Supreme Court New South Wales Medium Neutral Citation: Fobupu Pty Ltd v Hawatt [2022] NSWSC 1089 Hearing dates: 11 August 2022 Date of orders: 15 August 2022 Decision date: 15 August 2022 Jurisdiction: Common Law Before: Lonergan J Decision: (1) Judgment for the plaintiff for possession of the land comprised in Certificate of Title Identifier [REDACTED] comprising property at [REDACTED]. (2) Leave to issue a writ of possession forthwith. (3) Judgment for the plaintiff in the sum of $2,640,214.72. (4) The defendants pay the plaintiff's costs of the proceedings, including the reasonable legal costs of the plaintiff's solicitor on a solicitor/client basis. Catchwords: LAND LAW – possession of land – default on mortgage – where first defendant is bankrupt – mortgagee entitled to possession – leave granted to issue writ of possession – no point of principle Legislation Cited: Australian Consumer Law (NSW) Real Property Act 1900 (NSW) Category: Principal judgment Parties: Fobupu Pty Ltd (Plaintiff) Majed Hawatt (First Defendant) Rania Hawatt (Second Defendant) Representation: Counsel: P Afshar (Plaintiff) No appearance (First Defendant) In person (Second Defendant) Solicitors: Mills Oakley (Plaintiff) File Number(s): 2021/00152032 Publication restriction: Nil Judgment 1. The plaintiff, Fobupu Pty Ltd, seeks judgment against the defendants, Majeed Hawatt and Rania Hawatt, (now Rania Chemaissen), for possession of property at [REDACTED] and payment of a loan with interest. 2. The defendants are the registered proprietors of a property comprised in Certificate of Title Folio Identifier [REDACTED] in New South Wales [REDACTED], ("the Property"), as tenants in common in equal shares. 3. Pursuant to a Loan Agreement executed in August 2017, the plaintiff agreed to and did loan $1.5 million to the defendants. The loan was secured on the property by a registered mortgage. 4. The Loan Agreement required repayment on 1 March 2018 of the $1.5 million advanced, together with interest at 12% per annum over the loan period. It was not repaid. 5. On 25 May 2021 a Notice pursuant to s 57(2) of the Real Property Act 1900 (NSW) ("the Act") was delivered to the defendants which stated that unless the Notice was complied with within 1 month, the mortgagee proposed to exercise its power of sale over the property. In the Notice, the sum due comprising the loan and interest was identified as $2,250,493.14 plus $400 for the costs associated with issuing the Notice. 6. On 27 May 2021 the Statement of Claim was filed seeking judgment for possession and judgment in an amount to be fixed by the Court at final hearing, plus costs. 7. A Defence was filed by the first defendant on 17 August 2021 asserting that the plaintiff knew the defendants' ability to repay the loan depended on "sales from the Mosman building construction project" and that the inability to repay the loan was due to "delays to the project caused by COVID-19 restrictions" and that the Loan Agreement was "frustrated" by COVID-19 and it was "unconscionable" to enforce the loan. The first defendant was represented for a period by a solicitor who raised substantive defences in an Amended Defence filed on 8 December 2021, including that there were representations made by the plaintiff to the first defendant that he did not have to repay the loan until completion of the development, that the plaintiff contravened the Australian Consumer Law and that an estoppel applied. 8. There were many adjourned directions hearings including three in December 2021 to allow time for that solicitor to prepare evidence to pursue those asserted defences. There were delays which on occasion seemed to be "delaying tactics" as opposed to a genuine need for further time to prepare. When attempting to set a date for hearing, the first defendant asserted via his solicitor in February and early March 2022, that he could not take a hearing date until October 2022 due to work commitments. He asserted this on oath in an affidavit filed in March 2022. The Court required that the first defendant attend Court by AVL and explain why, and if that was in fact the case. He readily conceded to the Court after a small number of questions that he could in fact appear in August and so an August hearing date was fixed. 9. In May 2022, shortly before the directions hearing on 24 May 2022, the solicitor for the first defendant informed the Court of his intention to cease to act. He filed a Notice of Ceasing to Act on 19 July 2022. 10. On 8 April 2022, the Official Receiver in Bankruptcy had accepted a Bankruptcy Form and Debtors Petition filed by the first defendant and Liam Bailey was appointed Trustee of the first defendant's estate. It appears this fact was drawn to the Court's attention in or around July 2022. 11. In July 2022 the Trustee informed the Court in writing that he does not oppose the relief sought by the plaintiff in the Statement of Claim and has confirmed by email that he does not press the defences set out in the Amended Defence filed on 8 December 2021. Evidence 1. Two affidavits of Ghulam Akbar Khan, one of the directors of the plaintiff, were read, one affirmed 19 October 2021 and the other affirmed 3 August 2022. An exhibit to the 2021 affidavit was tendered which provides evidence of the matters pleaded in the Statement of Claim regarding the nature and effect of the Loan Agreement and Mortgage. The Loan Agreement 1. The Loan Agreement signed by both defendants on 11 August 2017 included, relevantly, the following terms: 1. The plaintiff agreed to provide a loan of $1.5 million to the defendants. 2. The interest rate was to be calculated at 12% per annum. 3. In the event of default, interest would then accrue at a rate of 14% per annum. 4. If the failure to pay on the repayment date proceeds for more than 5 business day, default has occurred. The same applies to a failure to pay the interest due. 5. The defendants must pay the plaintiff's costs, losses, charges etc paid or incurred by it, incidental to any breach or default under Loan Agreement or mortgage or associated with the plaintiff's the exercise or attempted exercise of any right, power privilege authority or remedy under it or the Mortgage. 6. The defendants must sign a mortgage and the plaintiff must be registered as first mortgagee. 7. The defendants must fully discharge the loan by the repayment date - 1 March 2018. 8. Upon default, all monies payable under the Loan Agreement became immediately due and payable and the registered mortgage immediately enforceable. 1. On 29 August 2017 the plaintiff advanced to the defendants the sum of $1.5 million by way of seven separate bank cheques. The Default 1. The loan was repayable on 1 March 2018 but to date the loan has not been repaid. 2. On 25 May 2021 a Notice pursuant to s 57(2)(b) of the Act was issued to the defendants. The Notice was not complied with. 3. The plaintiff is entitled to enforce its rights under s 58 of the Act and seek and obtain possession of the property and exercise the powers of sale confirmed by that provision of the Act. 4. The plaintiff also claims that it is entitled to interest on the principal at the rates set out in the Schedule to Mr Khan's August 2022 affidavit at the default rate – a total to 11 August 2022 of $1,040,214.72. 5. I have concluded that the plaintiff is entitled to interest at that rate and on those terms and in that amount under the terms of the Loan Agreement. Legal Fees 1. 20 Relevantly, under the heading "Other payments: Costs and Expenses", Clause 5 of the Loan Agreement provides that the defendants: "… must, on demand by the Lender, pay to, or as directed by the Lender and indemnify the Lender against, all costs, losses, charges, expenses, liabilities, damages, fees and disbursements (including all reasonable legal costs on a solicitor and own client basis) paid or incurred by the Lender of or incidental to… (a) …. (b) any breach of or default under this agreement or the security by the borrowers including the fees of all professional consultants, properly incurred by the lender in consequence of or in connection with, any such breach or default." 1. The August 2021 affidavit of Mr Khan annexed to it three tax invoices for professional fees due to Mills Oakley for work done in and associated with these proceedings. The total professional fees set out in those bills is a large sum: $75,789.52. Several items have been crossed out of the invoices described in Mr Khan's affidavit as "redactions to remove items not relevant to Fobupu's enforcement of the Loan", so it is unclear what sum is being claimed as reflective of Clause 5 of the Loan Agreement as "reasonable legal costs on a solicitor and own client basis". 2. The tenor of the affidavit of Mr Khan suggests that it is expected that the Court will make some specific order in this regard, but it seems to me that on the material available, and the lack of certainty as to the relevant amount claimed, the appropriate costs order is that the defendants pay the plaintiff's costs of the proceedings, including the reasonable legal costs of the plaintiff's solicitor on a solicitor/client basis. Orders 1. I make the following orders: 1. Judgment for the plaintiff for possession of the land comprised in Certificate of Title Identifier [REDACTED] comprising property at [REDACTED]. 2. Leave to issue a writ of possession forthwith. 3. Judgment for the plaintiff in the sum of $2,640,214.72. 4. The defendants pay the plaintiff's costs of the proceedings, including the reasonable legal costs of the plaintiff's solicitor on a solicitor/client basis. ********** 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 2022