor and not the mortgagor.
In relation to High Street, the plaintiff submits that High Street is not in possession of the land simply because it is the new trustee of the Raftery Creek Unit Trust. High Street is not a necessary party to the proceeding as the plaintiff does not seek relief as against the Trust.
In relation to any dispute over the amount secured by the mortgage, the plaintiff submits this is an issue as between the mortgagor and mortgagee. High Street’s joinder is not needed to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon because High Street has no interest in the possession action and the amount secured by the mortgage is an issue as between the mortgagor and mortgagee.
The plaintiff submits that at most, it may be arguable that because High Street has a beneficial interest in the balance of any sale price of the secured land, it is just and convenient to determine that question between it and Raftery Creek on the one hand, and the plaintiff on the other as part of this proceeding, but that would not justify joinder of High Street on the issue of possession.
I am not satisfied that High Street is either:
(a) a ‘person’ whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or
(b) a person with a claim in the proceeding which it is just and convenient to determine.
I accept the plaintiff’s submission that her action for possession is based on its proprietary interest in the land as mortgagee of a registered mortgage granted by Raftery Creek and the plaintiff’s specific rights under the terms of the mortgage. There is no evidence before the Court that High Street is in possession in a way that is relevant to the plaintiff’s application.
Contrary to High Street’s submissions:
(a) Raftery Creek, in its own right, is noted on title as the registered proprietor of the land, not High Street. Raftery Creek is the mortgagor noted on the title, not High Street. Additionally, neither the title nor the mortgage documents refer to Raftery Creek’s entry into the Fourth Variation or the mortgage in the capacity as trustee of the Raftery Creek Unit Trust; and
(b) the order of the Federal Court appointing High Street as replacement trustee of the Raftery Creek Unit Trust did not operate to alter Raftery Creek’s status as registered proprietor and mortgagor on the title to the land.
The evidence of Mr Mackali, the sole director and shareholder of High Street, is that he agrees to the fact of a debt owing by the mortgagor to the mortgagee, noting that High Street is not the mortgagor. On the evidence and submissions filed, other than the possession argument, High Street only seeks to take issue with the quantum of the debt owed under the mortgage. Neither Raftery Creek’s default under the terms of the mortgage nor the consequent existence of Raftery Creek’s debt to the plaintiff are challenged.
I turn now to the plaintiff’s application for summary judgment for possession of the land.
Principles applicable to a plaintiff’s summary judgment application
The principles applicable to an application by a plaintiff for summary judgment were recently set out by Sloss J in Bendigo and Adelaide Bank Limited v Grahame:[16]
[16][2020] VSC 86, [23]-[34].
Section 61 of the CPA permits a plaintiff to make an application for summary judgment on the ground that the defendant’s defence or part of that defence has no real prospect of success. Section 63 of the CPA provides that, subject to s 64, the Court may give summary judgment in a civil proceeding ‘if satisfied’ that a claim has ‘no real prospect of success’.
Section 64 of the CPA provides that:
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.
In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd[17], the Court of Appeal set out the relevant test to be applied in determining an application for summary judgment made under ss 61 and 63, as follows[18]:
[17](2013) 42 VR 27.
[18]Ibid, 40 [35] (Warren CJ and Nettle JA, Neave JA agreeing in part at 42 [40]–[42]).
(a)the test for summary judgment under s 63 of the [CPA] is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;
(b)the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in [General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125];
(c)it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d)at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
Section 7(1) of the CPA sets out its overarching purpose, which is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. Section 8 of the CPA requires that the Court must ‘seek to give effect to the overarching purpose in the exercise of any of its powers’ and section 9 provides that when making any order or giving any direction in a civil proceeding, the Court is to further the overarching purpose by having regard to the objects specified in subsection (1), being:
(a) the just determination of the civil proceeding;
(b)the public interest in the early settlement of disputes by agreement between parties;
(c) the efficient conduct of the business of the court;
(d) the efficient use of judicial and administrative resources;
(e)minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for—
(i) the fair and just determination of the real issues in dispute; and
(ii) the preparation of the case for trial;
(f) the timely determination of the civil proceeding;
(g) dealing with a civil proceeding in a manner proportionate to—
(i)the complexity or importance of the issues in dispute; and
(ii) the amount in dispute.
Where a plaintiff in a civil proceeding seeks to bring an application under s 61 of the CPA, it must be made in accordance with Order 22 of the Rules.[19]
[19]Rule 22.03 of the Rules.
Rule 22.04 of the Rules sets out the material required to be filed in support of an application for summary judgment. It provides as follows:
(1)An application shall be made by summons supported by an affidavit—
(a)verifying the facts on which the claim or the part of the claim to which the application relates is based; and
(b)stating that in the belief of the deponent the defence to the claim or the defence to the relevant part of the claim—
(i) has no real prospect of success; or
(ii)has no real prospect of success except as to the amount of the claim or as to the amount of the relevant part of the claim.
(2)Where a statement in a document tends to establish a fact within paragraph (1) and at the trial of the proceeding the document would be admissible by or under the Evidence (Miscellaneous Provisions) Act 1958, the Evidence Act 2008 or any other Act to verify the fact, the affidavit under paragraph (1) may set forth the statement.
(3)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out and, having regard to all the circumstances, the Court considers that the statement ought to be permitted.
(4)The plaintiff shall serve the summons and a copy of the affidavit or affidavits and of any exhibit referred to in the affidavit or affidavits on the defendant not less than 14 days before the day for hearing named in the summons.
Rule 22.05 of the Rules provides:
(1)The defendant may show cause against the application by affidavit or otherwise to the satisfaction of the Court.
(2)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out.
(3)Unless the Court otherwise orders, the defendant shall serve a copy of any affidavit and of any exhibit referred to in the affidavit or affidavits on the plaintiff not less than three days before the day for hearing named in the summons.
The requirements set out in rr 22.04 and 22.05 were considered by the Court of Appeal in Hausman v Abigroup Contractors Pty Ltd.[20] In relation to an affidavit in support of an application for summary judgment, the Court of Appeal stated that what ‘must be verified are the facts necessary to establish a good cause of action’.[21] Once the plaintiff has established the elements of its cause of action, there is ‘something akin’ to a shifting of the evidential burden to the defendant.[22]
[20](2009) 29 VR 213; [2009] VSCA 288.
[21]Hausman v Abigroup (2009) 29 VR 213, 225 [60].
[22]See Hausman v Abigroup (2009) 29 VR 213, 223–4 [53] n 13. ‘Whether there is in fact such a burden upon a plaintiff, once the prerequisites for summary judgment have been satisfied, is a difficult question. Rule [22.05] requires a defendant, who is the subject of an application, in proper form, for summary judgment, to “show cause” why such judgment should not be granted. It may be that this imposes upon a defendant an evidential burden, or something akin thereto’.
With regard to the equivalent of what is now r 22.05, the Court of the Appeal stated as follows:[23]
[23]Hausman v Abigroup (2009) 29 VR 213, 225-6 [62]–[65] (citations omitted).
[62]…Assuming the plaintiff’s application is properly made, there will be judgment for the plaintiff unless the defendant shows cause against the application to the satisfaction of the court. The Rule provides that the defendant can show such cause ‘by affidavit or otherwise’.
[63]The defendant must satisfy the Court that, in respect of the claim to which the application for judgment relates, a question ought to be tried, or there ought for some other reason to be a trial of that claim. The Court, if so satisfied, will give the defendant leave to defend and the proceeding will continue to trial in the ordinary way. The Court will normally require an affidavit by, or on behalf of, the defendant before it will be satisfied that the defendant is entitled to leave to defend. The standard of diligence required of the defendant in preparing a case in opposition to the application, especially if under pressure of time, is perhaps not as high as that required in preparing for trial.
[64]Nonetheless, the defendant is required to use reasonable diligence to put before the Court, albeit in a summary form, all the evidence relied on in the defence. In that regard, it would generally be regarded as an injustice to the plaintiff to introduce for the first time, on appeal, evidence which was readily available for the hearing of the application, but was not produced. An affidavit filed by the defendant may contain a statement of fact based on information and belief.
[65]The authorities suggest that an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood. A bald denial that the defendant is indebted to the plaintiff will not suffice. The affidavit should, so far as practicable, deal specifically with the plaintiff’s claim and the facts set out in the supporting affidavit to establish that claim. It should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.
Those principles from Hausman v Abigroup extracted above remain good law since the advent of the CPA.[24]
In Hausman v Abigroup, the Court of Appeal also made clear that on a summary judgment application the judge ‘should not be required to trawl through the defendant’s material in an effort to see whether there can be constructed from that material an answer to the plaintiff’s claim.’[25] Rather, the Court stated:
[55]…It must be for the defendant to point to some material, whether legal or factual, that provides an arguable response to that claim. That is so even if it is the plaintiff who must ultimately discharge the burden of persuading the judge that there is no issue that warrants trial, and that summary judgment should therefore be granted.[26]
[24]Innovateq Australia Pty Ltd v Barnes [2016] VSC 618, [11] (Ierodiaconou AsJ) citing Capital One Securities Pty Ltd v Soda Kids Holdings Pty Ltd [2012] VSC 163 and Portbury Development Pty Ltd v Ottedin Investments Pty Ltd [2012] VSC 490.
[25]Hausman v Abigroup (2009) 29 VR 213, 224 [55].
[26]Ibid.
The plaintiff’s claim
In support of her application, the plaintiff relies on the affidavits of:
(a) Jacqueline Mehmet affirmed 20 July 2021;
(b) Olivia Barlow sworn 1 February 2021;
(c) Dianne Guy sworn 1 February 2021;
(d) Janet Gantcheff affirmed 6 September 2021; and
(e) Lorraine Tainton sworn 7 September 2021.
Ms Mehmet is the solicitor with conduct of this proceeding on behalf of the plaintiff. Ms Mehmet identifies the paragraphs of the plaintiff’s statement of claim that have been admitted by the defendant. Relevantly, Ms Mehmet says the defendant has admitted that:
(a) Raftery Creek was at all material times incorporated and capable of being sued;
(b) prior to 15 February 2011, the plaintiff and Mr Tainton were the joint registered proprietors of the land;
(c) in late 2010 the defendant, the plaintiff and Mr Tainton entered into the Fourth Variation;
(d) the terms of the Fourth Variation are pleaded by the plaintiff include that:
(iv) the second mortgage was to provide for the payment of the sum of $800,000 on or before 31 October 2011. That sum would be interest free if repaid by 30 April 2011, but if not repaid by that date, would attract a rate of 10% interest per annum from the date of settlement until the date of repayment; and
(v) the Taintons were entitled to remain in occupation of the land for one year from the settlement date ‘rent and outgoings free’;
(e) in January 2011, settlement occurred and the defendant became the registered proprietor of the land;
(f) on or about 21 January 2011, the defendant mortgaged all of the land to the plaintiff and Mr Tainton or alternatively to Mr Tainton;
(g) the terms of the mortgage are as pleaded by the plaintiff;
(h) the defendant was placed into liquidation on or about 31 May 2019;
(i) on or about 7 October 2020, the plaintiff gave the defendant notice that the defendant was in breach of the mortgage;
(j) in breach of the mortgage, the defendant has failed to repay the moneys owing and that the plaintiff is entitled to possession of the land;
(k) the breach is an event of default under the terms of the mortgage; and
(l) the secured loan remains due and owing by the defendant to the plaintiff.
Ms Mehmet says the defendant has not pleaded to the following allegations, asserting they contain no allegations of material fact against Raftery Creek, that:
(a) the plaintiff sues in her own capacity and as the legal personal representative of her deceased husband;
(b) the plaintiff was married to Mr Tainton at all material timed until his death;
(c) by the contract of sale executed on or around 18 December 2006, the plaintiff and Mr Tainton as vendors agreed to sell the land to Mr Molloy; and
(d) between 2006 and 2010, the plaintiff and Mr Tainton agreed to a series of variations to the contract of sale, extending the date for settlement, adjusting the price and varying the nominated purchaser.
In relation to whether the defendant remains in possession of the land, Ms Mehmet states the plaintiff and Mr Tainton gave the defendant possession of the land in January 2011 and have at no time up until 7 October 2020, when the notice of default was served on the defendant, retaken possession.
Ms Mehmet notes that Raftery Creek has not admitted paragraph 19 of the plaintiff’s statement of claim which provides that the plaintiff is entitled to possession of the land pursuant to the mortgage and s 78(1) and s 81(1) of TLA. She notes that Raftery Creek has admitted that the plaintiff is entitled to possession by paragraph 14 of its defence. Otherwise, the plaintiff relies upon the admitted facts for this conclusion of law.
In response to Raftery Creek’s reliance on s 471B of the Corporations Act 2001 (Cth) (‘Corporations Act’), in its defence (as discussed below) Ms Mehmet says the plaintiff relies on s 471C of the Corporations Act which provides that nothing in s 471B affects a secured creditor’s right to realise or otherwise deal with the security interest.
Ms Mehmet concludes by stating that she believes Raftery Creek’s defence has no real prospect of success.
Ms Barlow and Ms Guy’s affidavits referred to above evidence service of the sealed writ and statement of claim on High Street.
Ms Grantcheff’s affidavit evidences service of the default notices on Mr Mutton, as discussed above.
The contents of the plaintiff’s affidavit sworn 7 September 2021 have been referred to in the factual background above.
Plaintiff’s cause of action made out
I am satisfied that the plaintiff’s evidence establishes the essential elements of the plaintiff’s cause of action, as follows:
(a) the plaintiff is entitled to sue in her own capacity and as the legal personal representative of Mr Tainton;
(b) the Taintons were the joint registered proprietors of the land at all material times prior to 15 February 2011;
(c) by contract of sale executed on 18 December 2006, the Taintons as vendors agreed to sell the land to Mr Molloy;
(d) in late 2010, the Taintons entered into an agreement with Raftery Creek and 335 Raftery Road Pty Ltd to vary the contract of sale of the land, such agreement being the Fourth Variation;
(e) the terms of the Fourth Variation included that in consideration of payment of the sum of $700,000 at settlement and granting a mortgage to the Taintons securing payment of a sum of $800,000, the Taintons would transfer the land to Raftery Creek;
(f) in January 2011, the parties settled the varied contract of sale and Raftery Creek became the registered proprietor of the land;
(g) on or around 21 January 2000, Raftery Creek granted a mortgage to the Taintons which was registered in respect of the land as registered mortgage AH788974A;
(h) the terms of the mortgage incorporated the memorandum of common provisions;
(i) Raftery Creek breached the terms of the mortgage by being placed into liquidation by order of the Federal Court made 31 May 2019;
(j) on 7 October 2020, the plaintiff served notices on Raftery Creek stating that it was in default under the mortgage and demanded payment of the secured sum;
(k) in breach of the mortgage, Raftery Creek has failed to repay the secured sum within the seven days allowed in the notice;
(l) the breach was an event of default under the terms of the mortgage;
(m) Raftery Creek has breached the mortgage by failing to repay the secured sum and the sum remains due and owing; and
(n) pursuant to s 78(1) and s 81(1) of the TLA, the plaintiff is entitled to possession of the land.
The plaintiff has demonstrated an entitlement to enforce its mortgage and recover possession of the land.
The defendant’s defence
On 31 March 2021, Raftery Creek filed a defence by which it said, in short, that:
(a) on 17 August 2010 the Raftery Creek Unit Trust was established;
(b) from 17 August 2010 until 1 September 2020, the defendant acted as the trustee of the Raftery Creek Unit Trust;
(c) the defendant held the land as bare trustee for the Raftery Creek Unit Trust;
(d) as a result of the defendant’s liquidation on 31 May 2019 and pursuant to orders of the Federal Court of Australia made on 1 September 2020, the defendant was removed as trustee of the Trust and 290 High Street Nagambie Pty Ltd (ACN 049 810 168) was appointed as trustee of the Raftery Creek Unit Trust; and
(e) although the defendant admits (subject to production of the document(s) described):
(vi) entering into an agreement with the plaintiff in or about late 2010 described in the writ as ‘the Fourth Variation’ by which it agreed to register a second mortgage securing $800,000 advanced by the plaintiff;
(vii) the terms of the mortgage as plead by the plaintiff; and
(viii) default, breach of the mortgage and service of a notice of default and demand giving rise to an entitlement for possession of the land by the plaintiff;
the defendant says that the plaintiff ‘cannot proceed with the proceeding’ because:
(ix)following the Federal Court’s orders, the land vested in the new trustee, High Street;
(x) the defendant is not the proper defendant to the proceeding and High Street ought to be joined; and
(xi)pursuant to section 471B of the Corporations Act, leave of the Court is required to issue proceedings against a company being wound up in insolvency; and such leave has not been obtained.
Raftery Creek defence is essentially two pronged. First, it seeks to deny that it is in possession of the land based on the same arguments raised by High Street. Second, it relies on the absence of a grant of leave by the Court to bring the proceeding.
For the reasons outlined above in relation to High Street’s joinder application, I do not agree that Federal Court’s order of September 2020 operated to take possession of the land from Raftery Creek. Raftery Creek remains both the registered proprietor and mortgagee on the title to the land. It remains in possession of the land in the relevant sense under the TLA.
Section 471B of the Corporations Act has the effect that, except with the leave of the Court, a person cannot begin or proceed with a proceeding in a court against the company or in relation to property of the company and cannot begin or proceed with an enforcement process while the company is being wound up. As submitted by the plaintiff, s 471C of the Corporations Act limits the operation of s 471B by providing that nothing in s 471B affects a secured creditor’s right to realise or otherwise deal with the security interest. By virtue of the mortgage between the Taintons and Raftery Creek, the plaintiff is a secured creditor and by this proceeding the plaintiff seeks to realise its security interest. I am satisfied that this aspect of Raftery Creek’s defence has no prospect of success.
I am satisfied that Raftery Creek’s defence has no real prospect of success.
The plaintiff is entitled to orders for possession of the land.
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