Unity Funding Pty Ltd v Osman

[2020] NSWSC 948

Supreme Court

New South Wales

Medium Neutral Citation:

Unity Funding Pty Ltd v Osman [2020] NSWSC 948

Hearing dates:

22 July 2020

Date of orders:

23 July 2020

Decision date:

23 July 2020

Jurisdiction:

Equity - Duty List

Before:

Robb J

Decision:

(1) Order that the writ of possession in respect of the property identified in order 2 made by the Court in these proceedings on 13 March 2020 be stayed until 20 August 2020.

(2) Order that the first defendant’s notice of motion filed on 14 July 2020 be otherwise dismissed.

(3) Order the first defendant to pay the plaintiff’s costs of the notice of motion.

Catchwords:

LAND LAW — application for the stay of a writ of possession — where, due to some extenuating circumstances, it is appropriate for a short stay to be ordered

Category:

Procedural and other rulings

Parties:

Unity Funding Pty Ltd (plaintiff)
Zenah Osman (first defendant)
Frances St Dual Property Pty Ltd (second defendant)
National Australia Bank Ltd (third defendant)
Ace Demolition and Excavation Pty Ltd (fourth defendant)

Representation:

Counsel: M Young SC (plaintiff)
M Castle (first defendant)

Solicitors: Bransgroves Lawyers (plaintiff)

File Number(s):

2019 / 338809

Judgment

1. The plaintiff, Unity Funding Pty Ltd, commenced these proceedings by statement of claim filed on 29 October 2019.

2. So far as relief against the first defendant, Zenah Osman, is concerned, the plaintiff sought orders to give effect to an equitable mortgage dated 23 May 2017 over a property owned by the defendant at Lidcombe in this State.

3. The proceedings were determined by orders made by the Court on 13 March 2020. Orders were made giving judgment against the first defendant, that the equitable mortgage be specifically performed, and that the first defendant deliver vacant possession of the property to the plaintiff within 14 days. An order was made for the property to be sold by the plaintiff in a manner set out in detail in the orders.

4. However, the orders made on 13 March 2020 included the following:

1. The Defendant pay the plaintiff the sum of $89,000 by 10 April 2020 to be applied by the plaintiff to the debt owing under the Equitable Mortgage.

2. Stay the enforcement of the summary judgment granted to the plaintiff in orders 2 to 5 above until 11 November 2020 on the condition that:

a.   The payment in order 6 is made;

b.   The Defendant continues to pay monthly interest due and payable to the Third Defendant under the Third Defendant’s Mortgage commencing on 30 April 2020 and to provide evidence of payment to the plaintiff within two business days of payment being made.

5. The Third Defendant, as mentioned in order 7(b), was National Australia Bank Ltd, who has a first registered mortgage over the property.

6. As I understand it, the orders made by the Court on 13 March 2020 were made by agreement between the plaintiff and the first defendant.

7. As pleaded in the statement of claim, the plaintiff entered into a loan agreement on 23 May 2017 to lend $1,200,000 to a borrower. Repayment of the debt was guaranteed by a number of persons, and the equitable mortgage was granted by the first defendant over the property as a third-party security for the debt.

8. The debt was to be repaid on 23 November 2017. The debt was not repaid on that date. On 26 June 2018, the plaintiff entered into a deed of settlement with a number of the parties to the transaction, which relevantly had the result that the amount that the first defendant was required to pay to the plaintiff was reduced to $700,000. The first defendant was required to make her payment on 26 June 2019. That payment was not made, and the amount owed by the first defendant to the plaintiff remains outstanding.

9. By order 17 made by the Court on 13 March 2020, judgment was given in favour of the plaintiff against the first defendant and second defendant for $748,009.13 plus further interest and costs in accordance with the equitable mortgage.

10. The first defendant was also ordered to pay the plaintiff’s costs of the proceedings on an indemnity basis in accordance with the terms of the equitable mortgage.

11. Given the number of defaults made by the first defendant in complying with her obligations to the plaintiff, the agreement by the plaintiff to accept orders 6 and 7 constituted a substantial indulgence of the plaintiff towards the first defendant.

12. The first defendant failed to pay the sum of $89,000 by 10 April 2020 and that payment remains outstanding.

13. Consequently, the condition to the stay granted by order 7 failed, and the plaintiff became entitled to possession of the property and to conduct the sale of the property as equitable mortgagee on the terms authorised by the orders.

14. The first defendant has not given vacant possession of the property to the plaintiff notwithstanding that order 3 had required that to be done within 14 days of the making of the orders.

15. The plaintiff has obtained the issue of a writ of possession, and the Court was told that the Sheriff is expected to execute the writ next Tuesday, 28 July 2020.

16. The Court is dealing with a notice of motion filed by the first defendant on 14 July 2020. The notice of motion, and the two supporting affidavits of the first defendant that have been filed, were prepared by the first defendant with the assistance of her family but no professional legal advice.

17. The notice of motion sought an order that the writ of possession dated 12 June 2020 be stayed until 17 December 2020. It also, in the alternative, sought an order that the time for payment by the first defendant of the $89,000 be extended to 21 December 2020, and that the commencement date for payment of interest to the first mortgagee be extended to 30 December 2020.

18. It is to be noted that, if the Court made the last of these orders, then the first defendant may not pay the interest due to the first mortgagee until 30 December 2020, which would have the effect of reducing the value of the plaintiff’s security in the property.

19. The hearing of the first defendant’s notice of motion took place in the Duty List on 22 July 2020. The first defendant was represented at the hearing by counsel who had not had the opportunity to prepare the evidence in support of the first defendant’s application.

20. Counsel orally varied the relief that the first defendant sought to an order staying the execution of the writ of possession until 30 December 2020. The Court was informed that the first defendant had made a mistake in inserting the date 17 December 2020 in the notice of motion. Counsel submitted that, if the Court was not prepared to order a stay of execution of the writ of possession for the length of time sought by the first defendant, it should, as a matter of grace, stay the execution for 28 days to enable the first defendant to give vacant possession of the property to the plaintiff in an orderly way.

21. The plaintiff opposed the making by the Court of all of the orders sought by the first defendant.

22. In her 13 July 2020 affidavit, the first defendant explained that she had hoped to raise the $89,000 through a loan for $100,000 from an aunt, but that the aunt was unable to make the loan because of the effects of the COVID-19 pandemic on her small business. As a result, the first defendant negotiated a one-month extension of the time to make the payment with the plaintiff, but she was not able to raise the money in the extended time.

23. The first defendant explained that the property is the home for herself, her 61-year-old mother, her 64-year-old father, her 21-year-old sister and her 25-year-old sister. Both the mother and father are ill, the mother suffering from pneumonia and the father from anxiety and depression. The first defendant’s two sisters are university students. The first defendant’s disabled 41-year-old brother also resides at the property from time to time.

24. The first defendant gave evidence of contracts for the sale of two adjoining properties in Lidcombe for prices of $3,300,000 and $2,000,000. The contracts were entered into on 6 September 2018 and 5 December 2018 respectively. The vendors were not the first defendant but were two private companies. The purchasers were separate companies, although they may be related given that they had the same solicitors. The first of the contracts has the words “New date 16 Dec. 2020” and the second has the words “New date 17 Dec 2020” written on it in handwriting under the place for the contract date. The first defendant described the properties as “my properties” in par 27 of her first affidavit. The first defendant explained that the settlement date for the contract was extended as the purchasers “could not complete the sale on the anticipated due date”.

25. Paragraph 30 of the affidavit states:

I expect to receive circa $700,000 when the properties at… Lidcombe settle in December 2020, by way of agreement from the second mortgagee…namely, ACE Demolition & Excavation Pty Ltd.

26. The first defendant did not initially give evidence of her relationship with the vendors of the property, or how she can ensure that the vendors will give her the money that she expects to receive. The Court must infer from par 30 of the affidavit that the two properties are already subject to at least two mortgages. There was no evidence from the first defendant concerning the amount owed by the vendors to each of the mortgagees, and the Court has no means of assessing what the amount of those debts may be by 30 December 2020. There was no evidence about the unsecured debts of the vendors.

27. The first defendant gave some evidence of a debt that she claimed was owed to her, but it is not necessary to explore that issue as there was no evidence that could satisfy the Court that the debt would in fact be repaid to the first defendant in a timeframe relevant to the present application.

28. The first defendant put before the Court a draft affidavit dated 22 July 2020. With the cooperation of the plaintiff, the Court received the draft affidavit as an exhibit on the basis of an undertaking by the second defendant to swear the affidavit and file it electronically.

29. Further evidence concerning the contracts for the sale of the two properties was presented to the Court. The first defendant said that she was the sole director of both vendor companies and the sole shareholder of one of them. The terms of the deeds of variation that extended the settlement dates for both contracts provided that settlement was to occur “28 days after receiving notice of a decision being handed down and/or settlement is reached in relation to Supreme Court Proceedings where the Vendor is a party to such proceedings, but no earlier than 30 December 2020”. The file number of the proceedings is identified. The first defendant is a defendant and cross claimant. The evidence disclosed nothing about the proceedings.

30. The orders that the first defendant seeks on her notice of motion as varied assume that both contracts for sale will settle no later than 30 December 2020. However, as the Court knows nothing about the Supreme Court proceedings, it must proceed upon the basis that it is possible that those proceedings will be determined or be settled at some time after 30 December 2020. The purchasers will not be required to settle the contracts for sale for 28 days after receiving notice of that event.

31. The first defendant gave evidence that the purchasers had paid substantial sums in addition to the deposits that were payable under the contracts. She said that, as a result, there was a high likelihood that the purchasers would complete the contracts so that they would not waste the substantial amounts that they had paid. That may be true, although the Court has no evidence concerning the circumstances of the purchasers and their financial capacity to complete the contracts.

32. The first defendant also gave evidence, without documentary corroboration, that she was beneficially entitled to at least $400,000 that was held in the trust account of a corporate law practice that she has recently learned is in the course of being wound up. The Court was told at the hearing that the first defendant understands that the monies in the trust account have been dissipated. Consequently, while the first defendant may have some right of recovery in the winding up or from the Fidelity Fund, it will be a long time before any rights of the first defendant will bear fruit.

33. The first defendant also gave evidence of some entitlement to assets in the form of unsecured debts. There is no basis for confidence in what is before the Court that these assets could readily be realised to assist in paying the debt owed by the first defendant to the plaintiff. The fact that the first defendant has not been able to realise these assets since the date of the Court’s orders on 13 March 2020 casts great doubt on their value.

34. In the plaintiff’s director’s affidavit of 17 July 2020, he gave evidence that the payout figure for the first mortgage on 6 March 2020 was $1,345,322.13. There was some evidence that the value of the properties may have been in the order of $1,921,585 as at 25 February 2019, but the director was unable to obtain an updated appraisal because of the present uncertainty of the market.

35. If the two contracts for sale complete as the first defendant hopes, as her evidence discussed at [25] above shows, she will not have enough money to repay the plaintiff even if all goes well. If the current contracts for sale are not completed by the purchasers, there is a substantial risk that the plaintiff will not recover the full amount that it is owed by the first defendant. The judgment debt of $748,009.13 will increase as a result of interest and costs being incurred. The first defendant may not be able to pay the interest payable to the first mortgagee. The debt due to the first mortgagee may increase. The equity of the vendor companies in the properties may ultimately be much less than the amount of the debt to the plaintiff. That result does not allow for the fact that the first defendant’s own evidence establishes that there is a second mortgagee and there is no evidence of the amount of the debt to that lender.

36. During the course of the hearing, the Court suggested to counsel for the first defendant that it would be difficult for the Court to entertain the application made by the first defendant unless there was some proposal as to how the plaintiff could be secured on a basis that was ‘bankable’, so that there was no risk that the granting of an extension of time to the first defendant would reduce the plaintiff’s prospects of recovering all of the money that is owed to it.

37. The first defendant was unable to do more than to rely upon the evidence that I have summarised above. The first defendant has not put to the Court any proposal upon which the Court could safely act with confidence that the position of the plaintiff, which has acted generously in its dealings with the first defendant, would be properly protected.

38. Consequently, it will be necessary for the Court to dismiss the first defendant’s notice of motion.

39. The plaintiff opposed the Court making an order staying execution of the writ of possession for 28 days, primarily on the ground that the first defendant is the author of her own misfortune by making the present application as late as she has.

40. There is force in that submission, but given that there is some evidence that the first defendant’s ability to raise the $89,000 was impeded by circumstances related to the COVID-19 pandemic, I propose to order a stay of execution of the writ of possession.

41. Were it not for the number of people who make the property their home and the health issues from which the first defendant’s parents suffer, I would have been inclined to grant a stay for half of the period sought by the first defendant. However, given those matters and the fact that the plaintiff has not shown any particular disadvantage that it will suffer as a result of a longer stay, I will grant the stay sought by the first defendant.

42. In this respect, I accept the submission by counsel for the first defendant that the Court’s order was that the first defendant give vacant possession of the property, so it will not be appropriate for the occupants simply to leave on the basis that their possessions may be removed after the plaintiff has obtained possession. Given that the property is a family home, it will be reasonable for the Court to give the occupants time to make an orderly vacation of the property and to find alternative accommodation.

43. The orders of the Court are:

1. Order that the writ of possession in respect of the property identified in order 2 made by the Court in these proceedings on 13 March 2020 be stayed until 20 August 2020.

2. Order that the first defendant’s notice of motion filed on 14 July 2020 be otherwise dismissed.

3. Order the first defendant to pay the plaintiff’s costs of the notice of motion.

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Decision last updated: 23 July 2020