New South Wales Court of Appeal CITATION: Golden Oceans (NSW) Pty Ltd v Evewall Pty Ltd [2009] NSWCA 366 HEARING DATE(S): 6/11/09 JUDGMENT OF: Young JA EX TEMPORE JUDGMENT DATE: 6 November 2009 DECISION: Appeal dismissed with indemnity costs. CATCHWORDS: PROCEDURE - costs- appeal abandoned- when indemnity costs granted. - MORTGAGES - mortgages and charges generally- the mortgage- quaere whether undertaking given to court to grant second mortgage in stay of proceedings creates an equitable charge over property the subject of the stay until second mortgage granted. Golden Oceans (NSW) Pty Limited (First Appellant) PARTIES: Glenn Raymond Carroll (Second Appellant) Michelle Anne Carroll (Third Appellant) Evewall Pty Ltd (Respondent) FILE NUMBER(S): CA 40330/09 COUNSEL: A L Connolly (Appellants) J Oakley (Respondent) SOLICITORS: Trisley Lawyers (Appellants) Robert King (Respondent) LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC 2511/09 LOWER COURT JUDICIAL OFFICER: Rein J LOWER COURT DATE OF DECISION: 13 July 2009 LOWER COURT MEDIUM NEUTRAL CITATION: Golden Oceans (NSW) Pty Ltd v Evewall Pty Ltd [2009] NSWSC 674 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40330/09 YOUNG JA Friday 6 November 2009 GOLDEN OCEANS (NSW) PTY LTD v EVEWALL PTY LTD Judgment 1 HIS HONOUR: This is an appeal from a decision of his Honour Justice Rein in a conveyancing case. The proceedings before his Honour were a purchaser's suit for specific performance, but there was also a cross-claim that the relevant contract had been validly terminated and the deposit forfeited. The judge decided in favour of the vendor on the cross-claim, made the appropriate declaration and ordered that certain monies being the balance of the deposit be paid. 2 The purchaser appealed, and in aid of the appeal, moved a single judge of appeal for a stay. 3 On 21 September 2009 Tobias JA granted a stay upon terms that the second and third appellants (they being individuals who are the shareholders of the first corporate appellant) by the 28 September 2009 grant second mortgages to the respondent in registrable form over two properties at Wallalong to secure the amounts payable under Rein J's orders as well as $25,000 security for the costs of the appeal. He also noted the undertaking of the appellants to the court to make immediate application to the first mortgagee for consent. 4 The first mortgagee appears to have been asked to give at least some sort of consent within about a month. Nothing hinges on that. 5 However, the proposed second mortgages were never given. The reason why the second mortgages were never given was that a company, GKQ Mortgages Pty Ltd filed, a caveat on 17 September 2009 claiming that it had an unregistered mortgage bearing date 18 August 2009 over the properties. 6 It is common ground that the appellant had granted some form of mortgage over property at Booral and a caveat was put on by GKQ Mortgages on 19 June 2009 to protect what they claimed to be an unregistered mortgage of 18 August 2009. It would seem, that default was made under that mortgage and a consequence of that default was that a sleeping charge or mortgage over all other properties of the mortgagor was activated and that this is how it came about, that GKQ has a mortgage over the properties referred to by Tobias JA. 7 I do not have the sufficient paperwork to be able to rule on whether that claim has validity or not, nor have I got sufficient information to consider whether, when a party applies to the court for a stay and accepts it on the terms that it will grant a second mortgage, that of itself, grants an equitable charge over the property the subject of the stay up until the time the second mortgage is actually granted. I suspect that might be the case but it has not been fully argued today. 8 Thursday last week or earlier this week, the Registry was informed that the appellants would be discontinuing the appeal and willing to consent to an order for costs. Today, Ms Oakley of counsel for the respondent claims indemnity costs. She says that there are two reasons for this: one is that the court was misled when the stay was granted because there was no capacity to give those second mortgages. Secondly, that the appeal has been abandoned and, impliedly, she said it was hopeless. Mr Connolly of counsel who appeared for the appellants resisted that. 9 So far as the first aspect of the claim for indemnity costs is concerned I permitted to be filed and have read an affidavit of Mr Robert King, solicitor, of 6 November 2009 which annexes the correspondence between the solicitors since the stay was granted by Tobias JA. 10 The claim that a party has misled the court is a really serious one and the court is unlikely to make such a finding apart from clear evidence. The circumstances of the GKQ mortgage make me reluctant to find that the appellants deliberately misled the court as I can understand how people might not realise the effects of a clause in a mortgage which allows the mortgagee, on default, to come into possession of a mortgagor charge against all other property owned by the mortgagor. Accordingly, I cannot bring myself to find that there was a deliberate misleading of the court. 11 However, the stay application was on a false basis no matter whose fault it was. It should not have succeeded. It has held up the disposal of the property for a short period of time and I think the proper order is that the appellants should pay the respondent's costs of that motion for stay on an indemnity basis. 12 However, so far as the appeal itself is concerned, the mere fact that it has been abandoned in the last week does not, of itself, mean that it would be appropriate for indemnity costs to be ordered. 13 It would seem that the principal argument on the appeal would have been that where a notice to complete gives the opponent until 20 February 2009 to complete, making time of the essence, and that time goes by without a multi-party agreement to extension but the person giving the notice to complete indicates that it will extend it for four days, that the time has ceased to be of the essence. It seems to me that that is not a very strong argument but, it is one that will succeed or not succeed depending on all the circumstances you have. 14 There was dispute before the trial judge as to whether the parties extended the time for completion of the contract to 10 April 2009 and on that issue of fact the trial judge accepted the respondent's evidence that it was not. However, there is no doubt at all that in the period of 20 to 24 February 2009 there were continued negotiations between the parties and that in the ultimate, the respondent gave notice that it would give until 27 February before it issued a notice of termination. It seems to me that the odds are that it would be very difficult indeed for the appellants to show that the making of time of the essence by the vendor had ceased so that it had to issue a completely new notice to complete or was intent that there be settlement in a reasonable time. The facts found by the learned primary judge seem to me to indicate that he was satisfied that time was still of the essence. 15 Accordingly, in all the circumstances, that being the only substantial ground of appeal that was going to be pressed that, coupled with the abandonment of the appeal, the appeal was sufficiently hopeless that there should be a general order that the appellants pay the respondent's costs on an indemnity basis. 16 Accordingly, the appeal is dismissed with indemnity 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.