Supreme Court New South Wales Medium Neutral Citation: Roxo v Normandie Farm (Dairy) Pty Ltd [2015] NSWSC 895 Hearing dates: 31 March 2015 Date of orders: 08 July 2015 Decision date: 08 July 2015 Jurisdiction: Common Law Before: Schmidt J Decision: Normandie give Mr Roxo possession of the whole of the land and improvements described as Lots 17, 19 and 32 in Deposited Plan XXXXXX and Lot 6 in Deposited Plan XXXXXX being the whole of the land in Folio identifiers 17/XXXXXX, 19/XXXXXX, 32/XXXXXX and 6/XXXXXX and known as XXXX XXXXXX XXXX Road Bungonia in the State of New South Wales ("the Property"). Catchwords: MORTGAGES – mortgages and charges generally – the mortgage – mortgage to secure borrowings – possession of property – whether plaintiff was estopped from charging interest – whether interest enforceable on account of unconscionability – whether defendant repaid principal due under the mortgage – whether defendant in default under the mortgage – whether plaintiff entitled to possession – order of possession made Legislation Cited: Conveyancing Act 1919 (NSW) Farm Debt Mediation Act 1994 (NSW) Limitation Act 1969 (NSW) Real Property Act 1900 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Category: Principal judgment Parties: Ross Roxo (Plaintiff) Normandie Farm (Dairy) Pty Ltd (Defendant) Representation: Counsel: Mr MW Young SC (Plaintiff) Mr D Parish (Defendant) Solicitors: Duncan Scott Solicitor (Plaintiff) O'Neill Partners – Commercial Lawyers (Defendant) File Number(s): 2013/102473 Publication restriction: None Judgment 1. The plaintiff, Mr Ross Roxo, seeks an order for possession of property at Bungonia, known as "Jacqua" under s 60 of the Real Property Act 1900 (NSW), over which the defendant, Normandie Farm (Dairy) Pty Limited, the registered proprietor, granted him a registered mortgage to secure borrowings of some $755,000 under a short term loan entered in May 2005, as well as an order for costs. The principal was due to be repaid in June 2005. Whether interest is owed on those borrowings, whether the principal has been repaid, and Normandie is in default under the mortgage, are all in issue. 2. Normandie's amended defence raised various matters not eventually pressed. Its case was finally that Mr Roxo is bound by an oral agreement which he made with its sole director and shareholder, Ms Julia McKay and her husband, Professor Milton, who had also borrowed funds from Mr Roxo. Given that agreement, it claims, Mr Roxo is not entitled to recover the interest he claims he is owed under the mortgage. It also claims that it has repaid all that it owes Mr Roxo and that accordingly, he is not entitled to possession of the property. This is in issue. 3. Ms McKay's evidence was that before the loan agreement and mortgage were entered, Mr Roxo agreed with her and Professor Milton that he would not strictly enforce the terms of the mortgage. She understood that to mean that even if the loan was not repaid when it fell due, Normandie would not be obliged to pay Mr Roxo any interest. Mr Roxo denied making such an agreement. The documents which Normandie and Mr Roxo later executed are inconsistent with such an agreement having earlier been made. The issues 1. The issues which the parties identified as still lying between them at the hearing were: "1. Was the plaintiff estopped from charging interest under the Mortgage? 2. Is the interest provision in the Mortgage unenforceable on account of unconscionability? Is the interest provision in the Mortgage unenforceable on account of unconscionability? 4. How, if at all, does s 42(1) of the Limitation Act prevent the plaintiff from now relying upon non-payment of interest by the defendant under the Mortgage? Has the defendant repaid the principal due under the Mortgage? Is the defendant in default under the Mortgage? Is the plaintiff entitled to an order for possession?" 1. During submissions, the Limitation Act 1969 (NSW) issue was abandoned. It was also conceded for Normandie that, if the agreement on which its case rested was not found to have come into existence, its unconscionability claim would also fall away. 2. The resolution of what remained in issue thus depended on the evidence of Mr Roxo and Ms McKay, Normandie's sole director and shareholder. I have concluded that in the case of conflict, Mr Roxo's evidence must be preferred over that of Ms McKay. Not only was her evidence shown to be unreliable in various relevant respects, it was not credible in other important respects, particularly given evidence which she had earlier given in other proceedings in the Federal Court. 3. It is relevant that Mr Roxo's evidence was that he no longer had all of the documents relating to the loans which he made to Normandie and Professor Milton, as the result of a fire, a flood and various computer problems, which he described. His attempts to pursue repayment of the loans included, he said from memory, an earlier attempt to enforce Normandie's loan, he thought in 2010, when Ms McKay had relied on the Farm Debt Mediation Act 1994 (NSW). There was no documentary evidence of this and it was challenged as a convenient lie. 4. Ms McKay's affidavit evidence was that Mr Roxo had not acted to enforce the loan until 2013. It was put to Mr Roxo in cross-examination, however, that he had issued an earlier s 57(2)(b) notice in 2011. That, he explained, was at a time when there had been a falling out between them over the running of the Memsie property in Queensland, in which Ms McKay had become involved. At that time, Mr Roxo explained, Ms McKay was still living on the Bungonia property, he was paying for rent and power there and it was being used to agist some cattle from the Memsie property. He explained that he then considered that Normandie had no equity in the property; it could not repay what was owed under the loan; but he considered that it was not a good time to sell. In those circumstances he saw no harm in allowing Ms McKay to continue living there, when she was otherwise "pretty much destitute" and he had sympathy for her situation. 5. That situation changed in 2011 when they fell out over the Memsie property and he again pursued possession of the Bungonia property. That account accorded with Ms McKay's own evidence as to what had transpired between them in 2011. This and other evidence which I will deal with, led me to the conclusion that Mr Roxo's evidence had to be preferred. He was prepared to make appropriate concessions, even when seemingly contrary to his interests and to accept and correct failures of memory. In the result, I came to the conclusion that his evidence was both more reliable and credible than that of Ms McKay, whose evidence I will deal with below. Was the claimed agreement made? 1. It is best immediately to deal with the conflict as to the existence of the claimed agreement, that even if Normandie's short term loan was not repaid when it fell due, it would not be obliged to pay Mr Roxo any interest, on which the first and second issues depended. 2. Mr Roxo advanced three loans to Normandie and Professor Milton, who died in 2007. The first was advanced to Professor Milton in 2003 for the purchase of certain equipment secured by a property which he owned at Potts Point, which he was proposing to sell. The second loan was advanced to Professor Milton in May 2005. It was secured by an unregistered mortgage over the Potts Point property and a security interest over Ms McKay's shareholding in two companies, Sorority Pty Ltd and Penrose Club Holdings Pty Ltd. 3. The third loan was also advanced in May 2005 to Normandie for the purchase of the Bungonia property. It was secured by the mortgage over that property. It was due to be repaid on 19 June 2005. Normandie, Ms McKay and Professor Milton were each "debtors" under that mortgage. 4. Ms McKay's evidence was that she had considered that the two loans Mr Roxo advanced in 2005 to have been the one borrowing, used to fund the entire purchase of the property, as well as stamp duty, renovations and improvements. In submissions, it was explained that the agreement for which Normandie contended was one which encompassed not only the borrowings advanced to it, but also that advanced to Professor Milton. On Ms McKay's evidence, he was involved in the conversation when the agreement in relation to the borrowings was reached with Mr Roxo. 5. For Mr Roxo, it was complained that this was a claim not properly available to Normandie, because it had not been pleaded in its amended defence. 6. Rule 14.14 of the Uniform Civil Procedure Rules 2005 (NSW) certainly requires a defence to plead any matter which, if not pleaded specifically, would take the opposite party by surprise. While the amended defence refers to Mr Roxo offering to assist Ms McKay and Professor Milton by offering them "a short term loan" and then assisting Normandie to refinance, it does not expressly plead that it was agreed that interest owing on the money loaned to both Normandie and Professor Milton would not be enforced. It also pleads that the agreement in relation to Normandie was reached in conversations between Mr Roxo and Ms McKay. 7. Despite this, I consider that justice requires that the case as finally pressed by Normandie should be considered and resolved, given the way in which Ms McKay put her evidence. Mr Roxo certainly had a fair opportunity to meet that evidence, as I will explain. 8. Normandie's case was finally that Mr Roxo had agreed to lend it and Professor Milton two sums, totalling over $1 million, so that it could purchase the dairy property at Bungonia, where Ms McKay and Professor Milton, then in his late 70s, intended to live. Despite what was later agreed in writing, in a transaction about which Normandie was legally advised, Normandie claimed that two matters were agreed in an earlier conversation between Mr Roxo, Ms McKay and Professor Milton: first, that neither Normandie nor the Professor would have any obligation to repay those borrowings, either on the agreed date, or at any other specified time, until the loans were refinanced; second, that no matter how long that took, neither of them would be liable to pay Mr Roxo any interest at all. Mr Roxo denied ever having made such an agreement. 9. On its face such a generous agreement seems implausible, but possible, given the high interest rates agreed and the fact that neither Professor Milton nor Normandie ever repaid either the principal or interest. Mr Roxo however, not only denied having made that agreement, his evidence was that he was not in a position to make such an agreement and that he had pursued repayment. 10. Mr Roxo's unchallenged evidence as to how he came to be involved in the business of lending supports the view that it was unlikely that he would enter into such an agreement. While Mr Roxo does appear to have been very forbearing, consistent with a friendship having developed, as was Ms McKay's evidence and he having been very sympathetic to the considerable personal hardships which confronted her over time, I am satisfied that the claimed agreement never came into existence. 11. That conclusion rests on the following evidence. 12. Mr Roxo is a chemical engineer. In his affidavit, he deposed that he was not in the usual business of lending, but had got into that business, using funds left to him by his late father for the care of his three mentally and physically disadvantaged siblings, for whom he is obliged to care for the remainder of their lives. 13. For some time, he offered that money and other funds he had borrowed, through financiers, to provide business loans. His experience was that he received only a fraction of the monies which the financiers' clients were paying for the money he was providing and so he decided to lend money direct to borrowers. He then had a suite of documentation drafted by a solicitor and, after making a few loans, decided that he would deal only with businesses and not private individuals, because he had become concerned about what appeared to be extraordinarily high short term monthly interest rates, when worked out annually. 14. When lending funds under this arrangement he required a solicitor to explain the documents to the borrower before execution, including that failure to pay the monthly interest would result in the sale of the property which secured the borrowings. He found that, despite this requirement, he still encountered problems, with the eventual result that he ceased pursuing this activity. 15. Mr Roxo's evidence was that he was introduced to Professor Milton and Ms McKay by a director of Propex Finance Pty Ltd in 2003. Professor Milton then required short term funding to buy some agricultural equipment available at a reduced price, in a liquidation sale. Professor Milton told him that he and Ms McKay had plenty of assets, but their money was locked up and the equipment was available at a fraction of what it was worth. In September 2003, Mr Roxo agreed to advance Professor Milton $114,500 for 1 month, at a rate of 6% per month, but the loan was not repaid in October 2003, when fell due. He agreed to extend the loan. 16. Mr Roxo said that, in September 2003, Ms McKay had provided him with information about potentially lucrative business opportunities which she was pursuing and she provided further information in January 2004. When in August 2004 the first loan still remained unpaid, he began sending emails, seeking repayment. In cross-examination, Mr Roxo agreed that in this business it had been important for him that borrowers had an exit strategy and that they had the means to discharge their debts in the short term. In his cross-examination, Mr Roxo agreed that when the loan was not repaid at the end of the 1 month term, the interest rate increased, but that he had not sought to recover the increased rate. On his evidence he was then discussing with Ms McKay and Professor Milton the business ideas they were pursuing, to enable them to repay the loan. 17. In her evidence, Ms McKay, who is legally qualified, but now a farmer, revealed that she had been a director of Southland Dairies, a company which failed in about 2004, after which it went into liquidation. It was she who wanted to purchase the equipment from the liquidator, because she intended to purchase a dairy farm. Her evidence was that it was in 2004 that she was introduced to Mr Roxo and the original funds were borrowed. Nothing turns on this disparity in the date, other than to reveal that Ms McKay's evidence is not entirely reliable. 18. Ms McKay claimed that, as the result of this introduction, a friendship developed with Mr Roxo, with the result that he was not only happy to assist she and Professor Milton finance the purchase of the equipment, but he was later supportive of her plans to purchase a farm, even though the first loan had not been repaid when it fell due, nor were interest payments being made. 19. Ms McKay's evidence was that, in 2005, when she identified the Bungonia property which she wished to purchase, Normandie had no assets with which it could finance the purchase. It needed to borrow $1,030,000, as bridging finance, while Professor Milton's property was sold. Because of her involvement with Southland Dairies, she had problems obtaining any finance and so they again approached Mr Roxo. 20. There is nothing in any of this evidence which supports a finding that Mr Roxo then agreed to lend Ms McKay and Professor Milton over $1 million indefinitely, until they refinanced, without any interest ever becoming payable. That was not only inconsistent with the mortgage documents which they executed, after receiving legal advice, but also with Mr Roxo's approach to the first loan to Professor Milton, which had still not been repaid. Emails in evidence show Mr Roxo had been pursuing its repayment during 2004. There, he had pointed out that this loan was accruing penalty interest and urged that it be repaid. 21. In cross-examination, Ms McKay agreed that she was aware of this initial borrowing, but could not remember receiving these emails, although she agreed that there may have been telephone conversations about the matters there raised. She also denied Professor Milton telling her that repayment of the loan was being pressed by Mr Roxo, as it plainly then was. She also disputed having been reminded that default interest was accruing at 8.5% and claimed that the extension of time for repayment to 1 September 2004 had occurred when her mother was dying and that she then had other things on her mind. Ms McKay also claimed that by 2005 they not only had a business relationship with Mr Roxo, but also a social relationship, which continued during 2005, which explained his forbearance. Mr Roxo disputed this. 22. In January 2005, Ms McKay directed payment of $23,500 to Mr Roxo, in respect of Professor Milton's loan. In cross-examination she also conceded receiving emails in April 2005, when Mr Roxo continued to press for repayment of the loan. She agreed that he was then seeking payment of penalty interest, if the loan was not renegotiated. That, too, was inconsistent with the agreement which she claimed was reached in early May. Ms McKay also agreed that she then understood that Mr Roxo was prepared to enforce the penalty interest rates to which Professor Milton had earlier agreed and that such provision was also made in the further mortgage documents which were later executed in respect of the second and third loans. 23. In cross-examination, Mr Roxo also said that from the outset he was aware that he was advancing the whole of the money used to purchase the Bungonia property, as well as stamp duty, so that Normandie, from the outset, had limited equity in the property. That was why he required collateral security for the short term borrowing he was then prepared to provide. 24. In Ms McKay's affidavit (ex 4) she deposed that she and Professor Milton met with Mr Roxo in early May 2005 and discussed finance for the purchase of the property. Her evidence was: "15. At this meeting Mr Roxo showed Gerald and me mortgage documents and loan documents. One of these documents is in the same form as now referred to in Mr Roxo's affidavit at Annexure A without our signatures. There were also mortgages over the Darlinghurst property, a property Gerald owned in Pittwater, a property near Penrose owned by a number of shareholders with a majority interest owned by my mother, myself and my half-brother Jonathon Burleigh and a charge over my shares in Mollymook. Mr Roxo said: "I can loan you the money with this mortgage attached to the property." Gerald said: "I don't want to take out a mortgage over all this property, I'm in my late seventies already and I don't want to leave Julia and my children with a big debt." 17. Mr Roxo said: "I want to help you guys acquire a home and a farm, Gerald but I need some security. I won't enforce the strict terms of the mortgage. I'm fond of you both. After you sell Surrey St you can refinance and I will help you and Julia do the refinance." 1. Mr Roxo denied this conversation, which was challenged as involving a lie. It was argued for Normandie that Mr Roxo's forbearance itself established that the claimed agreement had been made and that it would have been in Normandie's obvious interest to refinance, if it had thought that interest was accruing at the rate of $34,000 per month. Mr Roxo not pursuing repayment was consistent with Normandie having no obligation to pay interest. That was also submitted to be consistent with other business opportunities which were being discussed with Mr Roxo, about which he agreed his patience had run out in 2011. 2. It must be accepted that Mr Roxo's forbearance is consistent with the existence of the claimed agreement, but given the other evidence which has to be taken into account in resolving this issue, that cannot, of itself, prove its existence. 3. The overwhelming difficulty with the case which Normandie advanced was that, on their face, the words on which its case depended, did not amount to an offer to agree to the terms which it claimed in these proceedings had been reached with Mr Roxo at the May 2005 meeting, namely, that even if the loans were not repaid when they fell due, neither Normandie nor Professor Milton would be obliged to pay Mr Roxo any interest. Ms McKay deposed to the understanding she had gleaned from that conversation, to have been: "18. I understood this to mean that the Defendant as mortgagor and Gerald and me as borrowers would not be liable to pay the interest rates contained in the mortgage document and that the Defendant would not have to pay back the money within the very short time period stipulated in the mortgage document, but rather be able to source finance with Mr Roxo's help and repay the principal once this was done. 19 Upon this understanding, I executed the Mortgage on 19 May 2005 on behalf of the Defendant and in my own capacity. Gerald executed mortgages over the other properties as well. A copy of the Mortgage is annexed to Mr Roxo's affidavit and marked with the letter "A". I do not have the copies of the mortgages I executed over other properties." 1. This is not a basis on which a finding could rest that Mr Roxo had agreed with Professor Milton and Ms McKay, that he and Normandie would have no obligation to pay Mr Roxo any interest on the second or third loans, no matter how long it took them to repay Mr Roxo, even if Ms McKay's evidence could be preferred over that of Mr Roxo. 2. Neither the mortgage nor any other document refers to such an agreement having been made. The 16 May letter of offer which Ms McKay and Professor Milton provided Mr Roxo, specified the interest rate, as well as the default rate, as did the mortgages which they later executed, after receiving legal advice. They and Normandie were bound by the terms of the mortgage entered. 3. Ms McKay's evidence that if she had known that Mr Roxo would later enforce the interest payable on the loan, she would have sought finance elsewhere, has to be considered in this light. That evidence was not plausible, particularly given her evidence as to the difficulty she then had in obtaining finance elsewhere. Ms McKay also agreed in cross-examination that when Professor Milton died, Normandie faced considerable difficulties in refinancing its borrowings, given that more than 100% of the value of the property had been borrowed to fund the purchase and because Professor Milton's estate then had to be dealt with. 4. In cross-examination, Ms McKay also agreed, when explaining the evidence she had given in Federal Court proceedings, to which I will come, that it was never the situation that she believed that no interest would be payable, but she said she believed "that the interest would be ameliorated considerably" because of the things she was doing to assist Mr Roxo. That not only underscores that Ms McKay did not have the understanding which she claimed before she entered the written agreement, but precludes Normandie's estoppel argument from succeeding. It also helps explain why Ms McKay's evidence cannot be accepted preferred over that of Mr Roxo. 5. In cross-examination, Ms McKay also agreed that at the May meeting there had been no discussion of interest rates. Ms McKay then sought to qualify this on the basis that: "A. There was a - there was a discussion. Gerald was - you've got to remember Gerald was becoming a fairly elderly man by then. He was in his late 70s and he was very uncomfortable with entering into this agreement at all and to - I'm certain, to allay Gerald's fears and to make him feel more comfortable with arrangements, Ross certainly mentioned that he would not enforce the strict terms of the mortgage and certainly wouldn't throw us out on the street. Q. First of all, Mr Roxo never said, I won't enforce the strict terms of the mortgage, did he? A. He did say that. Q. He certainly said nothing about interest, did he? A. He said that he wouldn't enforce the strict terms of the mortgage. Q. Even if we accept for the sake of argument that he said those words, that could mean anything, couldn't it? It could mean that he would give you two months to repay instead of one month, for example. A. No, no, he— Q. Mightn't it? A. He made it clear that he would take care of us, that he would not enforce the terms of the mortgage, and that this was a friendly arrangement and that we should try to get a refinance as soon as the Darlinghurst property was sold and that he would assist us in that regard. Q. You did not understand Mr Roxo to be saying that he would never enforce the mortgage, did you? A. I believed I would pay him back for the mortgage. Q. You didn't understand Mr Roxo to be telling you that he would never enforce the mortgage. Isn't that right? A. Did you just say the double negative again? Q. It was not your understanding, was it, that Mr Roxo was saying that he would never enforce the mortgage? A. Yes, it was my understanding. Q. You understood that he would never, no matter how many years went by, no matter— A. Within— Q. –what happened, that he would never enforce the— A. Within reason, within reason, I suppose. Q. What do you mean by, "Within reason"? A. If you say in 20 years or something, no, I, I certainly believed I had to make some – complete my obligations as quickly as I could. Q. What about ten years? A. What about ten years? It rather depends on the circumstances. No, I, I just didn't think that Ross would enforce the terms of the mortgage. Q. So you understood— A. And that's certainly what he said to, to me and to Gerald, to give him comfort. Q. We have what you say he said to Gerald and yourself, but are you saying that you understood from those words that you repeat in your affidavit that even after ten years from the entering into the mortgage it may be that Mr Roxo was telling you he wouldn't enforce the mortgage even then? A. I never thought it would take ten years. Q. You say, do you, you understood that Mr Roxo was giving you however long you wanted, however long that might be, to pay back— A. Within reason, is what I said." 1. On Mr Roxo's affidavit evidence, Ms McKay and Professor Milton had sought extensions of time to repay the loans because of personal tragedies, even before Professor Milton himself died in 2007. In cross-examination, he said that he had received advice that it was best to avoid litigation at a time when Ms McKay and Professor Milton had been telling him that they were pursuing various solutions and so he held off enforcement of the loan. He denied that he had acted as he did, because there was no interest owing under the loan. He also denied having a discretion to enter such an agreement, given that the funds belonged to members of his family and some had been borrowed. He said that he was in no position to be able to agree to make no interest loans. 2. Mr Roxo said that he tried to help Ms McKay refinance. He had also sought to enforce transfer of her shareholdings, but there were problems with probate. Mr Roxo accepted that in 2007 he had agreed to defer commencement of legal proceedings, to enable the orderly administration of Professor Milton's estate and that he held a transfer in shares, which he had not been able to realise since the end of 2008, but which might not be valueless. He said that those shares and the Bungonia property still secured Normandie's borrowings. He agreed that he knew that the equity in the property was dissipated after about 5 or 6 months. He also agreed that after it became apparent that the borrowings could not be repaid, he was advised that an orderly sale of a property at Mollymook should be permitted. 3. All of that evidence has to be considered in light of Ms McKay's agreement that Mr Roxo had not said that he would wait for years for repayment. She said that it had been a difficult time for her, because of the death of her husband, mother and brother and that Mr Roxo had shown her consideration and kindness. She also said that she knew that she would have to repay "the principal first and then we could discuss the other matters later". She also agreed that Mr Roxo had extended her various accommodations as the result of the tragedies which had befallen her and that she had discussed business opportunities with him, which might have permitted Normandie to pay out its borrowings. 4. I am satisfied that this evidence does not permit the conclusion that the claimed agreement came into existence. Nor was any detrimental reliance on the claimed agreement established, even as to the interest rate, on which the unconscionability claim rested. On the evidence, Ms McKay, Normandie's director and controlling mind, was an experienced, legally qualified businesswoman who pursued Normandie's purchase of the Bungonia property and a range of other potential business opportunities, with the support of her husband. They believed that would enable Normandie to repay what it owed Mr Roxo. Ms McKay was able to convince Mr Roxo to forbear for a considerable time, until he finally pursued his rights under the mortgage. No unconscionable conduct on Mr Roxo's part has thereby been established. 5. The interest rates agreed were plainly high, but there was no evidence that they were out of the ordinary for such short term borrowings. It was not suggested that the rates alone provided a basis on which unconscionability could be found. 6. The loan was advanced for a month, in circumstances where Mr Roxo was concerned that Normandie had an exit strategy by which the short term borrowings could be refinanced, to which I will come. He was satisfied with the information he was provided as to that strategy. In the result, it must be concluded that Mr Roxo is not estopped from charging interest under the mortgage and as Normandie conceded, its unconscionability claim has no basis. Did Normandie repay the principal due under the Mortgage? Is Normandie in default under the Mortgage? 1. It is convenient to deal with these issues together. 2. Normandie resisted Mr Roxo's claims on the basis of Ms McKay's evidence that that it owed Mr Roxo nothing for interest and that it had repaid the principal it had borrowed from him. She explained that was why she was resisting Mr Roxo's claim for possession of her home. That evidence cannot be accepted. 3. I have already dealt with the claimed agreement on which Normandie's case on interest rested. In final submissions it was conceded that if the conclusion was reached that the claimed agreement was never made, it would follow that Normandie was in default, that it owed something like $3 million in total and that an order for possession should follow. 4. Mr Roxo's evidence was that Ms McKay first approached him in January 2005, in relation to the purchase of the property for which she had paid a deposit and which was due to settle on 29 April. She then said that she needed funds for a short time, until she received a very large down payment for a major deal she was about to sign. In May, he received information from her solicitor, about an option for sale of the property at Mollymook, owned by Sorority for some $3.5 million. He considered that this satisfied his requirement for an exit strategy, the proposed loan being for a business purpose and a means to discharge the proposed debt being demonstrated. 5. Professor Milton later approached him in early May about the second loan, required as a rollover of the first loan and to purchase shares in Penrose Club Holdings Limited. It was he who told Mr Roxo about a major water deal which Ms McKay was then negotiating, which they expected would more than double the value of the shareholding in Penrose, from which they stood to make millions. Professor Milton also told him that water from an adjoining property had already been sold to Coca Cola and that the water was also attractive to an energy consortium. They then needed to borrow money for 3 months maximum, to buy out other shareholders and get control of Penrose. Mr Roxo then agreed to loan him some $300,000. The second loan was secured by an unregistered mortgage over the Potts Point property and an executed share transfer of Ms McKay's shareholdings in Sorority and Penrose. 6. On 19 May, advances totalling $1,055,000 were made to Professor Milton and Normandie, some of which was used to fund renovations and other improvements at the Bungonia property. The third loan was secured over the property at Bungonia the subject of these proceedings, after independent legal advice was obtained. The property was Normandie's only significant asset. Those advances were due to be repaid on 19 June. The evidence establishes that they have never been repaid and that Normandie is in default under the mortgage. 7. That Mr Roxo had received payments totalling over $1 million, which were used to repay Professor Milton's borrowings was not in issue. It was Mr Roxo's case that after the sale of the Potts Point property, he received three payments from Ms McKay in 2008 totalling $590,000, as well as a further $145,000 in 2009, which was all applied to Professor Milton's first loan, in addition to the $23,500 paid in January 2005. 8. Under the terms of clause 18 of that mortgage, Mr Roxo had the right to appropriate those payments as he determined, to principal, interest, costs and expenses. The clause also provided "[a]ny such appropriation overrides the nomination made by the mortgagor". In cross-examination, Mr Roxo agreed that part of that sum may have come from the sale of the Mollymook property. He also accepted that he had then agreed with Ms McKay to accept that amount in full and final payment of that loan. 9. Mr Roxo also agreed that he later received some $639,000 after the sale of a property at Pittwater, which was applied to Professor Milton's other borrowings. 10. Mr Roxo was cross-examined as to why he had not dealt with some of these matters in his first affidavit. His explanation that he considered that they were not relevant to Normandie's borrowings was credible. It was when Ms Roxo's claim that the Normandie's borrowings had been repaid emerged from the affidavit she swore, that Mr Roxo dealt with the payments he had received and how they had been applied to reduce Professor Milton's borrowings. 11. Ms McKay's evidence was that, in 2008 a payment of $350,000 was made to Mr Roxo from the sale of the property which had secured Professor Milton's first loan. She also paid him $168,000 and $72,000 in December 2008, out of inheritances she had received after her mother, father, brother and Professor Milton. On Mr Roxo's direction, she had made these payments to his mother, Marie Ross. A payment of $145,000 had been made in June 2009 at his direction to Judy White. In cross-examination Ms McKay agreed that was a company of which she was a director and that the payment was made for shares, which were later issued. 12. That these payments had anything to do with repayment of Normandie's borrowings was not established by Ms McKay's evidence. 13. Without Mr Roxo's consent as mortgagor, the property at Potts Point could not have been sold as it was. Normandie's claim, in those circumstances, that the resulting payments made to him should have been directed to its borrowings, rather than to repaying what Professor Milton owed him, appears to have been disingenuous. No proper foundation for that claim was established on the evidence. 14. Mr Roxo agreeing with Ms McKay to treat Professor Milton's first loan as having been repaid in full by the payments made in 2008 and 2009 was inconsistent with her claim that what was paid should have been used to reduce Normandie's borrowings. It was, however, consistent with her evidence that Mr Roxo had treated her with a great deal of sympathy, at a time when in quick succession Professor Milton, her mother, father and brother had all died. 15. Mr Roxo's evidence was that he had also sought to enforce the transfer of Ms McKay's shareholdings, which secured the Normandie loan, but there were difficulties created by the finalisation of probate in her mother's estate. Ms McKay denied that he had ever told her about this, but this, too, was not plausible. 16. Mr Roxo also said in cross-examination that he had received advice that in the circumstances, other avenues which Ms McKay was then pursuing, in order to repay Normandie's borrowings, should be permitted to be pursued. That what he was then owed outweighed the value of the Bungonia property, must be accepted. That he was concerned about the price which the property might then command was unchallenged, as was his evidence that, in the circumstances, he was content to allow Ms McKay to continue living at the property as a caretaker. 17. This situation came to an end in 2011, when Mr Roxo formed the view that Ms McKay had acted inappropriately in relation to the Memsie property. He came to the conclusion that repayment from Normandie would not be forthcoming, the various ventures which Ms McKay had been pursuing having come to nothing. In cross-examination, he agreed that there had been ongoing discussions about the sale of spring water and subdivision and government approval of a gas project, which had led him to hold off enforcing the loan. In the circumstances, he said, he had been prepared to allow Ms McKay to pursue opportunities which would quite phenomenally allow her to improve her ability to repay the loan. She was well connected and introduced him to wealthy, high placed people, which for a long period of time had induced him to believe that something might happen, which could result in a windfall which would change Ms McKay's situation. That belief, he said, was brought to an end by her conduct in 2011. He was not asked to elaborate. 18. Ms McKay also claimed to have made other payments to Mr Roxo for unspecified sums, which she said came from "the Memsie Account". Memsie was the dairy farm in Queensland which Mr Roxo had acquired from a Mr Catto. Ms McKay had agreed to manage that farm in September 2010. She took a lease of the property in June 2011. They had a falling out in October 2011. Ms McKay's evidence about these matters simply did not establish that such payments, if in fact made, had anything to do with Normandie's borrowing. Even if payments were made, which Ms McKay intended to apply to repayment that borrowing, the evidence did not establish that even the principal which Normandie owed Mr Roxo would thereby have been repaid. 19. That Normandie has not repaid its borrowings was put beyond doubt by Ms McKay's evidence in cross-examination, where it became apparent that she was prepared to say things which she thought might advance its case, even when patently untrue. 20. At one point she said that she had thought by 2007/2008 that the Bungonia property was worth more than Normandie had paid for it, but still she did not refinance. She agreed that would have been difficult, but denied knowing that the loan and interest then owing exceeded the value of the property. That evidence was not credible, particularly given her earlier evidence that she had treated what Normandie and Professor Milton had borrowed as one loan, they having borrowed more than 100% of the value of the property when it was purchased, in order to pay stamp duty, renovate and improve the property and Normandie never having repaid the principal, let alone any interest. 21. Ms McKay agreed that she did not then attempt to refinance, because of Professor Milton's death and because of the friendly relationship she thought she had with Mr Roxo, who had not been pressing her for repayment. She also agreed that she knew that if she refinanced, a new lender would not allow years to go by without payment of interest or principal. She also said that she thought that she needed Mr Roxo's consent to refinance. That evidence was also inherently implausible. 22. Ms McKay was also cross-examined about the evidence she had given in proceedings in the Federal Court in June 2011, where she had said on oath when examined about Professor Milton's insolvent estate, that there was then about a million dollars owing to Mr Roxo under the loan and that she was living at the Bungonia property, which secured the loan, "under grace and favour". She also said that Mr Roxo was claiming interest on that loan, in respect of which she owed him about a million dollars. 23. Ms McKay claimed that she had given that evidence at a time when she had not realised that Mr Roxo had received $640,000 from Professor Milton's estate. That, too, was implausible. I have already dealt with the repayment of Professor Milton's borrowings. Consistently with Ms McKay's evidence in 2011, that had nothing to do with the repayment of Normandie's borrowings. 24. Later Ms McKay accepted, however, that if in 2011 she had said that a million dollars of interest was still owing to Mr Roxo, that must have been what she then believed. Still, Ms Roxo then claimed that Normandie had repaid both the principal and interest. That evidence was patently untrue, even though she denied that her claim to have repaid a million dollars in interest was a lie. At one point she said that was "not a matter for this case. It's a matter in respect of the Memsie operation". At another she claimed to have assisted Mr Roxo in his affairs in various ways, to have looked after his brother and to have been used by him as a tool. None of this evidence established that Normandie has repaid what it borrowed. 25. In the result it must be concluded that Mr Roxo has established relevant default under the mortgage. Possession 1. There was finally no issue as to Mr Roxo's service of a s 57(2)(b) notice. 2. He has established that he is entitled to the order for possession which he seeks. Normandie has failed to establish that it has any basis for resisting such an order being made. Costs 1. The usual order as to costs is that they follow the event. In this case, that would be an order that Normandie pay Mr Roxo's costs, as agreed or assessed. Unless the parties approach within 7 days to be heard, that will be the Court's order as to costs. Orders 1. For the reasons given, I order that: Normandie give Mr Roxo possession of the whole of the land and improvements described as Lots 17, 19 and 32 in Deposited Plan XXXXXX and Lot 6 in Deposited Plan XXXXXXX being the whole of the land in Folio identifiers 17/XXXXXX, 19/XXXXXX, 32/XXXXXX and 6/XXXXXX and known as XXXX XXXXXX XXXX Road Bungonia in the State of New South Wales ("the Property"). Amendments 09 July 2015 - typographical error in catchwords 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. Decision last updated: 09 July 2015