Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Mudge v Business Finance Pty Ltd (Receiver and Manager Appointed) [2021] NSWCA 250 Hearing dates: 13 October 2021 Date of orders: 20 October 2021 Decision date: 20 October 2021 Before: Gleeson JA at [1] Simpson AJA at [42] Decision: (1) Extend the time for filing of the summons seeking leave to appeal to 6 August 2021. (2) Summons seeking leave to appeal be dismissed. (3) Applicant to pay the respondents' costs in this Court. (4) Notice of motion filed by the applicant on 6 August 2021 be dismissed with costs. Catchwords: APPEALS – application for leave – where mortgagee brought proceeding for removal of caveats lodged by guarantor/mortgagor against two adjoining properties – interlocutory order made for withdrawal of caveats – sale of properties completed – contention that sale of properties unauthorised – whether leave should be granted – whether injustice which is reasonably clear – leave refused Legislation Cited: Conveyancing Act 1919 (NSW), ss 115(3), 170(1)(b) Corporations Act 2001 (Cth), s 420(2)(b) Real Property Act 1900 (NSW), ss 74MA(2), 138(2), (3) Supreme Court Act 1970 (NSW), s 101(2)(c), (e), (m) Uniform Civil Procedure Rules 2005 (NSW), rr 42.1, 50.12(1)(a), (c), 51.12(2)(d), 51.41(1) Cases Cited: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 Bayblu Holdings Pty Ltd v Capital Finance Australia Limited [2011] NSWCA 39; (2011) 279 ALR 166 Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v DAS [2012] NSWCA 164 Hanson Construction Materials Pty Ltd v Roberts (2016) 93 NSWLR 1; [2016] NSWCA 240 Hassan v Sydney Local Health District (No 2) [2020] NSWCA 356 House v The King (1936) 55 CLR 499; [1936] HCA 40 Macatangay v State of New South Wales (No 2) [2009] NSWCA 272 McInnes v Rheem Australia Pty Ltd [2021] NSWCA 89 Paciocco v Australia and New Zealand Banking Group Limited (2016) 258 CLR 525; [2016] HCA 28 Prouten v Chapman [2021] NSWCA 207 Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870 Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 Water Board v Moustakas (1988) 180 CLR 491; [1988] HCA 12 Category: Principal judgment Parties: John Mudge (Applicant) Business Finance Pty Ltd (Receiver and Manager Appointed) (First respondent) Marcus William Ayres in his capacity as receiver and manager of Business Finance Pty Ltd (Receiver and Manager Appointed) (Second respondent) Representation: Counsel: J Mudge (self-represented) (Applicant) S Ipp (Respondent) Solicitors: Corrs Chambers Westgarth (Respondent) File Number(s): 2021/226449 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2021] NSWSC 733 Date of Decision: 21 May 2021; 22 June 2021 Before: Darke J File Number(s): 2021/116792 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. GLEESON JA: The applicant, Mr John Mudge, seeks leave to appeal from the whole of the orders made by Darke J on 21 May 2021 in proceedings brought by Business Finance Pty Ltd (Receiver and Manager Appointed) (Business Finance) and Mr Marcus William Ayres (Mr Ayres) as receiver and manager of Business Finance for the removal of caveats lodged by Mr Mudge against the titles of two adjoining properties in the Ballina area of which he was the registered proprietor known as the Gilmore Close land and the Sneaths Road land, and for ancillary relief. The caveats were an impediment to the completion of contracts for sale entered into by Business Finance and Mr Ayres on 11 February 2021. 2. The substantive orders made on 21 May which Mr Mudge seeks to challenge are: 1. that Mr Mudge withdraw two caveats by 1 pm on 24 May 2021 and be restrained from lodging any further caveats on either folio identifiers in respect of the two properties (orders 3 and 4); and 2. the refusal of an application by Mr Mudge for leave to file a cross-claim (order 1), a confidentiality order in relation to certain documents exhibited to an affidavit of Mr Ayres (order 2), and an order requiring the second defendant, the Registrar General of New South Wales, pursuant to s 138(2) and (3) of the Real Property Act 1900 (NSW) to give effect to the sale of the Sneaths Road land and transfer that land to the purchasers in circumstances where the original certificate of title for that land could not be produced (order 5). 1. Mr Mudge requires leave to appeal in respect of orders 3 and 4 as they were made pursuant to s 74MA(2) of the Real Property Act: Supreme Court Act 1970 (NSW), s 101(2)(m). He also requires leave to appeal in respect of orders 1, 2 and 5 as they are interlocutory orders: Supreme Court Act, s 101(2)(e); Macatangay v State of New South Wales (No 2) [2009] NSWCA 272 at [10]-[11]. 2. Mr Mudge also seeks leave to appeal from a costs order subsequently made by Darke J on 22 June 2021 that Mr Mudge pay the plaintiffs' costs of the proceedings below on the ordinary basis in the specified gross sum of $110,000 (incl GST): Business Finance Pty Ltd (Receiver and Manager Appointed) v Mudge [2021] NSWSC 733. Leave to appeal in respect of the costs order is also required: Supreme Court Act, s 101(2)(c). 3. Mr Mudge requires an extension of time for leave to appeal: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 50.12(1)(a), (c). The summons seeking leave to appeal filed 6 August 2021 is 50 days out of time in respect of the caveat orders and 18 days out of time in respect of the costs order. Mr Mudge belatedly sought an extension of time in his notice of motion filed 11 October 2021, after the respondents had filed a notice of motion on 6 October 2021 seeking an order dismissing the summons seeking leave to appeal as incompetent pursuant to UCPR, r 51.41(1) for failure to seek an extension of time. 4. Although the respondents accept that the delay is not inordinate, they say the delay is unexplained and Mr Mudge has failed to demonstrate that he has a reasonably arguable case for obtaining leave to appeal if an extension of time is granted: Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 at [55]. It is convenient to address the question of an extension of time after consideration of the merits of the application for leave. Background 1. The caveats lodged by Mr Mudge on about 7 April 2021 against the titles to the Gilmore Close land and the Sneaths Road land both claimed a "legal interest and equitable interest" by virtue of the facts set out in an annexure to the caveats which challenged the exercise by Business Finance and Mr Ayres, respectively, of the power of sale as mortgagee in possession pursuant to a registered mortgage in respect of the Gilmore Close land and by Mr Ayres as the agent of Mr Mudge in respect of the Sneaths Road land. (Mr Ayres was appointed receiver and manager of the Sneaths Road land by Business Finance pursuant to a deed of appointment dated 25 May 2020). The contracts for sale entered into on 11 February 2021 followed a public auction. The total price of the contracts was $1,645,000. Of this amount, $1,642,532.50 was attributable to the Gilmore Close land and the balance of $2,467.50 to the Sneaths Road land. 2. Mr Mudge granted the registered mortgage over the Gilmore Close land to Business Finance in 2018 as security for his obligations as guarantor of a loan to Seraphim (Consulting) Pty Ltd (Seraphim), a company controlled by Mr Mudge, in an amount of $808,000 for a term of six months. The loan by Business Finance was for business purposes and to discharge previous financial obligations of Seraphim, which were apparently secured by a registered mortgage over the Gilmore Close land in favour of National Australia Bank (NAB). It is not clear what amount was secured by the prior mortgage, which was discharged on registration of the mortgage in favour of Business Finance. Mr Mudge, on behalf of Seraphim, had given cheque directions to Summer Lawyers and to Business Finance on or about 26 April 2018 to pay the balance of the loan, after the deduction of fees and expenses, to his account with NAB in an amount of $751,260. 3. The terms of the registered mortgage included memorandum AM544278P. By cl 2.1 of that memorandum, Mr Mudge granted a mortgage over all of his assets owned at the date of the mortgage (cl 2.1). As Mr Mudge's assets included the Sneaths Road land, the effect of the memorandum was to grant an equitable mortgage over that land. Mr Mudge denied that he was provided with the memorandum before signing the mortgage. However, there was evidence that Summer Lawyers, on behalf of Business Finance, had provided to Mr Mudge's solicitor all relevant mortgage documents, including the certified identification documents, and that the signing of these documents by Mr Mudge had been witnessed by the solicitor for Mr Mudge. 4. Seraphim was wound up by order of the Federal Court of Australia on 9 November 2018. The winding up of Seraphim constituted a default under the terms of the loan agreement and the mortgage. On 30 November 2018, default notices and demands were issued to Seraphim, Mr Mudge and the liquidator of Seraphim. In response to Mr Mudge's denial that the demand addressed to him had been served at the Gilmore Close property, the respondents adduced evidence of a copy of the Express Post envelope bearing the relevant tracking number which contained the demand dated 30 November 2018 addressed to Mr Mudge at the property, together with evidence from Australia Post confirming that this envelope was "[d]elivered as addressed on 3 December 2018 at 2:57 pm into the letterbox of the address". 5. On 3 December 2018, Business Finance took possession of the Gilmore Close land as mortgagee in possession. Business Finance subsequently obtained a declaration for vacant possession on 16 December 2019 in proceedings in the Supreme Court. The contracts for sale entered into on 11 February 2021 were scheduled to complete on 13 April 2021. As indicated, settlement did not occur on that date because of caveats lodged over both properties by Mr Mudge. 6. The primary judge correctly approached the application to withdraw the caveats by reference to the well-established principles that the caveator bears the onus of showing that there is a serious issue to be tried as to the existence of the interest claimed over the land in the caveat. Once the caveator discharges that onus, the continuation or removal of the caveat depends upon the court's assessment of the balance of convenience: Hanson Construction Materials Pty Ltd v Roberts (2016) 93 NSWLR 1; [2016] NSWCA 240 at [77]; see also Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd [2011] NSWCA 39; (2011) 279 ALR 166 at [20]. 7. After finding that the description of the estate or interest claimed in the caveats was "probably insufficiently clear", such that each caveat over the land was likely to be defective in substance and liable to be removed on that ground alone, the primary judge proceeded to consider the broader merits of the caveats in light of the matters raised in submissions by Mr Mudge. His Honour treated Mr Mudge's claim in the caveats to be that of a registered proprietor or mortgagor where a mortgagee has entered into a voidable contract for sale: Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870 at 875. 8. The primary judge recorded that the complaints made by Mr Mudge fell into two categories. First, that various default notices were either not served or properly served and accordingly no rights to possession or sale arose. Second, that the process of sale by the respondents was improper or not in good faith such that the contracts for sale were voidable. 9. As to the first complaint, the primary judge considered that there was sufficient evidence of service of the demands. To the extent that there was any deficiency in service, his Honour found that Mr Mudge had delayed taking any action to prevent the sale of the properties notwithstanding that Business Finance had possession of the properties in December 2018 and Mr Mudge's solicitors had sent a letter raising the issue of non-service of the demands in April 2019. In addition, his Honour considered the delay by Mr Mudge in pursuing the alleged non-service of the demands to be a relevant factor in the Court's exercise of discretion on the application for withdrawal of the caveats. 10. As to the second complaint, the primary judge found that none of the ten arguments advanced by Mr Mudge supported his claim to a caveatable interest, and that he did not have an interest or right sufficient to impugn the exercise of the power of sale or the completion of the contracts for sale. His Honour observed that the evidence suggested that the sale price of the properties was not below market value and that the sale process appeared to have been carried out in a proper fashion with a marketing campaign followed by a public auction. His Honour noted that there was even a pause in the sale process to enable consideration to be given to Mr Mudge's assertion as to the rezoning potential of the properties. 11. His Honour concluded that Mr Mudge had failed to satisfy the onus of showing that there was a serious question or issue to be tried, or that there was a prima facie case in the sense described in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [65] (Gummow and Hayne JJ). 12. Having concluded that the Court should order that the caveats be withdrawn, his Honour nevertheless addressed the balance of convenience. He found that it strongly favoured the withdrawal of the caveats, given that Business Finance had been in possession of the properties since December 2018, had made efforts to sell the properties since about February 2019, and Mr Mudge had not, at any stage, taken action to preclude the continuation of that process, even though he had raised numerous complaints about the process as well as numerous arguments to the effect that the sale process was in some way illegal or invalid. His Honour also noted that, although the properties had been placed back on the market in late 2020 with a view of selling them in February or March 2021, and Mr Mudge was plainly aware of that, no action was taken by Mr Mudge to enjoin the process. Subsequent events 1. Following the 21 May orders, the sale of the properties completed on 25 May 2021. The net proceeds of sale were applied by Business Finance to the amount owing by Seraphim under the loan, but were insufficient to repay the loan in full. According to Mr Ayres, there is a shortfall of $4,605,187.83 as at 6 September 2021 owing by Mr Mudge as guarantor. 2. The significant disproportion between the sale price and the ultimate shortfall seems to be a consequence of the extraordinarily high default interest rate under the mortgage; 60 per cent per annum, reducible to 15 per cent upon prompt payment. It is not necessary to consider whether the interest provision in the mortgage constitutes an unenforceable penalty (Paciocco v Australia and New Zealand Banking Group Limited (2016) 258 CLR 525; [2016] HCA 28), and if so, what consequences would follow in terms of the calculation of the amount owed by Mr Mudge to Business Finance. Proposed appeal 1. Mr Mudge was self-represented on this application, as he was in the Court below. He has not served a draft notice of appeal as required by UCPR, r 51.12(2)(d). Accordingly, it is necessary to turn to his written summary of argument to identify the basis of the proposed appeal. 2. The summary of argument identified three high level questions. The first is whether Mr Mudge's claim as caveator has or may have substance and should have been "maintained/preserved" over the two properties. The second is whether the primary judge erred by not considering, accepting or placing any weight on Mr Mudge's "credible" evidence in eight specified respects. The third is whether the primary judge erred in failing to find that the Australia Post evidence showed that Mr Mudge was not served with the demands. Disposition of application 1. Addressing the usual criteria for leave, it is plain that none of the questions raised by Mr Mudge involve an issue of principle or a question of public importance: Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v DAS [2012] NSWCA 164; Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206. Accordingly, it is necessary to consider whether any of the questions raise an injustice which is reasonably clear in the sense of being more than merely arguable. 2. Mr Mudge's written summary of argument did not identify any legal or factual error in the primary judge's rejection of Mr Mudge's contention that he had a caveatable interest with respect to the properties. Insofar as Mr Mudge made an oral submission that the sale process was not in good faith because the properties were not advertised as suitable for eco-tourism or potential residential development, that submission was not addressed in his written summary of argument, nor developed in oral argument. Mr Mudge did not identify any deficiencies of the valuation evidence or the marketing process undertaken by the respondents, which the primary judge relied on in rejecting Mr Mudge's submission that the sales of the properties involved an improper exercise of a power of sale or the exercise of a power of sale in bad faith. 3. Mr Mudge's contention in par 2(i) of his written summary of argument – that the primary judge failed to afford him procedural fairness at the hearing on 21 May 2021 – was not supported by reference to any particular aspects of the hearing below. Having reviewed the transcript of the hearing, I am satisfied that his Honour appropriately dealt with Mr Mudge as an unrepresented litigant. There is no substance in the criticism that the primary judge did not afford Mr Mudge a fair hearing. 4. Mr Mudge's contentions in par 2(ii)-(vi) of his written summary of argument that the primary judge erred in a number of ways was not based on any specific findings of fact or law which were challenged. 5. Insofar as Mr Mudge asserted that the reasons for the 21 May orders were inadequate, that complaint is untenable. Given the interlocutory nature of the hearing to maintain a statutory injunction against the respondents from dealing with the two properties, the reasons of the primary judge well-exceeded the "minimum acceptable standard": see the discussion in Prouten v Chapman [2021] NSWCA 207 at [32]. 6. His Honour's reasons identified the relevant facts and issues, stated the applicable principles, and applied those principles to the arguments raised by Mr Mudge. There is no basis for complaint that some arguments were dealt with more briefly than others. There was no requirement for the judge to give a detailed explanation for rejecting every argument, especially arguments that were of little, if any, relevance (for example, that the powers of attorney were without merit or invalid, when no reliance was placed on the powers of attorney in the exercise of the powers of sale). 7. Mr Mudge's complaint that the primary judge failed to consider, accept or place any weight on Mr Mudge's "credible" evidence that the notice of demand had not been served at the Gilmore Close property ignored that in response to Mr Mudge's denial of service of the demand at that address, the respondents adduced the evidence referred to above from Australia Post confirming service by Express Post of an envelope containing the demand addressed to Mr Mudge at the Gilmore Close property: see [10] above. The primary judge was entitled to prefer this evidence over Mr Mudge's denial. 8. Insofar as Mr Mudge submitted in oral argument that the Gilmore Close property was not his last known residential address and accordingly service at the Gilmore Close address was deficient, and that his solicitor and mortgage broker knew at the time that he resided elsewhere (Conveyancing Act 1919 (NSW), s 170(1)(b)), the respondents objected to Mr Mudge raising a new point on the proposed appeal which had not been raised below. Mr Mudge did not dispute that this was a new point. That is a sufficient reason alone to refuse leave to rely upon this ground: Water Board v Moustakas (1988) 180 CLR 491; [1988] HCA 12. 9. In any event, Mr Mudge has not shown any injustice in relation to the "service" point. As the respondents correctly pointed out, at the time of obtaining the loan in 2018, Business Finance was provided with a document signed by Mr Mudge and his solicitor styled "Combined Appointment as Identifier Certificate and Identification Certificate", which included a photocopy of Mr Mudge's Driver Licence, which showed his address as the Gilmore Close property. Mr Mudge did not point to any evidence that indicated that Business Finance was aware of a different residential address for Mr Mudge at the time of issue of the demand on 30 November 2018. 10. As a further answer to the "service" point, counsel for the respondents submitted (in effect, as a foreshadowed notice of contention) that the respondents were entitled to exercise the contractual power of sale in cl 19.7 of the memorandum to the mortgage and cl 2 of the deed of appointment of Mr Ayres, together with s 420(2)(b) of the Corporations Act 2001 (Cth), if there was any impediment to the exercise of the statutory power of sale. The primary judge did not find it necessary to deal with this argument given his conclusion on the service point. As no injustice has been demonstrated, it is not necessary to say anything about this alternative argument. 11. As to the primary judge's refusal to grant leave to Mr Mudge to file a cross-claim on 21 May 2021, this was a decision regarding a matter of practice and procedure and particular caution and circumspection is required when reviewing such decisions: Hassan v Sydney Local Health District (No 2) [2020] NSWCA 356 at [25] (Bell P, Basten and Leeming JJA agreeing). In this case, Mr Mudge failed to identify any error of the type in House v The King (1936) 55 CLR 499 at 504-505; [1936] HCA 40 in the primary judge's reasons for refusing leave to file a cross-claim. Moreover, Mr Mudge could have brought separate proceedings against Business Finance or Mr Ayres at any time after Business Finance took possession of the Gilmore Close land. He has not done so. No injustice has been made out by this complaint. 12. Insofar as Mr Mudge complained that the primary judge erred in giving too much weight to the respondents' argument that Mr Ayres (as receiver and manager) had an express right to sell the Sneaths Road land under s 115(3) of the Conveyancing Act, this complaint is misplaced. The primary judge made no finding concerning the application of s 115(3). 13. To the extent that Mr Mudge seeks leave to appeal against order 5, that order was facultative in circumstances where Mr Ayres did not have possession of the certificate of title to the Sneaths Road land and the order was made against the Registrar General (who has not been joined as a party in this Court). Mr Mudge did not make any submissions in his written summary of argument as to why there was any error in order 5. 14. Mr Mudge's proposed challenge to the costs order made on 22 June 2021 was not addressed in his written summary of argument and no attempt was made in oral argument to identify any error in the costs order. The costs order in favour of the respondents accorded with the usual rule that costs follow the event: UCPR, r 42.1. The specification of a gross sum was a discretionary decision well-open to the primary judge on the evidence before him. It is well-established that the court will be slow to grant leave in respect of an appeal restricted to a challenge to an order for costs. This is for two reasons. First, as the power to award costs is discretionary, the "constrained" or "deferential" standard of appellate review of an exercise of judicial discretion adopted in House v The King applies. Second, costs involve matters of practice and procedure and hence there is the "added restraint" and the "particular caution" which an appellate court should exercise in reviewing a judgment on such matters: McInnes v Rheem Australia Pty Ltd [2021] NSWCA 89 at [22]-[23]. No error has been identified in the discretionary decision on costs. 15. One further matter should be mentioned. As Mr Mudge did not seek or obtain a stay of the 21 May orders to preserve the subject matter of the litigation pending any application for leave to appeal, and the sale of the properties completed on 25 May 2021, there is no utility in the proposed appeal against the 21 May orders. Mr Mudge has no right to maintain a statutory injunction against the current registered proprietors of the properties pending resolution of any dispute he has with Business Finance and Mr Ayres (such as an action for compensation for any loss if the mortgagee sale was unauthorised, or challenging the amount of the debt claimed to be owing to Business Finance). Notice of motion 1. By notice of motion filed 6 August 2021, Mr Mudge seeks relief in pars [1] to [8], duplicating the relief sought in the summons seeking leave to appeal. That part of the motion should be dismissed for the same reasons as given above in relation to the application for leave to appeal. 2. Paragraphs [9] to [16] of the motion seek procedural orders in relation to the service and expedited hearing of the motion, as well as orders against the respondents and third parties for the production of various documents. Given the outcome of the application for leave to appeal, it is unnecessary to consider the balance of the motion which seeks to obtain additional evidence for the proposed appeal. The motion should be dismissed with costs. Conclusion 1. I am satisfied that although the proposed appeal is without merit, there should be an extension of time given that the delay is not inordinate and that there is no prejudice to the respondents by that delay. 2. I propose the following orders: 1. Extend the time for filing of the summons seeking leave to appeal to 6 August 2021. 2. Summons seeking leave to appeal be dismissed. 3. Applicant to pay the respondents' costs in this Court. 4. Notice of motion filed by the applicant on 6 August 2021 be dismissed with costs. 1. SIMPSON AJA: I agree with Gleeson JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 October 2021