Powers v Hall [2013] NSWSC 1356

Supreme Court New South Wales

Medium Neutral Citation: Powers v Hall [2013] NSWSC 1356 Hearing dates: 13 September 2013 Decision date: 13 September 2013 Jurisdiction: Common Law Before: Beech-Jones J Decision: Application to restrain sale by auction dismissed. Catchwords: Default judgment - restraint of sale - no question of principle. Legislation Cited: Contracts Review Act 1980 Cases Cited: Starceavich v Swart & Associates Pty Ltd [2006] NSWSC 960; 12 BPR 23,639 Category: Procedural and other rulings Parties: Tommy Wayne Powers and Rosemary Anne Powers a.t.f. Paecu No 1 Trust Super Fund (Plaintiffs) Danny Gordon Hall (Defendant) Representation: Counsel: T. McGrath, solicitor (Plaintiffs) C. Carroll (Defendant)

Solicitors: Pateman Legal (Plaintiffs) Levitt Robinson Solicitors (Defendant) File Number(s): 2013/078095

EX TEMPORE Judgment 1Before me is a Notice of Motion filed in this Court today seeking a number of orders in respect of a default judgment entered in this Court on 13 May 2013. 2The default judgment gave possession to the plaintiffs in respect of some parcels of land in North Bendalong Road, North Bendalong. It also awarded a monetary judgment in favour of the plaintiffs against the defendant for $2,104.064.60. 3The Notice of Motion seeks the setting aside of the default judgment and the granting of leave to file a defence and a cross claim. Prayer 5 of the Notice of Motion seeks an order by way of interlocutory injunction restraining an auction of various parcels of the land that is due to take place tomorrow, Saturday, 14 September 2013. 4Given the time at which the application was made and the fact that there is some degree of complexity in the matter, I do not consider it appropriate, sitting as Duty Judge, for me to embark upon the question as to whether the default judgment should be set aside. Instead I will stand over that part of the motion that seeks that relief and instead consider the immediate question of the restraint of the sale. Insofar as there is an outstanding monetary judgment against the defendant, the plaintiffs have accepted that that can be stayed until the resolution of the balance of the motion. 5It appears that in early 2011 the defendant was in substantial default with his then financier, BNY, in relation to the subject property. The financier obtained possession of the property and was due to sell it. The defendant says that under extreme commercial and personal pressure he entered into a further financing agreement with the plaintiffs in the current proceedings that averted the sale of the property. 6Unfortunately, he ended up in default of those further facilities. In March 2013 a statement of claim was filed seeking monetary judgment and an order for possession. As I have stated, default judgment was entered on 13 May 2013. It seems that a Writ of Possession was executed some time around 17 July 2013. 7As I have indicated, the plaintiffs have arranged for an auction of some of the parcels of property, tomorrow, 14 September 2013. 8The affidavit in support of the motion seeks to explain the delay of the defendant in applying to the Court. He stated that he experienced difficulties in obtaining acceptable legal representation. He also states that he has made a number of attempts to refinance. He indicates that he resides on part of the property which, as I understand it, is due to be sold tomorrow. He has annexed certain documents which appear to record an offer made to him on 12 September 2013 by a Christopher Way, to effectively became his partner, and assume what is described in the letter as his current finance obligations of $1.7 million. 9The letter proposes some form of transaction, which involves obtaining finance and paying out the plaintiffs. There are a number of contingencies surrounding the proposal including the obtaining of finance and various other conditions. 10The plaintiffs only received very late notice of the application. In the time that they were given, they were able to prepare an affidavit from the solicitor who had carriage of the matter, and who had spoken to the selling agent. 11Two matters emerge from that material. First the selling agent has also been speaking to Mr Christopher Way. That agent records a conversation with Mr Way, which is difficult to reconcile with the offer that he made on 12 September. The agent records Mr Way as having no interest in the property because of some difficulty surrounding title and obtaining finance. 12Second, the advice from the agent indicates that if the sale did not proceed then, because this would be the second occasion that a mortgagee sale has fallen over, that could be expected to cause future problems in relation to the realisation of the property. 13The basis for restraining the sale is said to be a combination of two matters. First, the defendant says they have an arguable Contracts Review Act 1980 claim arising out of the circumstances into which they entered the finance agreement with the plaintiffs. 14I have been referred to figures that indicate that, on the best case for the defendant, that is, if all of his contentions about the relevant unfairness of the financing arrangements are demonstrated, he would presently owe something in excess of $1.5 million. Critically he would still have been in default and the power of sale would still have arisen in favour of the plaintiffs. 15Second, the defendant then points to the proposal with Mr Way, and says that if that proposal comes to fruition, then the combination of success of his Contracts Review Act claim and "refinancing with Mr Way" means that he will be able to discharge his indebtedness. 16In support of these propositions, counsel for the defendant has referred me to the decision of White J in Starceavich v Swart & Associates Pty Ltd [2006] NSWSC 960; 12 BPR 23,639. In Starceavich, White J addressed the circumstances in which a party bringing a Contract Review Act claim could prevent the exercise of a power of sale. At [53] his Honour stated: "If, at a final hearing, the plaintiffs establish that the provisions to which I have referred are unjust, or that the contract of loan and the mortgage taken as a whole are unjust, then prima facie the plaintiffs would not only be entitled to orders under s 7 modifying the rate of interest, the terms for capitalisation of interest, and the other terms relating to the payment of moneys on the taking of enforcement action. Prima facie, they would also be entitled to orders varying the mortgage so as to preclude the defendant from enforcing its security to claim a debt going beyond that which the Court found to be justly due." 17However, this passage is of no, or at least little, assistance to the defendant. On its best case there is still an amount which is "justly due" to the plaintiffs that exceeds $1.5 million. It inevitably follows that on its best case any variation of the plaintiffs' security would not be such that would have the effect that presently the plaintiffs either do not have a right to possession or the right to exercise a power of sale. 18It may be that the combination of a variation of the mortgage and the fruition of the deal with Mr Way may mean that at some point in the future the defendant may have an amount of money that can meet the adjusted indebtedness. However, that is a very different circumstance to that contemplated by White J. 19In essence, the defendant has, in fact, no basis for staying the exercise of the power of sale by the plaintiffs. What he puts forward to this Court is a request that it make a commercial judgment as to whether Mr Way's proposal is something that should be taken. However, the fact that there has arisen in the plaintiffs' favour their power of sale means that in reality the commercial judgment as to whether Mr Way's proposal is acceptable should be a matter for them and not the Court. 20Further, at [62] of Starceavich, White J stated: "The balance of convenience clearly favours the granting of the relief sought. Restraining the defendant from exercising its power of sale, or from keeping possession of the property until the final hearing of the proceedings, will not deprive the defendant of its security." 21In this case the material from the agent reveals that there are significant doubts as to whether Mr Way's proposal will come to fruition. They also reveal that there is a reasonable basis for believing that the value of the properties may be impaired if another auction is put off at the last moment. Thus, in those circumstances, there is in my view a realistic prospect of harm to the plaintiffs' security if the sale is delayed. 22Against that, there is no doubt from the defendant's affidavit that he has had a long attachment to these properties and he regards them as his home. 23In the end, what I am being presented with is the suggestion that the Court should make a commercial judgment between Mr Way's proposal and the plaintiffs pursuing their rights of possession and rights of sale, which on any view have arisen. As I have said, in the end these are matters for the plaintiffs and not for the Court. 24In my view, the application is simply made far too late and has far too little prospect of success to warrant the restraining of the auction at this point. 25Accordingly: (1)I dismiss the application for relief in the form of order or prayer 5 of the defendant's Notice of Motion. (2)I order that, until further order, order 2 made on 13 May 2013 be stayed. (3)I stand over the balance of the Notice of Motion to the Registrar's list on 27 September 2013 at 9.00am. (4)I order the defendant to pay the plaintiffs' costs.