Reported Decision : (2003) NSW ConvR 56-049 New South Wales Supreme Court CITATION : Permanent Trustee Australia Ltd & Anor v Akbarian & Ors [2002] NSWSC 385 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1217/02 HEARING DATE(S) : 2 May 2002 JUDGMENT DATE : 2 May 2002 Permanent Trustee Australia Ltd Challenger Managed Investments Ltd PARTIES : Mohsen Akbarian Sima Akbarian Arash & Arezu Pty Ltd JUDGMENT OF : Davies AJ at 1 COUNSEL : Mr P Walsh for the Plaintiffs The First Defendant in person, and representing the Second and Third Defendants SOLICITORS : Sunman & Walker Solicitors for the Plaintiffs The First Defendant in person, and representing the Second and Third Defendants CATCHWORDS : Mortgage - where loan agreement required defendants as mortgagors to take all necessary steps to provide the second plaintiff with a registered first mortgage - whether defendants required to execute a postponement of mortgage DECISION : See paragraphs 16-19 and 21 of the judgment. - 4 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Davies AJ Thursday, 2 May 2002 1217 / 02 Permanent Trustee Australia Ltd & Anor v Akbarian & Ors Judgment 1 His Honour: In these proceedings the first plaintiff, Permanent Trustee Australia Limited ("Permanent Trustee"), acts as a mortgagee of properties in relation to loans made by the second plaintiff, Challenger Managed Investments Limited ("Challenger"), a financier. 2 The first and second defendants, Mohsen and Sima Akbarian, desired to borrow monies from Challenger. At the time, the land which was to be the subject of the security, 35 Lancaster Avenue, St Ives, which was the home of Mr and Mrs Akbarian, was mortgaged first to the State Bank of New South Wales Limited ("the State Bank") and, secondly, to the third defendant, Arash & Arezu Pty Limited, which is the family company of Mr and Mrs Akbarian. Mr and Mrs Akbarian are the directors and shareholders of that company which has its registered office at their home. 3 It was the intention of the parties that the monies lent would, inter alia, pay out the State Bank of New South Wales and that Permanent Trustee would become the first mortgagee in place of the State Bank. 4 The loan agreement provided that the security would be a registered first mortgage over the freehold property at 35 Lancaster Avenue, St Ives. The deed of loan provided for "a registrable, stamped, first ranking real property mortgage over the Property". 5 On settlement, the parties on both sides took all steps that they considered necessary to achieve that result. The company, Arash & Arezu Pty Limited, executed a document in the form: "We hereby consent to the registration of 1st mortgage of 35 Lancaster Avenue, St Ives, Sydney, New South Wales, 2075 in the name of Permanent Trustee Limited." 6 Documents were lodged in the Land Titles Office. The Registrar General advised that he considered that, although by the above document Arash & Arezu Pty Limited consented to the registration of the first mortgage to Permanent Trustee, it did not address the issue of postponing the registered mortgage held by it in favour of the registered mortgage held by Permanent Trustee. What should have been done at the time of settlement is that a document, entitled "Postponement of Mortgage", form 97-05PM, should have been executed by Arash & Arezu Pty Limited, and that document should have been lodged for registration with the mortgage. As it was not lodged, the mortgages were registered on the title so that Arash & Arezu Pty Limited held the first mortgage and Permanent Trustee held a second mortgage. 7 The plaintiffs' solicitor then requested Mr Akbarian, who is appearing today for the three defendants and who appears to have been the spokesman for them in dealings with the plaintiffs, to execute such a postponement of mortgage. I do not propose to discuss the history of the correspondence that passed between the parties. The postponement of mortgage was not executed. 8 These proceedings were instituted on 23 January of this year and have come on for hearing today. What is sought is an order for specific performance of an agreement, the effect of which would be that the borrowers, Mr and Mrs Akbarian, would be obliged to take all steps necessary on their part to be taken to achieve for the plaintiffs the position that they agreed it would be in, namely that Permanent Trustee would hold a registered first mortgagee over the land. 9 I see no defence to the plaintiffs' claim. Mr Akbarian has raised a number of points. One was that the problem did not arise through his fault or on the part of Arash & Arezu Pty Limited; it arose because the solicitor for the plaintiffs asked that the wrong form be executed. It is agreed that the matter arose in the first instance from the failure of the solicitor for the plaintiffs to supply the form which the Land Titles Office required, but that is not a defence to these proceedings. Although the issue did not arise from a problem caused by the defendants, the defendants are obliged under the agreement to do whatever is necessary to ensure that the agreement is carried out. The terms agreed upon in their deed of loan are quite explicit, namely, Permanent Trustee is to have a registered first mortgage. 10 Mr and Mrs Akbarian were at all times obliged to do all things that were necessary on their part to ensure that that position came about. They were obliged to ensure, when asked to do so, that Arash & Arezu Pty Limited executed the postponement of mortgage in proper form. 11 Mr Akbarian also raised issues relating to penalty interest and legal costs. He wrote letters requiring undertakings that no penalty interest and legal costs would be sought. 12 I have not read through the whole of the correspondence, but it seems to me that the problem has really arisen from the failure of the defendants promptly to provide a postponement of mortgage when it was first requested. That would have been before the time when any questions of legal costs or penalty interest arose. 13 Unfortunately, there were other issues at the time between the parties and, although they were subsequently resolved, this present dispute remains as a result. I consider that it was unfortunate that the point of penalty interest was ever raised in relation to the postponement of mortgage. As I understand it, Mr Walsh, counsel for the plaintiffs, has indicated that any penalty interest arising out of the failure to provide the postponement will be waived. That is appropriate notwithstanding that there may have been an entitlement to penalty interest. 14 As to legal costs, it is not clear to me precisely what were the legal costs of which the parties were speaking. The only costs which are sought in relation to this matter are the costs of these proceedings that were instituted in January 2002. It seems to me that what will happen with respect to those costs will depend upon the orders made. 15 Accordingly, I am satisfied that the plaintiffs are entitled to relief. Although I am satisfied that the plaintiff is entitled to orders, it seems to me that it is not necessary to make all the orders contained in the summons. 16 I make the first declaration set out in paragraph 1 of the summons, namely the declaration that the first and second plaintiffs are entitled to have the loan agreement between the first and second plaintiffs and the first and second defendants dated 21 November 2000 specifically performed and carried into execution. 17 I consider that an order should be made in terms of paragraph 2 of the summons, with a slight addition. I will order that the first and second defendants specifically perform and carry into execution the said loan agreement and, in particular, all things necessary to be done on their part to be done to cause the first plaintiff to obtain a registered first mortgage over the property, 35 Lancaster Avenue, St Ives, New South Wales, being the land in folio identifier 2/500153, including causing the third defendant Arash & Arezu Pty Limited to execute a postponement of mortgage in due form so as to enable the first plaintiff to become a first registered mortgagee. 18 The plaintiffs are entitled to an order in the form of paragraph 3 of the summons. I order that, in default of the first and second defendants complying with order 2, a Registrar of the court be empowered to execute all instruments and do all things in the name of the first and second defendants that may be necessary to specifically perform and carry into execution the said loan agreement. 19 I will reserve liberty to apply for any other order directed to Arash & Arezu Pty Limited as may seem meet if circumstances calling for the order arise. 20 On the question of the costs of the proceedings, there are things to be said for both sides and things written on both sides which, on reflection, should not have been written. Looking at it all, it seems to me that the proceedings were made necessary by the failure of Mr and Mrs Akbarian to ensure that the correct form of postponement of mortgage was executed when the plaintiffs requested that be done, and it is most unfortunate that, in the end, legal proceedings ensued as a result of that. But that, in effect, is what has eventuated. There does not seem to me to be any ground on which I should alter the ordinary order as to costs, namely, that the plaintiffs have their costs. 21 Accordingly, I shall order that the first and second defendants pay the plaintiffs' costs of the proceedings. -oOo- Last Modified: 05/08/2002 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.