HODGEKISS v CHALLENGE BANK SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL POWELL JA 19 August 1995 [1995] NSWCA 194 Powell JA By Notice of Motion filed 29th September last, the Claimants ("Mr and Mrs Hodgekiss") seek an order that execution upon a judgment for possession, the entry of which was ordered by Young J, sitting in the Equity Division, on 28th August 1995, be stayed pending further order - one assumes, until the determination of the appeal in this matter - the Notice of Appeal in which was filed on 22nd September last. The circumstances which gave rise to the proceedings before Young J are that, in March 1990, Mr and Mrs Hodgekiss granted to the Opponent ("the Bank") a mortgage over a property at Woodside Avenue, Strathfield ("the subject property"), of which property they are registered as proprietors, for the purpose of securing the repayment, and payment, of a loan of $603,000.00, interest and other charges provided for in the mortgage. By late 1993, as it would seem, the mortgage was in default and there was served on the Claimants a notice requiring the payment of the full amount of the debt then outstanding - in order that such a notice might be served on Mr and debt then outstanding - in order that such a notice might be served on Mr and Mrs Hodgekiss, there must earlier have been served on them a notice pursuant to the provisions of s.57(2)(b) of the Real Property Act 1900. Had the repayment of the loan not been accelerated, it would not have been repayable until March of the loan not been accelerated, it would not have been repayable until March 1995. It would appear that, during the course of the following 12 months, or so, there was considerable correspondence between Mr and Mrs Hodgekiss, or their advisers, on the one hand, and the Bank, or its advisers, on the other, directed to having the loan discharged, or refinanced, during the course of which correspondence it became apparent that the parties did not agree (inter alia) as correspondence it became apparent that the parties did not agree (inter alia) as to the amount which was then due under the mortgage. to the amount which was then due under the mortgage. In August 1994, Mr and Mrs Hodgekiss' solicitors advised the Bank that they had instructions to have the mortgage loan paid out, and, in pursuance of the provisions of s.94 of the Conveyancing Act 1919, to have the mortgage, together with a guarantee which had been provided by a company, which appears to have been controlled by Mr Hodgekiss, assigned to a third party, which I assume to have been the party from whom Mr and Mrs Hodgekiss - or the guarantor company, it is not clear which - hoped to obtain new finance. Although, at first, the Bank - for reasons which, in the event, do not matter - was not disposed to assign its guarantee, it later agreed - at least in general terms - to do so. Thereafter drafts of the various documents thought necessary to give effect to the proposed assignment were prepared by, and exchanged between, the 2 UNREPORTED JUDGMENTS parties' solicitors, and there was correspondence between the solicitors as to "the pay out figure" - while this was occurring the amount of interest payable on the loan continued to increase. Although it seemed, at first, to have been agreed that, if the loan were to be paid out - as was then contemplated - in late December 1994, "the pay out figure" would be of the order of $750,000.00, at the last minute Mr and Mrs Hodgekiss disputed the correctness of that figure, so that the proposed arrangements then fell through. Thereafter, on 24th January 1995, there was filed in proceedings No. 1156 of 1995 in the Equity Division, a Statement of Claim, in which Mr and Mrs Hodgekiss sought against the Bank, first, a declaration that they were entitled to call for the mortgage to be assigned, and, second, a declaration as to the amount to be paid by them in order to entitle them to call for an assignment - although have not seen that Statement of Claim, subsequent events would tend to indicate that it did not contain any offer on the part of Mr and Mrs Hodgekiss, either, to redeem, or, to pay any amount which might be found due on the taking of an account, and it is clear that neither then, nor later, was the amount claimed by the Bank, either, tendered to it, or brought into Court. It would seem that, on 15th February 1995, the Bank served upon Mr and Mrs Hodgekiss a demand for payment to it of all the moneys which it then claimed to be payable pursuant to the mortgage, and that, after default in compliance with that notice, on 22nd February 1995 there was filed in proceedings No. 10587 of 1995 in the Common Law Division a Statement of Claim in which it sought as against Mr and Mrs Hodgekiss an order for possession of the subject property. Those proceeding were later transferred to the Equity Division, and were heard together with the proceedings which Mr and Mrs Hodgekiss had earlier commenced in that Division. Before the proceedings which had been commenced by the Bank had been transferred to the Equity Division, Mr and Mrs Hodgekiss had filed a Defence in which - notwithstanding that, by the time of the Defence being filed, the original term of the mortgage had expired - it was asserted that the fact that Mr and Mrs Hodgekiss had earlier commenced their proceedings in the Equity Mr and Mrs Hodgekiss had earlier commenced their proceedings in the Equity Division disentitled the Bank to possession of the subject property. The Defence which Mr and Mrs Hodgekiss filed was, in my view, quite misconceived. It is, and has long been, my understanding that, in the absence of some statutory, or contractual, provision to the contrary, a legal mortgagee of property is entitled to possession of the property the subject of the mortgage at any time when there are moneys due and owing under the mortgage (see, for example, Mumhv & Ors. v. Abi-Saab & Ors. *; Schneider & Anor. v. National Australia Bank) In the event, however, the Bank's proceedings, as I have earlier indicated, proceeded to hearing together with those which had been commenced by Mr and Mrs Hodgekiss, Judgment in the two proceedings being delivered by Young J on 17th August 1995. In his Judgment, his Honour held that, as Mr and Mrs Hodgekiss had not tendered "the pay out figure" to the Bank, nor sought to redeem the mortgage, they were not entitled to an account, and, no other "defence" to the Bank's claim for possession of the subject premises having been raised, the Bank was entitled to an order for possession - as I understand it, a formal order dismissing the proceedings which had been brought by Mr and Mrs Hodgekiss was later made. URJ HODGEKISS v CHALLENGE BANK (Powell JA) 3 Mr and Mrs Hodgekiss have now filed a Notice of Appeal in respect of his Honour's Judgment in the proceedings which had been brought by the Bank, and, as I have earlier noted, now seek an order that execution of the order for possession be stayed meantime. In seeking to demonstrate that Young J fell into error, Mr S.Y. Reuben, who appears today for Mr and Mrs Hodgekiss, submitted that it was not necessary for Mr and Mrs Hodgekiss, either, to tender "the pay out figure", or, to seek to redeem, in order that they have a "defence" to an action for possession, a submission which he sought to support by reference to the Judgment of Russell J (as his Lordship then was) in Birminvham Citizens Permanent Buildinv Society V. Caunt & Anor. 3. However, it seems to me, with respect, that that Judgment provides no support for the submission, as the following passage 4 in it demonstrates: - As was pointed out by Maitland [Lectures on Equfty, 2 ed., p. 188], equity would not interfere with a claim to possession at common law except on terms of payment off of the whole principal, interest and costs, an equity which was by statute imported into the common law, and which he described as a 'mock equity', no doubt because it required payment in full, and consequently the displacement of the mortgagee from his position as such, the very position which entitled him to possession. In Cholmondeley (Marquis) v. Clinton (Lora) Grant M.R. commented: 'a court of equity never interferes to prevent the 'mortgagee from assuming possession' - a comment which was approved by his successor, Sir Thomas Plumer, in the same litigation. here appears no trace, prior to 1936, of any right in any court to deny to a mortgagee asserting or claiming his right to possession, the appropriate order - though to this a qualification has to be made in that a court in the exercise of its inherent jurisdiction for proper reason to postpone or adjourn a hearing might by adjournment for a short time afford the mortgagor a limited opportunity to find means to pay off the mortgagee or otherwise satisfy him if there was a reasonable prospect of either of those events occurring. Indeed, it would be to me surprising if there had been such a trace, having regard to the fact that a legal mortgagee does not necessarily require any assistance from the court to assert his right to possession. Moreover, a mortgagee once rightfully in possession could never to ousted by the mortgagor except on faying off in full. (See Coate on Mortgages, vol. 2, p. 835). (The reference to 1936 is a reference to the year in which the Rules of the Supreme Court in England were amended as to permit a mortgagee to seek possession in proceedings in the Chancery Division.) As it is clear that the date for repayment and payment of the loan and interest secured by the mortgage is long since past - the amount claimed by the Bank now to be owing is of the order of $900,000.00 - and as, even now, Mr and Mrs Hodgekiss do not seek to redeem, it seems to me that the appeal is hopeless, and that, for that reason alone, no stay should be granted. But, even if I had been of a contrary view, I would, as a condition of the grant of any stay, I had been of a contrary view, I would, as a condition of the grant of any stay, have required there to be brought into Court the sum of $750,000.00, the such which, as I have earlier indicated, was, in December last, agreed as being "the pay out figure". It will be apparent, from what I have just said, that the offer - made for the first time this morning - that Mr and Mrs Hodgekiss bring into Court, within 28 days, the sum of $200,000.00, and, meantime, pay a daily occupation fee of some 4 UNREPORTED JUDGMENTS $319.00 - that sum representing the amount of interest, at the penalty rate, accruing daily - would be an inadequate basis upon which to found a stay. should, however, add that, given the sorry history of the promises - even if made in good faith - which have been broken over the last 9 months or so, it is far more probable than not that the sum of $200,000.00 would not be paid into Court within probable than not that the sum of $200,000.00 would not be paid into Court within the time suggested, so that any stay which had been granted, meantime, would lapse. The only indulgence which I am disposed to grant is to order that execution on the order for possession be stayed up to and including 6 November 1995, or further order, in that order that, if they be so advised, Mr and Mrs Hidgekiss may seek to havemy decision reviewed by a full court. I order that the Notice of Motion otherwise be dismiseed, and that the Claimants pay the Opponent's costs of the Motion. Claimants pay the Opponent's costs of the Motion.