Australian Executor Trustees v Tilley (No.1) [2012] NSWSC 1071

Supreme Court New South Wales

Medium Neutral Citation: Australian Executor Trustees v Tilley (No.1) [2012] NSWSC 1071 Hearing dates: 22/08/2012 Decision date: 22 August 2012 Jurisdiction: Common Law Before: Garling J Decision: Application for adjournment rejected Catchwords: PRACTICE AND PROCEDURE - application for adjournment - consideration of history - Civil Procedure Act 2005, ss 56 and 58 - dictates of justice - just quick and cheap resolution - not in interests of justice to adjourn Legislation Cited: Bankruptcy Act 1966 (Cth) Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 Category: Procedural and other rulings Parties: Australian Executor Trustees Ltd (P) Adam Thomas Tilley (D1) Benedict Thomas Tilley (D2) Simon Arthur Tilley (D3) Hunt Pacific Finance Pty Ltd (D4) Linkshore Pty Ltd (D5) Representation: Counsel: R Bellamy (P) P Moloney (D1, 3, 5) Solicitors: Gadens Lawyers (P) Moloney Lawyers (D1, 3, 5) File Number(s): 2011/113129

EX TEMPORE Judgment ON APPLICATION FOR ADJOURNMENT 1The plaintiff, Australian Executor Trustees Limited ("AET"), seeks orders by way of a notice of motion that judgment be entered in its favour for possession of identified land at Pyrmont. The first, third, and fifth defendants oppose the entry of judgment and seek to have the matter adjourned until 6 September 2012. This application for adjournment is opposed by the plaintiff. 2Proceedings by AET against five defendants, Mr Adam Tilley, Mr Benedict Tilley, Mr Simon Tilley, and two companies, Hunt Pacific Finance Pty Limited and Linkshore Pty Limited, were commenced by statement of claim on 6 April 2011. 3The statement of claim alleged that moneys had been advanced by the plaintiff which, by 9 February 2011, had not been repaid in accordance with the agreed schedule. Accordingly, the statement of claim pleaded that there had been default and that demand had been made upon the defendants both as principal borrowers and as guarantors for the entirety of the sum of money outstanding. 4As well, possession of the land was claimed. 5On 20 June 2011, a defence was filed. The defence put in issue the allegations and also, so far as the first defendant, Mr Adam Tilley, was concerned, pleaded that, on 9 December 2010, he signed an authority pursuant to section 188 of the Bankruptcy Act 1966 (Cth) and that the claim in the proceedings was subject to the authority which he had signed. 6A mediation occurred on 18 October 2011. That mediation resulted in an agreement. Initially the agreement was a handwritten one but that was replaced by a formal deed prepared by the plaintiff's solicitors. The Deed obliged the first, second, and third defendants, and also the fifth defendant, to pay AET a total of $1.1m in cleared funds or by bank cheque in two tranches. The first tranche was a payment on or before 14 March 2012 in a sum which was no less than $660,000, and the second tranche was a payment on or before 15 July 2012 of the remaining moneys up to the total sum of $1.1m. 7AET, at the time this Deed was entered into, held a registered first mortgage over the requisite land at Pyrmont. The Deed provided that upon payment of the first instalment, AET would provide a discharge of the mortgage over the Pyrmont property to the first, second and third defendants. The Deed further provided that AET was entitled to a second mortgage over the Pyrmont property which was to be unregistered and which was to be held pending the payment of the second instalment. 8The Deed further provided that the parties would enter into a consent judgment which would be held by AET and that the consent judgment would not be filed unless there was default under the Deed. If payments were made in accordance with the Deed then the consent judgment would be returned to the mortgagors. 9The Deed provided that, with respect to each of the payments of money, time was of the essence. Default was defined in the Deed in clause 5 in the following way: "If the Mortgagors and Linkshore do not make the Payment as required in clause 2.1 or if they do not provide the security specified in clause 3.1, the Mortgagors and Linkshore are in default of this Deed, and each of the mortgagors and Linkshore acknowledge and agree that the amount of the Payment that remains outstanding as at the date of the default under the Agreement will become immediately due and payable and [the plaintiff] will (a)... (b) be entitled to immediately file and enter Consent Judgment and proceed to enforce the Consent Judgment for the amount outstanding; (c) be entitled to immediately enforce any or all of its rights under the security provided in clause 3.1(b)." 10I should note that the security provided in clause 3.1(b) refers to the second unregistered mortgage over the Pyrmont property. 11In accordance with the agreement, or else substantially in accordance with it, the first payment or instalment was made on 16 March 2012 in the sum of $660,000. This was accepted as sufficient part performance of all of the obligations in the Deed of Settlement. At that time, AET provided to the first, second, third, and fifth defendants a discharge of mortgage in registrable form in respect of its then registered mortgage. The plaintiff also provided, at the direction of the first, second, third and fifth defendants, two original certificates of title for the Pyrmont property to a company Limenight Investments Pty Limited which had advanced moneys to the defendants to make the first payment. 12Limenight is a company of which one of the defendants, Mr Benedict Tilley, is the sole director. He is also the sole secretary of the company. He says that the company is beneficially owned by his wife, Mrs Tiffany Tilley. In any event, shortly after 16 March 2012 which was the date upon which the first instalment was paid, Mr Benedict Tilley caused the discharge of mortgage provided to Limenight Investments by the plaintiff to be lodged for registration. He made arrangements for the original certificates of title for the Pyrmont property to be obtained by that company or at least on its behalf. The company did not take any steps to register its mortgage. 13On 16 July 2012, which was the day after the second instalment was due to be paid by the defendants to AET, AET lodged a caveat over the Pyrmont property noting its interest under the unregistered mortgage. The caveat was lodged because moneys which were due to be paid in the second instalment, were not paid by 15 July 2012, and have not, as at today, been paid. 14On 25 July 2012, the lawyers for the defendants wrote to AET's solicitors in terms which included the following: "A recent title search of the property... reveals that your client lodged caveat number AH 112573 on 17 July, 2012... The first instalment was paid to your client on 16 March, 2012. On that day the registered proprietors of the Pyrmont property granted a mortgage to secure those moneys. The lodgement of your client's caveat now prevents the registration of that mortgage. In addition, the inability of that mortgage to be registered on the title in priority to your client's caveat places our clients in default of that mortgage." 15The letter asked for AET's written consent permitting the registration of the mortgage of Limenight Investments in priority to its mortgage and concluded that, "In the event that your client is unwilling to facilitate the registration of the mortgage in one of the two methods set out above, we apprehend proceedings will need to be commenced by the mortgagee seeking declarations with respect to priority." 16The matter came before me on 17 August 2012. It became clear to me in the course of the hearing on that day that the solicitors for AET had available a letter addressed to the relevant registration authorities noting that it consented to the registration of the mortgage of Limenight Investments. 17Accordingly, arrangements were made at that time between the parties at that time to hand over that letter of consent and so I am told, accordingly, the mortgage has been now lodged for registration. The proceedings were then stood over until 22 August 2012. 18On that day, an amended notice of motion was filed by AET. It sought orders which permitted the entry of the consent judgment which the parties had agreed at the mediation, and sought consequential orders relating to the enforcement of such judgment. As well, it sought an order that Limenight Investments Pty Limited be joined as a defendant to the proceedings. Limenight Investments was served with the proceedings on 21 August 2012, and Mr Moloney, solicitor for the defendants, informs me that Limenight does not oppose an order for its joinder but that he is unable to appear for it in the proceedings since he perceives that there may be a conflict between its interests and the interests of the other defendants for whom he acts. When the matter was called outside the court today there was no appearance by Limenight. 19Counsel for the AET seeks to proceed with the orders in the amended notice of motion. The effect of these orders would be to provide for the joinder of Limenight; to make orders for possession of the Pyrmont property in favour of the plaintiff; to order by way of enforcement that the plaintiff have leave to issue a writ of possession, and to order that the property be sold in such manner and on terms as the court may direct. Further orders were sought as to the way in which the property might be sold. 20The plaintiff sought to proceed with its motion pointing out that they were doing no more or less than they were entitled to do, by the agreement of the parties. The defendants sought an adjournment. In so doing they relied upon two affidavits: one of Mr Simon Tilley of 25 July 2012 and one of Mr Benedict Tilley sworn 21 August 2012. 21So far as the first of those affidavits is concerned, the terms of the Deed of Settlement and the arrangements for settlement are set out. The affidavit also notes that on 21 November 2011, each of the first, second and third defendants, who are the registered proprietors of the Pyrmont land, entered into a commercial lease with a company for a three-year period from 12 December 2011 until 11 June 2014 to lease the whole of the Pyrmont property. 22Mr Simon Tilley in his affidavit of 25 July 2012 in paragraph 28 asserts that the lodgement of the caveat by the plaintiff was a breach of the Settlement Deed. I am not persuaded that this is so. 23He further asserts that the fact that the caveat has been placed on the title puts him and his fellow registered proprietors in breach of the first mortgage which he had given to Limenight Investments. I have had a brief opportunity to look at the terms of that mortgage and in particular clause 11 which sets out events of default. No particular clause or part of that clause has been drawn to attention by Mr Simon Tilley in his affidavit and it is not immediately apparent to me why the conduct of the plaintiff would place the defendants in default of the mortgage. However, it perhaps does not need to be finally resolved. 24Mr Simon Tilley goes on to say, "I say that the plaintiff's conduct is preventing us from utilising funds from Limenight Investments Pty Ltd to pay the plaintiff the second instalment in the sum of $440,000.00. I say that we will be able to pay the second payment or instalment to the plaintiff pursuant to the Settlement Deed within 28 days of the Mortgage in favour of Limenight Investments Pty Ltd being registered in first priority." 25This affidavit suggests to me that Limenight Investments is in possession of funds which can be made available to the defendants for payment to the plaintiff. It does not suggest that there is any need for any further approval process before that is to occur. 26Mr Benedict Tilley has sworn an affidavit of 21 August 2012. In it he says, having referred to the payment of the first instalment, that although shortly after 16 March 2012 he caused the discharge of mortgage provided to Limenight to be lodged for registration he did not take steps to register Limenight's mortgage in respect of the Pyrmont property. "...I was expecting the Pyrmont property to be refinanced as part of a refinance transaction then being applied for by myself and the other defendants of which the Pyrmont property formed part. That transaction did not proceed." He goes on to say, "Upon not being able to procure finance approval involving the refinance of a number of properties including the Pyrmont property, I made enquiries with a view to the defendants borrowing the balance of $440,000 from Limenight Investments Pty Ltd. In addition, I caused steps to be taken to register the mortgage granted in favour of Limenight Investments Pty Ltd over the Pyrmont property. Limenight Investments Pty Ltd was unable to register its mortgage as a consequence of the lodgement of a caveat by the plaintiff..." He goes on to say, "In order for moneys to be lent to myself and the other defendants through Limenight Investments Pty Ltd that company itself must raise moneys from third parties. Limenight Investments Pty Ltd was unable to raise moneys which could be made available to myself and the other defendants to make the final payment to the plaintiff in the sum of $440,000 until such time as its mortgage was registered on the two certificates of title of the Pyrmont Property as a first ranking mortgage. I say that Limenight Investments Pty Ltd was unable to put in place funding which could be utilised by myself and the other defendants to pay the plaintiff the final payment in the sum of $440,000 until such time as the plaintiff allowed Limenight Investments Pty Ltd to register its mortgage on the title of the Pyrmont Property." 27He then calls attention to a letter of 21 August 2012 sent by Moloney Lawyers to AET's lawyers in which the following appears: "On the assumption that the mortgage granted in favour of Limenight Investments Pty Ltd as has occurred, our clients will be in a position to raise sufficient funds to repay the amount outstanding of $440,000. Our clients expect to be in a position to repay those moneys within the time frame originally discussed of 6 September, 2012. You will appreciate that estimate is much quicker than what was expected by Mr Simon Tilley when he swore his affidavit on 25 July, 2012." 28Mr Moloney's letter goes on to assert that his clients' position is that AET's refusal to permit them to register the mortgage granted to Limenight Investments, has hindered and prevented them from raising the funds necessary for making the second payment. 29 In support of the adjournment, Mr Moloney simply puts that an adjournment for a period of two weeks to enable the moneys to be paid is not unreasonable having regard to the failure between 25 July 2012 and 17 August 2012 of AET to hand over a document evidencing its consent to the registration of mortgage. 30Mr Bellamy, for AET, submits that the adjournment ought not be granted because there has really been no adequate explanation as to why the moneys have not been paid to date, and as to why it is that the moneys could not be paid or alternative arrangements made for the raising of the moneys could not be made prior to the obtaining of registration of the Limenight Investments mortgage. 31The adjournment of any matter that is properly before the Court is a matter of discretion. The Court is exercising a power under the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005 to deal with the progress of a matter. Section 58 of the Civil Procedure Act requires that the court must, in deciding whether to make any order granting an adjournment of proceedings, seek to act in accordance with the dictates of justice. Section 58(2) of the Civil Procedure Act sets out circumstances in which the court may determine what the dictates of justice are in a particular case. In so doing, the court is entitled to have regard to the overriding purpose of the Civil Procedure Act as set out in s 56: namely, that the Court is to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. 32In this case, the court is obliged to have regard to the degree of difficulty or complexity to which issues in the proceedings give rise; the degree of expedition with which respective parties have approached the proceedings; the degree of injustice that would be suffered by the respective parties as a consequence if an order for an adjournment was made or if an order was not made, and any other matters that are relevant in the circumstances of the case. 33It seems to me that the starting point of considering the application for an adjournment is to note that the parties agreed in their Deed of Settlement that the second instalment was to be paid by 15 July 2012, and in that respect, time was of the essence. They also agreed that if there was a default in the payment of that sum, the plaintiff was at liberty to enter judgment in accordance with the agreed terms. 34That there has been a default in the payment of the moneys by 15 July 2012 is not in dispute. No explanation is provided for that default by the defendants save for a general reference in the affidavit of Mr Benedict Tilley that he was expecting the Pyrmont property to be refinanced as part of a refinance transaction which did not proceed. The court is left to infer what that refinance transaction was, when it was engaged in, when it was commenced, what its course of negotiation was, and when the defendants learnt that the refinance transaction was not to proceed. No details are provided with respect to any of those matters whatsoever. I am not persuaded on the basis of that evidence that the court has received any adequate explanation as to why the defendants have failed to pay the second instalment of the moneys due. 35The next matter which is of significance, so it seems to me, is that the defendants were in a position on behalf of Limenight, or, alternatively, Limenight itself was in a position, between 16 March 2012 and 16 July 2012, namely, a period of four months, to lodge for registration the mortgage which Limenight held. They chose not to do so. The assertion that it is the conduct of the plaintiff which has caused Limenight to be unable to register its mortgage and the defendants to be unable to raise the moneys for the second instalment, to the extent that they have any credit, relate purely to the period from 25 July to 17 August 2012 which is a time during which the defendants have been in default of their obligations under the Deed of Settlement. 36In seeking the adjournment, there is an assertion in the affidavit of Mr Benedict Tilley that the money has not been able to be put in place by Limenight until such time as the mortgage was allowed to be registered. No details are provided by Mr Tilley, whom, I remind myself, is the sole director and secretary of Limenight Investments Pty Limited, as to the source of the funds for Limelight to lend to the defendants. 37Limenight is clearly a company associated with the defendants, it is controlled by Mr Benedict Tilley; he as the sole director and it is owned beneficially by his wife. Mr Simon Tilley knew enough of Limenight's affairs to make assertions about what it was doing in his affidavit of 25 July 2012. The distinct impression I gained from the affidavit of Mr Simon Tilley was that Limenight had the money available to advance to the defendants and it was awaiting the formalities of registration to enable that to happen. This is in contradistinction with the assertion by Mr Benedict Tilley that Limenight has been unable to put in place funding until the mortgage is registered. 38The ordinary experience of this court in transactions involving lending of moneys which are to be secured by mortgage security is that in the vast majority of cases mortgage securities exist over land which is to be proffered as security for some new loan or replacement loan. In those circumstances, what is required by lenders is that an appropriate discharge of mortgage be obtained at settlement when moneys are handed over. 39The absence of any fuller explanation from Limenight Investments which, contrasted with the ordinary experience of the court, does not lead me to have any confidence in the explanation proffered by Mr Benedict Tilley that the moneys are unable to be raised in the absence of the mortgage to Limenight Investments being registered on the property. 40In short, I am left with a wholly inadequate explanation as to why funds were not paid in accordance with the Deed of Settlement, and why funds have not been paid since. I am left with an assertion that funds will be paid in two weeks' time but without any detail which provides any comfort with respect to that. 41In those circumstances, I am not prepared to adjourn the matter. It would not be in the interests of justice having regard to the history which I have recounted for the plaintiff to wait whilst the defendants, dealing with an associated company, take their time, as it appears to me, to make arrangements to pay moneys which were due on 15 July. Once the defendants entered into the Deed of Settlement and made time of the essence for the payment of the second instalment of 15 July, then the plaintiff was entitled to expect that the defendants would adhere to their contractual agreement. 42In those circumstances, the interests of justice suggest that the parties should be held to their agreement and the matter should proceed. I reject the application for an adjournment.