New South Wales Supreme Court CITATION : Equitiloan Securities v Dominion Estates [2000] NSWSC 744 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 12479 of 1999 HEARING DATE(S) : 18 July 2000 JUDGMENT DATE : 31 July 2000 Equitiloan Securities Pty Limited (Plaintiff) PARTIES : v Dominion Estates Pty Limited (Defendant) JUDGMENT OF : Master Malpass COUNSEL : Mr F G Lever (Plaintiff) Mr G K Burton (Defendant) SOLICITORS : McIvor Coghlan (Plaintiff) Oakley Thompson & Co (Defendant) CATCHWORDS : Default judgment - application to set aside and for leave to bring a redemption suit by way of cross-claim - redemption considerations - continuation of stay. LEGISLATION CITED : Real Property Act 1900, s 57 (2) (b). CASES CITED : N/A DECISION : See paragraph 31. THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER MALPASS MONDAY 31 JULY 2000 12479 of 1999 EQUITILOAN SECURITIES PTY LIMITED v DOMINION ESTATES PTY LIMITED JUDGMENT 1 Mr McIvor is a solicitor who is involved in a number of related companies (including the plaintiff). Mr Voss is a company director who is also involved in a number of related companies (including the defendant). 2 There was a loan agreement between the parties. On 12 May 1997, the defendant gave the plaintiff a mortgage (the mortgage has been registered under the Real Property Act 1900). It contained what is known as an all moneys clause. It was given to secure moneys to be advanced pursuant to the loan agreement. Moneys were advanced pursuant to the loan agreement. The moneys were repaid. 3 As it was contemplated that there may be further borrowing, the mortgage was not discharged. An arrangement was made to advance the sum of $500,000 on security then held by the plaintiff. 4 It is the defendant's case that subsequently Mr McIvor had informed it that only $200,000 was available. In May 1998, there was in fact an advance of $200,000. It was to be repayable on 13 May 1999. 5 There is no challenge to the mortgage itself and to the fact that the advance of $200,000 is secured by the mortgage. This sum and the interest thereon has not been repaid. Accordingly it is not in dispute that to this extent there has been default under the mortgage which entitles the plaintiff to possession of the secured property. 6 The plaintiff contends that there were further advances made thereafter to the defendant (which brought the total of the sums advanced up to $500,000) and that these advances were also secured by the mortgage (there is writing from McIvor companies relating to these advances). The defendant takes the stance of challenging that contention. It was said that the plaintiff had conflated its claim. 7 Statutory demands have been made (inter alia in May 1999, a notice pursuant to s 57 (2) (b) of the Real Property Act 1900 was served on the defendant). Subsequent to the May 1999 demand, there was a purported execution of a Deed of Cross-Collateralisation. There was non payment of principal and interest. It appears that the relationship had become a heated one. 8 These proceedings were commenced by Statement of Claim filed on 13 October 1999. It was served on 21 October 1999. This process inter alia pleaded the mortgage and made a claim for possession of the secured property (a property known as Lot 2 Mountain Top Road, Georgica). 9 A Notice of Appearance was filed on 23 November 1999. There was a request for particulars. There was a forwarding of particulars and dispute as to their sufficiency. A draft unverified defence was provided (it differs from the stance now taken by the defendant). Default Judgment was entered on 19 January 2000. A Writ of Possession issued on 23 February 2000. 10 The defendant has filed two Notices of Motion. One was filed on 23 March 2000. It seeks inter alia a setting aside of the Default Judgment. The other was filed in court on the same day. It seeks leave to file a Cross-Claim. The proposed Cross-claim seeks to propound what has been called a redemption suit. 11 Subsequent to the obtaining of the Default Judgment, the defendant has made what has been described as either an offer to pay or a tender of what it believes to be due to the plaintiff (the advance of $200,000 together with interest thereon). This may be found in an affidavit sworn by Mr Voss. 12 A temporary stay has been granted. The Notices of Motion were heard on 18 July 2000. A number of affidavits have been read (including the affidavits sworn by Messrs McIvor and Voss). There has not been any cross-examination. 13 The court has a discretionary power to grant any of the relief sought by the defendant. It is exercised having regard to the relevant circumstances of the particular case before the court and so that justice is best served between the parties. The applicant bears the onus of satisfying the court of an entitlement to relief. 14 The evidence reveals an abundance of material. In this judgment, I have not sought to exhaustively record all of the relevant material. 15 Although there is a formidable body of material, the observation may be made that the evidence is in many respects less than satisfactory. There was much that was inadmissible in the affidavits (their reading was a protracted process). The contention of the defendant is that it has an arguable case in respect of the subsequent advances. Largely, it has not taken the course of seeking to adduce positive material which evidenced the facts and circumstances in relation to each of those advances. It has taken the approach that the entitlement of the plaintiff to recover these advances against the defendant pursuant to the security depends on the documentary material. It has embarked on a detailed and laborious analysis of this material for the purpose of throwing up confusion and doubt in relation to such entitlement. 16 The content of the documentation is such that it has a potential to generate a degree of confusion (inter alia as to the identity of the relevant parties and security). 17 For the purposes of deciding the present application, it is unnecessary to grapple with the detail of what was thrown up as a result of the exercise. Indeed, it seems to me, that it is unnecessary to express any view upon it. The plaintiff has submitted that the approach taken by the defendant is lacking in candour. It suffices to say that there seems to be force in this submission. If contrary to what I have said, there is a need to express a view, it can be said that I am not satisfied that the exercise (together with all other relevant material) demonstrates a bona fide challenge to the plaintiff's case on these matters. The court is not dealing with a summary judgment application and the plaintiff does not bear an onus to demonstrate that there is no triable issue. 18 The Statement of Claim does have some pleading shortcomings. In my view, there would be a lack of utility in setting aside the judgment and requiring the plaintiff to re-plead its case. 19 It propounds only a claim for possession of the property. There is no claim for a monetary judgment. Subject to what comfort the defendant can obtain from the questions of redemption, the defendant has no answer to the claim for possession. 20 The relevant law on these questions, as it presently stands, has its vagaries and the authorities provide limited guidance. The authorities suggest that there is a right to redeem in the sense of a right to pay off the debt and have the encumbrance removed from the register. It appears that this right continues, notwithstanding default, until the mortgagee purporting to exercise power of sale enters into a contract of sale with the purchaser. Where the mortgagee refuses either to accept a tender of the mortgage money or to execute an instrument of discharge, the mortgagor must look to process. Under the general law, the procedure was by way of redemption suit. It has been suggested that under the Torrens System the mortgagor would be entitled to institute an action asking for the taking of the accounts and for an order to compel performance by the mortgagee (Sykes, The Law of Securities (Fifth Edition) ). 21 The defendant contends that its moving of the court for a redemption suit and accounts (together with what it refers to as a tender of the amount which the mortgagor believes is truly secured) disentitles the plaintiff to either have the judgment in possession or to enforce that judgment until inter alia the accounts are taken. 22 In the circumstances of this case, I am not satisfied that this contention is supported either by the evidence or the law as it presently stands. Accordingly, I do not accept that contention. 23 The authorities suggest that there are essential features to the redemption process. I shall mention some of them. The entitlement arises out of payment. It is to be payment of what is due under the mortgage. A mortgagor seeking redemption is in the field of conscience (in seeking equity, the mortgagor must do equity). A tender does not extinguish the mortgage debt, but has certain consequences (inter alia in relation to costs). 24 The matter of a redemption was not raised until after the Default Judgment was obtained. The defendant has since that time only made an offer to repay what it says that it believes to be owing under the mortgage (the sum of $200,000 together with the interest that is due thereon). There has been no tender of the undisputed indebtedness. There has not been an offer to pay what may be held to be secured by the mortgage. 25 There were two discretionary considerations agitated by the parties in relation to the application to set aside the Default Judgment. 26 There was the question of whether or not the defendant had a bona fide defence on the merits to the plaintiff's claim. In my view, it has been unsuccessful on this issue. The throwing up of some doubt as to the facts and circumstances in relation to the subsequent advances does not help the defendant in this case. There is undisputed default under the security which gives rise to an entitlement to possession of the property. The relief sought is discretionary. In the circumstances of this case, I am not satisfied that the regularly entered judgment should now be disturbed because the defendant inter alia subsequently expresses a desire to propound a redemption suit and makes an offer to pay what it says it believes to be due under the mortgage. 27 The second question was that of the default. There seems to have been some animosity between the parties and the period of default was not of any great length. In my view, it would not have been such as to impede the setting aside of the judgment if there had been a bona fide defence on the merits. 28 I now turn to the two other areas of relief sought by the defendant. Firstly, the defendant seeks a continuation of the existing stay. Secondly, the defendant seeks leave to file the Cross-claim. 29 A claim for redemption is a matter which is usually sought in and dealt with by the Equity Division of this Court. It exercises what may be described as specialist jurisdiction in matters such as the taking of an account. Largely, the proceedings brought in this Division have served their function. In the circumstances of this case, I am not satisfied that leave should be granted to the defendant to agitate its proposed claim by way of Cross-claim in the present proceedings. If it does wish to pursue that matter, it remains open to it to commence the appropriate proceedings in the Equity Division. 30 Further, in the circumstances of this case, I am not satisfied that the defendant is presently entitled to a continuation of the stay. It remains open to the defendant to make such further application as it may be advised (including in the Equity Division) should there be a relevant change in circumstances. 31 The Notices of Motion are dismissed. The defendant is to pay the costs of the Notices of Motion. The Exhibits may be returned. ********** Last Modified: 09/26/2000 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.