Cass v Fisher [2020] NSWSC 738

Supreme Court New South Wales

Medium Neutral Citation: Cass v Fisher [2020] NSWSC 738 Hearing dates: 10 June 2020 Date of orders: 11 June 2020 Decision date: 11 June 2020 Jurisdiction: Common Law Before: Fagan J Decision: 1 Judgment for the plaintiff against the defendant in the sum of $69,289.49. 2 Costs reserved. Catchwords: MORTGAGES AND SECURITIES – duties, rights and remedies of mortgagee – repayment and possession – where obligation intended to be secured by mortgage not identified in the instrument – whether deed of loan enforceable – judgment for plaintiff for debt due under deed

CONTRACTS – whether deed and mortgage unjust for purposes of the Contracts Review Act 1980 (NSW) – no relief granted Legislation Cited: Contracts Review Act 1980 Civil Liability Act 2005 Real Property Act 1900 Cases Cited: King Investments Solutions v Hussain [2005] NSWSC 1076 McLeod v McLeod [2019] NSWSC 804 Category: Principal judgment Parties: Jennie Lee Cass (plaintiff) Handley Gilbert Fisher (defendant) Representation: Counsel: W Chan (plaintiff) P Batley (defendant)

Solicitors: Priest Legal (plaintiff) Legal Aid Commission NSW (defendant) File Number(s): 2019/117810 Publication restriction: No

Judgment [EX TEMPORE REVISED] 1. This is an action in debt and for possession of land. The plaintiff relies upon a deed of loan made on 11 January 2017 by which the defendant acknowledged a debt of $52,766 repayable no later than 30 June 2018 and bearing interest at 8% compounding monthly. No part of the principal or interest has been paid and the amount due at today's date is alleged to be $69,289.49 inclusive of interest. The plaintiff claims that the debt is secured by a mortgage over residential property located in the settlement of Arakoon on Trial Bay. 2. The defendant is the registered proprietor of the Arakoon property and there is clear evidence that he signed a mortgage on 11 January 2017. This was intended by the parties to be registered as a second mortgage behind an existing first mortgage in favour of St George Bank. By 6 March 2017 the plaintiff's solicitor had secured the consent of the Bank to registration of the subject mortgage behind the Bank's own encumbrance. On that date the plaintiff's solicitor sent the document to his agent in Sydney for registration. He was advised on 14 March 2017 that registration had been effected. 3. The registered second mortgage is in evidence. The standard mortgage proforma on which the document has been drawn contains the following words: [The mortgagor] mortgages to the mortgagee all the mortgagor's estate and interest in the above land, and covenants with the mortgagee that the provisions set out in the annexure and/or memorandum specified below are incorporated in this mortgage: annexure hereto; memorandum filed pursuant to s 80A Real Property Act 1900. 1. The plaintiff's solicitor caused the proforma mortgage to be completed by having typed into the blank space adjacent to the word "annexure" the words "not required". He caused there to be typed into the blank space next to the word "memorandum" the identifier "No. Q860000". As is well known, memorandum number Q860000 contains a generic set of mortgage terms but does not state the amount of debt or other liability secured by a mortgage. As there was no annexure to the mortgage and no other instrument creating a debt liability is referred to in the mortgage, the instrument is not expressed to secure any specified liability of the defendant. 2. The legal principles concerning a mortgage instrument which suffers from this defect have been considered in a number of cases that I discussed in McLeod v McLeod [2019] NSWSC 804 at [94]-[110]. The consequence of the mortgage document having been completed in the way that it was is that it is not an effective security. It cannot be enforced in these proceedings by an order that the mortgagor, being the defendant, deliver up possession of his land to the plaintiff as sought by the statement of claim. That is sufficient to dispose of the claim for possession of the land. It is also the case that the plaintiff's solicitors did not serve a notice in accordance with s 57(2)(b) of the Real Property Act 1900 (NSW) prior to commencing these proceedings for possession. Mr Chan of counsel who appears for the plaintiff has conceded that in the absence of service of a s 57(2)(b) notice, the mortgage, even if it were valid, could not be enforced. 3. Accordingly, on the evidence that is before me, the only questions that are to be determined are whether the deed of loan of 11 January 2017 is enforceable, and if so, what if any debt is owed under it. Should the plaintiff be successful on that aspect of her case, then she would be entitled to judgment for the amount of principal and interest earlier referred to. 4. In the defence the defendant disputes the enforceability of the deed of loan on a plea of non est factum. He has filed a cross-claim for relief against the deed and the mortgage under the Contracts Review Act 1980 (NSW). In submissions filed shortly before the commencement of the hearing the defendant abandoned his defence of non est factum. The defendant has now admitted that his signature has been affixed to the deed and that this occurred in the plaintiff's solicitor's office on the date that the deed bears. The deed therefore stands as a binding transaction and is sufficient alone to substantiate the defendant's liability unless he can justify a grant of relief under the Contracts Review Act. 5. The grounds upon which the defendant seeks to invoke the Contracts Review Act are such that it is necessary for me to assess conflicting evidence concerning whether the money referred to in the deed and claimed by the plaintiff ever was advanced by her to the defendant. The defendant has denied that he received loan advances. This has become an issue relevant to whether Contracts Review Act relief ought to be granted. 6. The defendant asserts that when he signed the deed and the mortgage the nature of the documents was not explained to him. He says that he did not examine the documents before signing or inquire what they were or what their effect would be. The defendant did not receive independent legal advice with respect to the documents. 7. The defendant's cross-claim pleads that the deed of loan was unjust in the circumstances at the time it was entered into within the meaning of the Contracts Review Act having regard to circumstances alleged at pars 3-20. Relying upon the written and oral submissions of the defendant's counsel, I identify the essential allegations as follows. It is asserted that injustice arises, first, from the defendant having signed both documents with a lack of understanding of their effect. Secondly, it is said that the defendant has poor eyesight and physical infirmities and that he was unwell on the day of signing, with the consequence that he was at a disadvantage with respect to making a sound judgment to protect his interests in relation to the documents. Thirdly, the defendant alleges that he was emotionally attached to, or affected by, the plaintiff and that this, combined with her presence at the time of signing, contributed to him not being able to make a sound decision about executing the documents presented to him by her solicitor. These first three points are characterised in the defendant's submissions as aspects of "procedural injustice". 8. The defendant also relies upon what he terms "substantial injustice". This is said to have arisen from the circumstance that he did not have the means to repay the loan under the deed and that there was a high likelihood of default, having regard to the 18 months' term of the lending. The defendant was 61 years old at the time of signing and was on a disability support pension from the Department of Social Security of the Commonwealth. He says that during the term of the loan he would have been unable to refinance it by resort to a commercial lender and that the transactions of 11 March 2017 therefore exposed him to a high risk of losing his home under the mortgage. 9. Although I have held that the mortgage is ineffectual and cannot be enforced, these arguments still have to be addressed with respect to the deed of loan. The deed contained a provision that the defendant would grant to the plaintiff a mortgage over his residential property at Arakoon: see cl 4.1. Consequently, although the mortgage that has been executed is defective the defendant remains exposed to the risk that his agreement to grant a mortgage will be enforced, for example, by a an order for judicial sale; see King Investments Solutions v Hussain [2005] NSWSC 1076. Also, he faces the possibilities of an application by the plaintiff for rectification of the mortgage to refer to the deed of loan or an application for specific performance of cl 4.1 of the deed, by the delivery up of an executed registrable mortgage. 10. Further, in the circumstances of the defendant's inability to repay the debt within 18 months, irrespective of any security over his property the deed exposes the defendant to the risk of default and entry of judgment, followed by enforcement of a judgment pursuant to a writ of execution. One way or another, the defendant's home, which appears to be his only significant asset, has been put at risk by him entering into the deed. 11. Another alleged aspect of injustice of the transactions of 11 January 2017, for the purposes of the Contracts Review Act, is the interest rate of 8% compounding monthly that was provided for in cl 5. The defendant submits that this is "relatively high" and that it contributes to substantive injustice of the transaction. The relief sought under the Act is an order setting aside the deed of loan. The defendant submits that the plaintiff should be left to recover, without security, so much of the debt as she may prove if her evidence prevails over the defendant's denials. He submits that the plaintiff should have no more interest on the debt than would be payable at rates prescribed under the Civil Liability Act 2005 (NSW). 12. The issues thus raised require that I should make findings of fact in relation to the financial relationship between the parties in some detail. It is also necessary that I address the defendant's contentions regarding their personal and social relationship.