Supreme Court New South Wales Medium Neutral Citation: National Australia Bank v Sayed (No. 3) [2015] NSWSC 1473 Hearing dates: 6 October 2015 Date of orders: 07 October 2015 Decision date: 07 October 2015 Jurisdiction: Common Law Before: Davies J Decision: The Notice of Motion of 4 September 2015 is dismissed with costs Catchwords: REAL PROPERTY – possession of land – mortgages – judgment for possession - stay of execution – cross-claim by mortgagor for sale of other land at an under value – whether cross-claim amounts to a set-off – whether damages on cross-claim would payout debt on land the subject of judgment – stay refused EQUITY – set-off – claim for damages against mortgagee – whether claim impeaches title of mortgagee in claim for possession Legislation Cited: Conveyancing Act 1919 (NSW) Cases Cited: Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 James v Commonwealth Bank of Australia (1992) 37 FCR 445 Lord v Direct Acceptance Corporation Ltd (Receiver And Manager Appointed) (In Liq) (1993) 32 NSWLR 362 Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 National Australia Bank v Sayed (No.2) [2012] NSWSC 20 Texts Cited: Meagher, Gummow and Lehane's Equity Doctrines and Remedies (5th Edition 2015 Lexis Nexis) Category: Procedural and other rulings Parties: National Australia Bank Ltd (Plaintiff) Bilal Sayed (Cross-Claimant) Representation: Counsel: G Lucarelli (Plaintiff/Cross-Defendant) In Person (Cross-Claimant) Solicitors: DibbsBarker (Plaintiff/Cross-Defendant) Unrepresented (Cross-Claimant) File Number(s): 2010/135614 Judgment 1. On 17 April 2015 judgment was given in these proceedings by Harrison AsJ after a hearing. The terms of the judgment were relevantly these: 1. The parties are to specifically perform the In Principle Agreement dated 23 August 2012 in accordance with orders 1A, 1B, 1C and 1D. 1A Subject to order 1D the Plaintiff is at liberty after 16 August 2015 to enter judgment against the Defendants on its amended statement of claim for; (a) $700,000; (b) interest from 16 April 2015; and (c ) possession of the whole of the land referred to in Certificate of Title Folio Identifier 3/1017140 and known as 25 Gahans Lane, Woonona, New South Wales. 1B Subject to order 1D, after 16 August 2015 the Plaintiff is to have leave to issue a writ of possession for the whole of the land referred to in Certificate of Title Folio Identifier 3/1017140 and known as 25 Gahans Lane, Woonona, New South Wales. 1C Subject to order 1D, in the event that the Defendants failed to pay to the Plaintiff the Settlement Amount of $670,000 by 16 August 2015, then the Plaintiff shall be entitled to recover the Plaintiff's enforcement expenses (on an indemnity basis) of enforcing the judgments and writ of possession referred to in Orders 1A and 1B. 1D In the event the Defendants pay to the Plaintiff the Settlement Amount under the In Principle Agreement, namely $670,000 by 16 August 2015, then orders 1A, 1B and 1C are discharged, the amended statement of claim is to be otherwise dismissed and the Plaintiff must deliver a discharge of its mortgage over the Woonona property. 1. The judgment also provided that there was to be no stay on the enforcement of the judgment. The cross-claim filed by the First Defendant was listed for directions on 28 May. 2. The Defendants failed to pay the amount of $670,000 by 16 August 2015 or at all. As a result, a writ of possession issued pursuant to the orders. That writ is due for execution tomorrow, 8 October 2015. 3. By Notice of Motion filed 4 September 2015, the First Defendant, Mr Sayed, seeks a stay of the orders of 16 April 2015 until his cross-claim is heard. The cross-claim concerns a sale at what is said to be an under value of other land at Corrimal. That land was sold by the bank on 19 February 2010 for $545,545.45. 4. Mr Sayed has had various lawyers acting for him, including until very recently Paul Bard Lawyers who instructed Mr Jim Thomson of counsel. It was while these lawyers were acting for him that the final form of the amended cross-claim was settled, filed on 18 August 2015 and served. 5. Mr Sayed appeared for himself on the present application. He informed me that he did not have lawyers acting for him because he could now not afford to do so. 6. The stay appeared to be put on three bases. First, it was asserted that remarks I made in an interlocutory judgment, that is National Australia Bank v Sayed (No.2) [2012] NSWSC 20, suggested that what was sought in the cross-claim amounted to a set-off. Secondly, if Mr Sayed was successful on the cross-claim, the debt on Woonona would be paid out, and even if he was not successful, there was enough equity in Woonona to pay the bank out if Woonona had to be sold down the track. 7. Thirdly, he could not afford to pay the $670,000 in accordance with the judgment and this was because his Credit Reference Association information with VEDA recorded a default listing with Credit Corp Services in respect of a debt of $7,699 that subsequently led to a service of a bankruptcy notice. This VEDA notification was said to be in breach of the In Principle Agreement that formed the basis for the judgment. 8. In that regard Mr Sayed relied on exhibit A. Exhibit A was an email from the solicitor for the Bank to Andrew Luong who was, I was informed, Mrs Sayed's solicitor at the date of the email, 23 August 2012. That email first provided for the settlement amount of $670,000 to be paid that was ultimately included in the In Principle Agreement. Paragraph 2 of the email went on to say this: In relation to a credit listing, my instructions are that NAB has not made any listing in respect of the Corrimal or Woonona loans, and will not make any express disclosure to Veda in relation to the debts owing under either of those loans. 1. As far as the first basis put forward for a stay is concerned, that is, remarks I made in my judgment, what I said is in fact contrary to what is asserted by Mr Sayed. In that judgment I said this: [16] In relation to the cross-claim, the Plaintiff draws attention to the claim contained in paragraphs 17 to 27 [of the then form of that cross-claim] asserting a sale of the development property, [that is the Corrimal property] at an under value. There is a claim for damages made and the proper value of the property asserted by the First Defendant is now pleaded in accordance with what I said ought to happen in my earlier judgment. As best I can understand the claim for the sale at an under value, it is a damages claim and does not appear to be put forward as a set-off which would, in any event, prevent the Plaintiff if it otherwise proves its case from obtaining possession of the property. 1. Moreover, the form of the Amended Cross-Claim has expressly severed any connection between what happened in relation to the sale of Corrimal and any effect that that has on the Woonona property. I refer in that regard particularly to prayers 2, 4 and 7 and to paragraphs 5 to 10, 15 and 47 to 51 of the pleading. 2. In Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 Giles J said at 465: Equitable set-off is available where the defendant establishes an equitable ground for being protected from the plaintiff's claim. That has been expressed in language to the effect that the defendant's set-off goes to the root of or impeaches the title of the plaintiff's claim, but also in language to the effect that the counter-claim is so directly connected with the claim that it would be unjust to allow the plaintiff to recover without taking into account the defendant's counter-claim. 1. In Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 Walsh J said: [13] A general rule has long been established, in relation to applications to restrain the exercise by a mortgagee of powers given by a mortgage and in particular the exercise of a power of sale, that such an injunction will not be granted unless the amount of the mortgage debt, if this be not in dispute, be paid or unless, if the amount be disputed, the amount claimed by the mortgagee be paid into court. [14] The rule, as it affects the exercise by a mortgagee of the power of sale, is stated in the following terms in Halsbury's Laws of England, 3rd ed., vol. 27, p 301: "The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute, or because the mortgagor has commenced a redemption action, or because the mortgagor objects to the manner in which the sale is being arranged. He will be restrained, however, if the mortgagor pays the amount claimed into court, that is, the amount which the mortgagee swears to be due to him, unless, on the terms of the mortgage, the claim is excessive." Then there is a reference to a special case where the mortgagee was the mortgagor's solicitor. The plaintiffs contend, however, that such a rule can have no application in this case, in which the action brought by them is brought to establish a claim that upon balance there is no debt due by them to the defendant, but on the contrary, there is a balance due to them. They contend that that action is not one in which they seek to maintain rights in the capacity of mortgagors. [15] In my opinion, the authorities which I have been able to examine establish that for the purposes of the application of the general rule to which I have referred, nothing short of actual payment is regarded as sufficient to extinguish a mortgage debt. If the debt has not been actually paid, the Court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due. [16] The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed. 1. As the learned authors of Meagher, Gummow and Lehane's Equity Doctrines and Remedies (5th Edition 2015 Lexis Nexis) make clear, for the claim to amount to an equitable set-off the claim must impeach the Plaintiff's claim or, in the case of a mortgage, impeach the Plaintiff's title to the mortgage. They say at [39-060(g)]: One ingredient of set-off in equity is that the Defendant's cross-claim must actually go to the root of, or be essentially bound up with, or "impeach", the title of the Plaintiff. The requirement is fulfilled where the Plaintiff's title to the legal demand would not have come about had the Plaintiff not breached some duty the Plaintiff owed to the Defendant. No requirement of impeachment exists at law, but in equity it is indispensable. It is not sufficient that there be countervailing claims, nor that those claims be mutual, nor even that they arise out of the same transaction. In order to make out an equitable set off, the Defendant must establish some equitable right to be protected from the Plaintiff's claim. See also Gummow J in James v Commonwealth Bank of Australia (1992) 37 FCR 445. 1. In Lord v Direct Acceptance Corporation Ltd (Receiver And Manager Appointed) (In Liq) (1993) 32 NSWLR 362 Sheller JA with whom Kirby P and Meagher JA agreed said at 367: Equitable set-off: Next the appellant argued that it had an equitable defence of set-off to the extent of the amount held on deposit. This argument necessarily proceeded on the assumption that the deposit had not been appropriated in satisfaction of the debt and remained a debt due to Me and Angus Pty Ltd that is to say a chose in action the property of Me and Angus Pty Ltd. For the defence to succeed the appellant needed to demonstrate some equitable ground for being protected by set-off against Direct Acceptance Corporation Ltd's demand to the extent of the deposit. The mere existence of a cross-demand would not be sufficient. The equity had to be such as impeached Direct Acceptance Corporation Ltd's title to demand payment. These propositions adopt the language of Lord Cottenham LC in Rawson v Samuel (1841) Cr & Ph 161 at 178-179; 41 ER 451 at 458, which was applied by the High Court in Hill v Ziymack (1908) 7 CLR 352 at 360-362: see also J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 61 FLR 108; 41 ALR 539, a decision of the Full Federal Court (at 554). In subsequent cases the Lord Chancellor's language has been explained or diluted often in ways not entirely satisfactory: see the discussion by Gummow J in Re Just Juice Corporation Pty Ltd; James v Commonwealth Bank of Australia (1992) 109 ALR 334 at 349-352; sub nom James v Commonwealth Bank of Australia 37 FCR 445 at 459-462. The cases have been extensively examined by Woodward J in D Galambos and Son Pty Ltd v McIntyre (1974) 5 ACTR 10 and Giles J in AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 at 710-712. In Bank of Boston Connecticut v European Grain and Shipping Ltd [1989] AC 1056 at 1102, Lord Brandon of Oakbrook said that the concept of impeaching the title to the legal demand was not one familiar today and referred to the expression used in Government of Newfoundland v Newfoundland Railway Co (1888) 13 App Cas 199 at 212-213 that a claim may be set-off if "flowing out of and inseparably connected with the dealings and transactions which also give rise to the claim". The concept is better stated in Meagher, Gummow and Lehane, Equity, Doctrines and Remedies, 3rd ed (1992), par 3709(h) at 818, where the learned authors say that it is an indispensable requirement of equitable set-off that the set-off actually go to the root of, be essentially bound up with, "impeach" the title of the plaintiff. If available, the set-off would operate on judgment or perhaps earlier to diminish or extinguish Direct Acceptance Corporation Ltd's claim: see par 3709(g) at 818 and Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd [1980] 2 NSWLR 514 at 518. 1. A complaint about the sale of a property at an under value is not one that impeaches the title of the Plaintiff to the land in question. 2. As far as the second basis for the stay is concerned, that is, that if Mr Sayed is successful on the cross-claim, the Woonona debt would be paid out on the basis of the pleading in the Amended Cross-Claim, the best result for Mr Sayed would be a finding that the Corrimal property was worth $1,050,000. So much appears in paragraph 38. All other things being equal, Mr Sayed would have $505,000 to pay out a debt on Woonona of $670,000. He was unable to say where the balance would be sourced. There was no evidence put on to demonstrate that he had other funds or availability to other funds to make up the difference. 3. However, all other things are not equal. First, on the assumption of a determination of the Cross-Claim by 1 September 2016, the evidence tends to suggest that interest alone to the date of the sale of Woonona in about January 2017 would amount to about $100,000 and the marketing and legal costs might be in the vicinity of about $60,000. The shortfall would be thereby increased. 4. Secondly, Mr Sayed's own evidence discloses that his former business partner, Mr Richard Taylor, had a 50 per cent interest in the Corrimal property. The evidence for this is to be found in paragraph 3 of Mr Sayed's affidavit of 22 April 2013 and tab 1 of exhibit 1 to that affidavit, paragraphs 9, 11, 12 and 15 of an affidavit of Mr Sayed of 22 August 2011 (which is tab 2 of the exhibit to Mr Sayed's April 2013 affidavit) and also the material behind tab 12 to that exhibit which includes the caveat lodged by Mr Taylor. 5. Mr Sayed said in submissions that Mr Taylor had been paid. The only evidence to support that submission was said to be paragraph 17 of Mr Sayed's affidavit of 22 April 2013, but that paragraph evidences only discussions between Mr Sayed and Mr Taylor in March 2009 of what might happen if certain offers were accepted in relation to the Corrimal development. 6. As far as the third basis for the stay is concerned, that is the breach asserted by the Bank of the In Principle Agreement and that part of it contained in exhibit A (the email of the 23 August 2012), tab 7 of Mr Sayed's exhibit to his affidavit of 4 September 2015 discloses that on 13 February 2009 NAB assigned a debt owed to it of $6,366.70 to Credit Corp Services Pty Ltd with a notice under s 12 of the Conveyancing Act 1919 (NSW) being given to Mr Sayed on the 4 March 2009. The VEDA document shows that its knowledge of that debt was derived from Credit Corp Services who obtained a judgment in the Local Court Downing Centre on 19 October 2010 for a claim made in 2009. On its face, this debt has nothing to do with the Corrimal or Woonona loans. 7. Moreover, there is no evidence that the debt had anything to do with the Corrimal or Woonona loans. Mr Sayed asserted that it did and pointed to paragraph 7 of the In Principle Agreement which provided: "Settlement amount of judgment debt includes amount owing on 'Classic Account' (approximately $26,000)." However, that could not be the same debt because the debt Credit Corp Services has obtained had been assigned in 2009. 8. Mr Sayed said the bank had failed to prove that it was not the same debt. However, he is seeking the stay on the ground inter alia that the Bank breached the In Principle Agreement. The onus is on him in the first instance to prove it was the same debt. The evidence is clearly to the contrary as I have shown. 9. The authorities that I mentioned earlier in relation to set-off concerned a claim in respect of land when the Mortgagee was at the stage of seeking a judgment for possession of that land. In the present case, by contrast, two things substantially strengthen the Bank's position. 10. First, it has a judgment which the Defendant was given time to satisfy but has not done so. 11. Secondly, the land, the subject of the dispute, is not the same land, and any award of damages in the Defendants' favour will not go to diminish what is owing under the judgment; rather it will merely provide a source of funds to reduce but not satisfy the judgment. 12. One further thing should be mentioned. Mrs Sayed was a party to the proceedings which resulted in the judgment. She was not made a party to this motion when she should have been. Her interests are not necessarily coextensive with Mr Sayed's. It is entirely possible that, especially in the light of the evidence from Alexandra Kirby, the Bank's lawyer, that Mrs Sayed would not have supported the present motion. 13. Mr Sayed fails to demonstrate any basis upon which the stay should be granted. 14. The Notice of Motion of 4 September 2015 is dismissed with 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. Decision last updated: 09 October 2015