The Trust Company (PTAL) Limited v Samuel M Holdings Pty Ltd
[2020] NSWSC 556
•14 May 2020
Supreme Court
New South Wales
Medium Neutral Citation: The Trust Company (PTAL) Limited v Samuel M Holdings Pty Ltd [2020] NSWSC 556 Hearing dates: 6 May 2020 Decision date: 14 May 2020 Jurisdiction: Common Law Before: Button J Decision: (1) The notice of motion of Mr Steven Murabito of 11 March 2020 is dismissed.
Catchwords: CIVIL PROCEDURE – claim for possession of real property – mortgage default by company – receivers appointed to the entirety of the company assets – writ of possession issued by court – whether service of the claim for possession on the receivers was sufficient – whether any separate reason to postpone writ Texts Cited: Uniform Civil Procedure Rules NSW rr 10.1, 10.2 Category: Principal judgment Parties: The Trust Company (PTAL) Limited (Plaintiff)
Samuel M Holdings Pty Ltd (Defendant)
Mr S Murabito (Intervenor)Representation: Counsel:
Solicitors:
M Young SC (Plaintiff)
A G Martin (Defendant)
R Tregenza (Intervenor)
Summer Lawyers (Plaintiff)
Sydney Law Practice (Intervenor)
File Number(s): 2019/358119
Judgment
Introduction
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This judgment resolves a notice of motion filed on 11 March 2020 on behalf of Mr Steven Murabito, to whom I shall subsequently refer as the “Director”.
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In a nutshell, the motion seeks a stay of the execution of writs of possession at two residential addresses in Port Kembla, in the Illawarra region of New South Wales; an order that a consent judgment for possession of those two parcels of land entered on 17 December 2019 be set aside; and an order that the Director be joined as a defendant in the substantive proceedings.
Background
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Only a brief chronological sketch is necessary.
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Samuel M Holdings Proprietary Limited (the Company) is the registered proprietor of the two pieces of real property. On 18 February 2019, the Company entered into two loan agreements and two mortgages.
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The first creditor was The Trust Company (PTAL) Limited, which is the plaintiff in these proceedings. The loan was in the sum of $1,760,000. On the face of the mortgage, the loan was secured by three pieces of real property: the two addresses in Port Kembla, and a further address in Leichardt in the inner west of Sydney. That mortgage bears a registration number ending in the numerals “621”, and I shall refer to it in that way.
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The second mortgage was given to H and H Mezz Proprietary Limited (“Mezz”). That was in the sum of $400,000. The loan was secured by a second mortgage over each of the addresses in Port Kembla, a second mortgage over the address in Leichardt, and a second mortgage over a further address in Leichardt. That mortgage bears a registration number ending in the numerals “622”, and I shall refer to it accordingly.
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Incorporated into each of the mortgages was a detailed memorandum.
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Before me, there was no dispute that the Company defaulted in 2019 with regard to the loan from the plaintiff, and the loan from Mezz.
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By way of a deed of 30 June 2019, Mezz purported to appoint receivers and managers to the Company in its entirety, pursuant to its powers under mortgage 622 (I use that contingent language because the right of Mezz to do so was disputed before me).
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On 22 August 2019, the Director became aware of the appointment of the receivers and managers pursuant to that deed. He took no measures at that stage to impugn that step.
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On 14 November 2019, the plaintiff filed a statement of claim in this Court seeking possession of the two pieces of land in Port Kembla, and leave to issue a writ of possession forthwith. No other orders were sought in that pleading.
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On 18 November 2019, a process server served that document upon the receivers and managers appointed by Mezz at an address in Parramatta. The statement of claim was served neither upon the Director personally, nor at the registered address of the Company.
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On 17 December 2019, a consent judgment was filed in this Court whereby the receivers and managers appointed by Mezz (the second mortgagee) consented to possession being granted to the plaintiff (the first mortgagee) of the two parcels of land in Port Kembla.
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On 28 January 2020, a writ of possession in favour of the plaintiff was issued out of this Court.
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On 4 March 2020, the debt owed by the Company to, and the interest in the mortgage of, Mezz was assigned to a further company, Ageist Proprietary Limited.
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On 11 March 2020, when execution of the writ of possession was imminent, the notice of motion of the Director was filed in this Court. It came before Cavanagh J on the same day, who stayed its execution until further order. Thereafter, I understand that his Honour made orders in Chambers permitting the substantive question to come before me promptly.
Submissions of the Director
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Although the notice of motion foreshadowed an attack on the validity of the appointment of the receivers and managers, it was made clear before me that that was no longer pressed, and that it had arisen as a result of a slip in the notification of that appointment by the receivers and managers to the Director.
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What was pressed, however, was the proposition that the service upon the receivers and managers was insufficient, and failed to comply with the Uniform Civil Procedure Rules NSW 2005 (the UCPR). Rules 10.1 and 10.2 were in particular relied upon.
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The anterior submission was that the appointment of the receivers and managers to the Company as a whole was not authorised by mortgage 622 and its memorandum. It was said that the appointment of the receivers and managers, especially if only to the particular parcels of real property and not to the Company as a whole, did not derogate from the need for there to be separate service upon the residual manifestation of the Company at its registered address, or at least upon the Director or directors.
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In those circumstances, it was said, the consent judgment of this Court was a “nullity”, and must be set aside.
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It was also submitted that, in some sense, the receivers and managers had not complied with the obligations arising from their roles.
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Quite separately, it was said that the writ of possession should be further stayed by me, above and beyond the period of its postponement since 11 March this year. That is because, it was said, a comprehensive sale is imminent that will satisfy the debts of both the plaintiff and the assignee of Mezz.
Determination
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Construing mortgage 622 and its memorandum as a whole, I am satisfied that the Company granted a right to Mezz to appoint receivers and managers to the entirety of its assets, if the Company defaulted in its repayment obligations to Mezz. At the hearing, counsel for the Company (as manifested by the receivers and managers) took me in detail through the memorandum in order to establish that proposition, and that pathway need not be repeated here. In my opinion, there is no sense in which the limited references in the mortgage to the parcels of real property “trumps” the more expansive references to far broader assets in the memorandum.
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It follows that I do not accept the submission that the appointment by Mezz of the receivers and managers to the entirety of the assets of the Company was beyond power.
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That legal determination is, however, unnecessary to my ultimate determination. Whether the receivers and managers were appointed to all of the assets of the Company, or merely to the parcels of real property, the claim for possession by the plaintiff pertained only to the latter. It is an entirely orthodox analysis to say that the receivers and managers were the agents of the Company with regard to that real property, even though, in truth, they were appointed pursuant to a mortgage that was designed to protect the interests of Mezz. They were and are the “external administrators” of the real property that is the subject of the claim for possession.
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There is no dispute that they were validly served with the statement of claim of the plaintiff. In my opinion, they were the “active party” to the litigation for the purposes of the UCPR. I do not accept that there was a separate requirement upon the plaintiff to serve some other manifestation of the Company, or its directors. Notably, counsel for the Director did not invite me to any authority of any Court in support of that specific proposition.
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Separately, the receivers and managers of the second mortgagee consented in a judgment permitting the first mortgagee to have possession, no doubt with an eye to sale in an effort to recoup debts owed to each creditor. There is nothing troubling about that step, nor on the evidence any suggestion of a lack of bona fides on the part of the receivers and managers.
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Finally, there is no warrant in these circumstances to delay further the execution of the writ, for the following reasons.
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First, counsel for the Director made it clear, as I have said, that there was no challenge to the validity of the appointment of the receivers and managers, at least as it pertained to the real property the subject of the claim for possession.
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Secondly, no substantive defence to the indebtedness, nor to default, nor to the validity of the mortgages, was foreshadowed.
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Thirdly, the receivers and managers having been validly appointed to the real property, the Director and those associated with him have no authority to sell the property in any event.
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Fourthly, there is a caveat on title filed by a third mortgagee (to which I have not previously referred, in the interests of conciseness) that would forestall any such sale in any event.
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Fifthly, I am not satisfied that a proposed corporate purchaser is a third party at arm’s length.
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Sixthly, default in the debt owed by the Company to the plaintiff is said to have occurred as long ago as 2 September 2019, and possession was first sought on 14 November 2019, almost exactly six months ago.
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Seventhly and finally, if resolution of this dispute could have occurred by way of a complete payout, it surely should have come to fruition between 11 March and 6 May 2020, a period of eight weeks.
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In summary then: I do not believe that service of the claim for possession was deficient; I therefore do not believe that the consent judgment should be set aside; and I do not believe that the writ of possession should be further delayed for any separate reason.
Costs
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Because of the various contingencies of result, I decided at the hearing that the question of costs should be resolved subsequently in Chambers. Having said that, the usual rule is that costs follow the event, with the result that one might expect them to be ordered in favour of the plaintiff and perhaps the Company against the Director. But counsel for each of them made it clear that they would rely on the security document itself in order to recoup their costs, if they were successful before me.
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If I have misunderstood, or the situation has changed since the hearing, each of those parties has leave to file dot point written submissions about costs of no more than three pages in length within one week of today. The Director will then have leave to file submissions with identical characteristics within one week thereafter. Any dispute about costs will then be resolved by me in Chambers.
Orders
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I make the following order:
The notice of motion of Mr Steven Murabito of 11 March 2020 is dismissed.
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Decision last updated: 14 May 2020
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