New South Wales Supreme Court CITATION : Robina Ann Edwards & Another v Tillers Forge Pty Limited [2007] NSWSC 96 HEARING DATE(S) : 13 February 2007 JUDGMENT DATE : 20 February 2007 JUDGMENT OF : Barr J at 1 DECISION : 1. Direct the entry of a verdict and judgment for the plaintiffs against the defendant in the sum of $73,450.00. 2. Order that the plaintiffs have judgment for possession of the land described in Folio 1/306994 and known as 78 Adams Street Narrandera. 3. Grant leave to the plaintiffs to issue a writ of possession forthwith.4. Order the defendant to pay the plaintiffs' costs. PARTIES : Robina Ann Edwards, Austin John Russell, Tillers Forge Pty Limited FILE NUMBER(S) : SC 12941/2002 COUNSEL : M J Gollan N/A (In person) SOLICITORS : Lee & Lyons Lawyers N/A (In person) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION GRAHAM BARR J 20 FEBRUARY 2007 12941/2002 ROBINA ANN EDWARDS & ANOTHER v TILLERS FORGE PTY LIMITED JUDGMENT 1 HIS HONOUR: The plaintiffs, Robina Ann Edwards and Austin John Russell, seek orders against the defendant, Tillers Forge Pty Limited, granting them possession of certain land and orders for the payment of monies and interest thereon pursuant to a mortgage. The plaintiffs are executors of the estate of the late Ann Lillian Telford, who died on 7 December 1999. On 2 December 1998 the defendant granted to Mrs Telford a mortgage over the property described in Folio 1/306994 known as 78 Adams Street Narrandera (the land). The defendant mortgagor's common seal was affixed to the mortgage and Mr Maurice Anthony Russell (Mr Russell) signed it, describing himself as the sole director. By annexure A to the mortgage, the mortgagor, using a common form of words, irrevocably appointed the mortgagee its attorney following upon any breach or default and made certain covenants, all expressly in consideration of $50,000.00. 2 The Statement of Claim was filed on 29 October 2002. It was drafted by a legal practitioner and its intention and meaning were clear. The Defence was not filed until 13 May 2005, after the conclusion of protracted proceedings during which default judgment was set aside. It was prepared, I think, by Mr Russell, who represented the defendant throughout. He is not a legal practitioner. The meaning of the Defence was far from clear at the hearing. Following explanation by Mr Russell, I permitted him to conduct his case informally and in a manner intended to prove the case he wished to put, even though that was not a case he had pleaded. I would grant leave to amend the Defence accordingly. 3 By paras 1, 3 and 4 of the Statement of Claim the plaintiffs pleaded the death of Mrs Telford, and the grant to them of probate of her will and asserted that the defendant was the registered proprietor of the land. The Defence admitted those assertions. 4 By para 5 of the Statement of Claim the plaintiffs pleaded the grant by the defendant of the mortgage. The Defence was as follows - Item 5 denies the amount. The correct Amount was originally $40,000 The balance of $10,000 was never paid to the defendant 5 By paras 6 and 7 of the Statement of Claim the plaintiffs pleaded the provisions of memorandum No Q860000 as annexure A to the mortgage and a covenant to repay Mrs Telford the principal amount, or so much of it as remained unpaid, on 31 October 2006 or, in the event of her earlier death, within six months after her death, and in the meantime by monthly instalments of $500.00, commencing on 31 July 1998. By a second paragraph numbered 7 the plaintiffs pleaded the provisions of annexure A for the payment of interest. 6 The only Defence response to these paragraphs was as follows - Item 6 – the defendant does not have annexure A Item 7: agrees that interest is owed on the Unpaid portion of the loan – namely $6.250,00 7 By para 8 of the Statement of Claim the plaintiffs pleaded the provision in cl 6 of annexure A granting Mrs Telford the liberty to exercise the powers of a mortgagee upon default. The response was as follows - 8 Denied 8 Paras 9 and 10 of the Statement of Claim were as follows - 9. The defendant: (a) has not paid monthly instalments of principal and interest between 31 July 1998 and the expiration of the six month period after the death of Ann Lillian Telford; and (b) has not paid the Principal Amount within six months of Ann Lillian Telford's death. 10. In the premises, the defendant is in breach of the Mortgage. 9 The Defence was as follows - 9.a. The defendant has paid monthly instalments to the value of $33,750 b, these instalments were paid before her death 10, The defendant is only in breach for the unpaid amount of $6,500 10 By para 12 the plaintiffs pleaded that the defendant had not repaid the principal amount or interest owed under the mortgage. The response was as follows - 12; The defendant has paid the amount of $33,750 but no interest on the balance 11 By para 13 of the Statement of Claim the plaintiffs pleaded that they had consequently become entitled to bring proceedings for the possession of the land pursuant to s60 Real Property Act and to sell the land pursuant to s58 of the Act. 12 The response was - 13. agreed. 13 When he opened the defence case, Mr Russell informed the Court that the reference in the Defence to the original amount of $40,000.00 related not to any consideration for the mortgage pleaded in the Statement of Claim but to a mortgage granted in 1993, inconsequence of which Mrs Telford advanced the sum of $40,000.00. That sum, he asserted, had been repaid. That statement was at odds with para 5 of the Defence as well as with the assertions in paras 9, 7 and 10 that instalments on the mortgage relied on by the plaintiffs had been paid to the value of $33,750.00, that the unpaid portion of that loan was $6,250.00 and that the defendant was in breach for the unpaid amount of $6,500.00. I informed Mr Russell that in view of the written acknowledgment of the defendant in the 1998 mortgage, which came into evidence without objection, I was likely to be unable to find that there was no consideration for the mortgage unless there was evidence to that effect. Mr Russell responded by reading portions of certain affidavits sworn by the two plaintiffs and by Elaine Russell, the wife of the second plaintiff, and filed by the plaintiffs. Despite my invitation, Mr Russell did not refer to any affidavit of his own. As will appear, none of the evidence adduced on behalf of the defendant supported Mr Russell's assertions that the $50,000.00 consideration referred to in the mortgage relied on by the plaintiffs did not exist. 14 On its face, the mortgage, exhibit B, records the defendant's obligation to repay $50,000.00 by the times I have summarised above. Interest is provided for at 7 per cent. There is no evidence or suggestion that any part of the principal or interest has been paid. The assertion, as I have said, is that there never was any $50,000.00. There is abundant evidence of payments of amounts of money totalling more than $33,000.00 made on behalf of Mr Russell or the defendant, but they all well precede the making of the mortgage relied upon by the plaintiffs. The plaintiffs have proved the service of all appropriate notices entitling them, as Mrs Telford's successors, to exercise the rights of a mortgagee upon default. 15 The relevant portions of the affidavits read by Mr Russell on behalf of the defendant are these. I will take first the affidavit of Austin John Russell, the second plaintiff. His references to his mother and to Elaine are to Mrs Telford and to his wife. 3. I am aware that an arrangement was affected in 1993 whereby the property known as 78 Adams Street, Narrandera was transferred by Maurice from his company to Stuart Russell with a mortgage entered in favour of my mother. This arrangement was entered because Maurice needed money to pay creditors and also was experiencing marriage difficulties. 4. In or around 1998 my mother gave my wife Elaine a large bundle of papers. I recall Elaine bringing them home. They were in a big box. I recall Elaine sorting out these papers. 5. The papers referred to in the preceding paragraph included various cheque book butts. I assisted Elaine in preparing a summary of the contents of these cheque book butts. Initially, we prepared a handwritten document in 4 columns identifying the cheque payments received by Robina, Maurice, Stuart, and myself. It was not possible to make a complete list as some of the entries in the cheque book butts only specified an amount or a name rather than a name and an amount and also some cheques book butts appeared to be missing. A true copy of this handwritten record is annexed hereto and marked with the letter "A". From the handwritten record Elaine prepared a typed version a true copy of same is annexed hereto and marked with the letter "B". 6. Approximately one week before the reading of my mother's will following her death on 7 December 1999 Maurice rang me and said to me words to the following effect "Would you consent to the mortgage held by mum to enable me to enter a fresh mortgage so as to use the property as collateral to start a new business venture?" This venture involved synthetic oils. I do not believe in second mortgages as a matter of principle and accordingly was unwilling to consent. I chose to simply not answer the question because I knew Maurice would be upset by my answer. 7. I recall that when my mother's will was read Elaine, Maurice, Robina and Stuart were with me at the office of Ian McGuire, solicitor. After we left the office Robina, Maurice, my wife Elaine and myself travelled together in a car back to Narrandera. Whilst we were travelling Maurice said to Robina and I words to the effect "Have you made a decision about the second mortgage?" I recall Robina and I replied in unison "No way". I recall that after we answered this question Maurice was very quiet. 8. About two weeks after the conversation was held in the car as referred to in the previous paragraph Maurice came to my house. I was at the compost heap. He approached me and said "Why won't you do it?" I replied words to the effect "I don't want to say". He then said "Tell me" I replied "I don't like the way you do business". 16 In her affidavit sworn on 5 May 2006 Elaine Russell said this - 3. In 1993 Ann Telford telephoned our house and I answered the phone and we had a conversation in which Ann said words to me to the following effect:- Ann: "I am considering lending Maurice money and as part of the loan I am considering transferring the property at 78 Adams Street to either John or Stuart". The next thing I knew was that the property had been put in Stuart's name. I cannot recall whether it was Ann Telford or John who told me about this. … 6. In or around 1998 Ann asked me to assist her to put her papers in order. She gave me a large box of papers which appeared to be those from her desk. I took these home with me to sort them out. 7. I started sorting out these papers by dividing them into three bundles. There was a bundle for her husband Harry, a bundle for her husband and his brother George and a bundle for her. 8. Amongst Ann's papers were a number of cheque books. I prepared a handwritten list from these cheque books of the monies received by each of her children with some assistance from my husband, John. 9. Shortly after I prepared this list a discussion was held between Maurice, John, Stuart and Robina in Deniliquin to the following effect:- John: "Elaine has prepared a list of all monies we have each received from mum". Maurice: "Why don't we all pay back the amounts we have each received?" John: "If we did that Maurice you would have more money to repay than anyone else". 10. In order to compile the list I took a number of steps. Firstly, I put the cheque books in chronological order. Then I entered each cheque book entry which contained a name and an amount onto a page containing 4 columns, being a column for each child. This was a handwritten document. A true copy of same is annexed hereto and marked with the letter "A". From the handwritten document being annexure "A" to this affidavit I prepared a typed version of the list. A true copy of the typed version is annexed hereto and marked with the letter "B". 11. I attended Leeton at the time my husband, Maurice, Stuart and Robina attended the office of Ian McGuire for the purpose of reading Ann's Will. I was not present when the Will was read. After the Will had been read my husband John, Robina, Maurice and I travelled in a car from his office. I recall that during the course of this trip Maurice said to Robina and John words to the effect "Are you going to allow me the second mortgage?" John ad Robina replied together "No way". After John and Robina answered Maurice's question he was quiet. 12. I recall that a short time after we attended the reading of the will Maurice visited our house. John was at the compost heap. Maurice did not come inside. He parked his car on our property and approached John at the compost heap. A very short time later I saw him return to his car and speed away. John explained to me later that Maurice had asked him again about the mortgage and pressed him for an explanation as to why he would not agree to the proposal. John told me he had told Maurice he did not like the way he did business and that Maurice left as soon as he said this. 17 In her affidavit sworn on 8 May 2006 the first plaintiff, Robina Edwards, said this - 3. As at 1993 I was aware that an arrangement had been entered between my two brothers Maurice and Stuart and my mother whereby Stuart had acquired from Maurice ownership of a property known as 78 Adams Street, Narrandera and a mortgage was held by my mother in respect of the property. I understood in 1993 that this arrangement was entered because my brother Maurice was experiencing marriage and financial difficulties and was concerned to ensure he was not in possession of the property to avoid it being taken by his creditors or lost in any property settlement entered with his wife in the event of their separation. Consistent with my understanding I recall Maurice separated from his wife in or around 1994. 4. I am aware that my mother frequently gave money to my brothers Maurice and Stuart in the years before and after 1993. My mother never told me how much money she gave them. I did at various times see her giving cash to Stuart. As far as I was concerned it was my mother's prerogative to give money to her children as she saw fit. 5. I recall that in 1984 I asked my mother if I could borrow money to assist me in purchasing a property. My mother told me at that time she wasn't able to assist me because she had given all her available money to Maurice to buy a property in Queensland. 6. In 1987 I borrowed the sum of $2,500.00 from my mother. As the time I borrowed this money she gave me a deposit book and we settled an arrangement whereby I made regular deposits into a specific account using the deposit book. I honoured this arrangement and repaid the money in this manner. 7. I recall that during a conversation in or around 1993 my mother said to me words to the effect "I have paid for some fence work and a new kitchen to be installed at 78 Adams Street, Narrandera". I recall that I visited Maurice's wife Lorraine at 78 Adams Street shortly after the kitchen was installed. I remember discussing the kitchen with her and making comments as to how it may have been done differently. I saw the new fence work at this time. 8. When my mother fell ill in 1996 I assumed control of her business affairs. A power of attorney was executed by her in my favour. At that stage she had over $40,000.00 in a cheque account. I understood my mother had taken this sum from a fixed deposit to give to me. I don't know why my mother did this. I think it may have been because we had spoken about me buying a property. I did not take the money. I arranged for it to be placed in a fixed deposit account. 9. I have no knowledge of the rental arrangements entered in relation to Maurice's occupation of 78 Adams Street, Narrandera. At no time did I ever discuss this issue with his wife Lorraine. 10. I had a discussion with Maurice in 1996 at the house of his then girlfriend Kerry Foster at 21 Whitton Street, Narrandera. I have a specific recollection of our conversation. During the course of the same I said to him "I have been given a power of attorney by our mother. She has asked me to manage her affairs. What is happening about repayment of the monies she lent to you under the mortgage for 78 Adams Street?" Maurice replied "Nothing". I replied "How about we open a bank account and pay you money into that account?" Maurice replied "Good idea". This arrangement was never put in place. 11. Before and after March 1997 discussions were held between Maurice, Stuart, my mother and myself in relation to Maurice's wish to assume ownership of 78 Adams Street. It seemed clear to me that Maurice had sought to lose ownership of the property whilst he settled his debts and finalised his separation from his wife and that he wished at this time to take ownership of the property again because these matters had been resolved. A number of alternatives were discussed. Stuart was unwilling to transfer the property to Maurice. I recall there were tax issues discussed although I cannot recall specifics. I am aware there were lengthy discussions held at the time the mortgage was entered and that Maurice was legally represented throughout these discussions. 12. Shortly following the death of my mother on 7 December 1999 her Will was read at the office of Ian McGuire, solicitor. After the Will was read my brother John, his wife Elaine, Maurice and myself drove back from the meeting together. We had a conversation in the car in relation to a proposal Maurice had made that a second mortgage be entered by him in respect of the property to enable him to use 78 Adams Street as collateral in starting a new business venture. Maurice said to John and I in the car words to the effect "Have you made a decision about the second mortgage, are you willing to let me take it out?" John and I replied in unison "No way". After John and I answered Maurice's question he was very quiet for the rest of the trip. 18 As Mrs Edwards deposed, during the time leading up to the execution of the 1998 mortgage Mr Russell wished to become registered proprietor of the land. The family members talked about that. At those times Mr Russell or the defendant (and I think that there is no relevant difference between those two interests for present purposes) was represented by a solicitor. There are two further pieces of evidence. The solicitor acting for Mrs Telford on the 1998 mortgage was Mr Ian Maguire of Leeton. On 16 March 1999 Mr Maguire wrote to Ms Hagedoorn, a solicitor in the firm Cater & Blumer of Leeton, a letter enclosing a copy of the certificate of title and the mortgage of the land which had been received after registration. The certificate of title showed that the land had been transferred to the defendant. On 17 March 1999, in a letter headed Dispute over Adams Street property, Ms Hagedoorn wrote a letter to Mr Russell, Tillers Forge Pty Limited, confirming that the certificate of title had been registered in the company's name and that the mortgage to Mrs Telford had been registered. 19 Far from supporting Mr Russell's assertion on behalf of the defendant that there was no consideration for the 1998 mortgage, the totality of this evidence shows that there was an arrangement within Mrs Telford family intended to take account of moneys or benefits received from time to time by the several children of the family and that in consequence those matters the land was transferred to the defendant and the mortgage executed. Mr Russell had legal advice and entered into the arrangement with his eyes open. There is no evidence to support the submission that the $50,000.00 consideration did not exist and every reason to think that that figure represented Mrs Telford's assessment of the sum for which Mr Russell or the defendant were indebted to her on account of the transfer of the land and otherwise. 20 Mr Russell referred in submissions to passages in the affidavits of Austin John Russell, Elaine Russell and Robina Edwards about a conversation that took place not long after Mrs Telford's death in which Mr Russell asked for consent to the discharge of the mortgage held by Mrs Telford to enable him to enter a fresh mortgage for business purposes. He submitted that the references to a "second mortgage" should not bear their ordinary meaning but referred to the 1998 mortgage. It was described as the "second" mortgage because there was a "first" mortgage, made in 1993 and since discharged. What the family were agreeing to, therefore, was the setting aside of the 1998 mortgage to enable Mr Russell to borrow the $50,000.00 elsewhere. 21 I do not think that that is a sensible construction of what the speakers said. The evidence of Austin John Russell that he did not believe in second mortgages as a matter of principle can sensibly refer only to a second mortgage properly so-called, existing concurrently with and taking precedence after a first mortgage. In my opinion the effect of the evidence is that Mr Russell was asking for further accommodation, which the members of the family were not prepared to extend to him. It supports, rather than undermines, the plaintiffs' case that the 1998 mortgage stood for $50,000.00 consideration. 22 The plaintiffs have not asked for interest provided for in the Rules but only at the rate provided for by the mortgage. Interest so calculated to 13 February 2007 totals $23,450.00. 23 I make the following orders - 1. Direct the entry of a verdict and judgment for the plaintiffs against the defendant in the sum of $73,450.00. 2. Order that the plaintiffs have judgment for possession of the land described in Folio 1/306994 and known as 78 Adams Street Narrandera. 3. Grant leave to the plaintiffs to issue a writ of possession forthwith. 4. Order the defendant to pay the plaintiffs' costs. ************* 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.