Supreme Court New South Wales Medium Neutral Citation: Leda Holdings Pty Ltd v Naturelink Environmental Services Pty Ltd (in liquidation) [2016] NSWSC 619 Hearing dates: 10 May 2016 Date of orders: 10 May 2016 Decision date: 10 May 2016 Before: Adamson J Decision: (1) Dismiss the Notice of Motion for a stay of the writ of possession. (2) Order Mr George Barnes to pay the plaintiff's costs of the Notice of Motion. Catchwords: PRACTICE AND PROCEDURE – plaintiff assignee of first registered mortgage and mortgagee of second registered mortgage – defendant mortgagor of property – occupier guarantor of second registered mortgage – orders for possession made by consent between plaintiff and defendant – application made by occupier to be joined as defendant to proceedings after writ had been issued – application for stay of writ of possession – application dismissed Legislation Cited: Conveyancing Act 1919 (NSW), s 12 Uniform Civil Procedure Rules 2005 (NSW), r 6.8 Real Property Act 1900 (NSW), s 57 Category: Principal judgment Parties: Leda Holdings Pty Ltd (Plaintiff) Naturelink Environmental Services Pty Ltd (in liquidation) (Defendant) George Frederic Barnes (Applicant/Occupier) Representation: Counsel: AC Casselden (Plaintiff) A Cheshire SC (Applicant/Occupier) Solicitors: Knight Lawyers (Plaintiff) Bransgroves Lawyers (Applicant/Occupier) File Number(s): 2016/22624 Judgment Introduction 1. By notice of motion, George Barnes sought orders that he be added as a defendant to these proceedings and that the writ of possession for a property in Terrace Road, North Richmond (the Property) be stayed until 5pm on 23 May 2016. 2. As the writ was due to be executed on 10 May 2016, shortly after the matter came on for hearing, I decided the matter on the basis of the evidence to hand but also, in part, on the statements made by counsel from the bar table. Mr Casselden, who appeared for Leda Holdings Pty Ltd (Leda), the plaintiff, relied in part on the allegations in the statement of claim, which resulted in consent judgment and orders being made by the Registrar for possession of the Property on 18 March 2016. He also relied on an affidavit of Robert Kalde, the plaintiff's solicitor. Mr Cheshire SC, who appeared on behalf of Mr Barnes, relied on an affidavit of his instructing solicitor, Nicola Craven. There was no appearance on behalf of Naturelink Environmental Services Pty Ltd (in liquidation) (Naturelink), the defendant, which, as referred to above, consented to the orders for possession and the issue of the writ. 3. At the conclusion of the oral hearing before me on 10 May 2016, I refused the stay and ordered Mr Barnes to pay the plaintiff's costs of the application. My reasons from refusing orders are set out below. The facts The Westpac Mortgage 1. On about 10 July 1996 Naturelink granted a mortgage to Westpac Banking Corporation (Westpac) to secure various business loans (the Westpac Mortgage). The Westpac Mortgage was registered. Over time the Westpac Mortgage secured Naturelink's indebtedness to Westpac under various Business Finance Agreements dated 22 December 2000, which were varied on 14 July 2003 and on 4 September 2012. The liquidation of Naturelink 1. On 1 September 2014 this Court appointed a liquidator to Naturelink and ordered that it be wound up. It was a term of the Westpac Mortgage that the appointment by the Court of a liquidator constituted a default by Naturelink. The default under the Westpac Mortgage 1. By 8 January 2015 Naturelink was in default of the Westpac Mortgage and associated loan agreements by reason of its failure to pay amounts due and owing. By that date, the amount in arrears was in the order of $591,000 including interest. Westpac issued default notices on that date under s 57(2)(b) of the Real Property Act 1900 (NSW). The Leda Mortgage and the 2015 Proceedings 1. Naturelink was also in default under a mortgage granted to Leda (the Leda Mortgage), which secured performance under a sale contract (the detail of which was not revealed by the evidence). 2. The Leda Mortgage was, at that time, the second registered mortgage which, accordingly, ranked in priority after the Westpac Mortgage. Mr Barnes was a guarantor of Naturelink's obligations under the Leda mortgage. Leda commenced proceedings in this Court (2015/277616) (the 2015 Proceedings) to enforce its mortgage. These proceedings remain on foot. There is apparently a dispute, which forms the basis of a cross-claim filed by the liquidator of Naturelink, as to whether the Leda Mortgage is enforceable. 3. On 25 September 2015 Leda served a notice to occupier on Mr Barnes at the Property. By letter dated 2 October 2015 Mr Barnes' solicitor, Peter Mitchell, wrote to Mr Kalde foreshadowing an application by Mr Barnes to be joined as a defendant to the proceedings. By letter dated 6 October 2015 Mr Kalde responded. He indicated that Leda did not consent to the joinder and invited Mr Mitchell to articulate the basis on which Mr Barnes could be a party to the proceedings. No such application for joinder was made until the filing of the present application by notice of motion in Court on 10 May 2016. The assignment of the Westpac Mortgage 1. On 27 October 2015 in return for the payment of $658,195.67, Westpac assigned to Leda its rights in relation to Naturelink's debts together with its rights under the Westpac Mortgage. The assignment included Westpac's right to take possession of the Property in the event of default by Naturelink. Notice of the assignment was given to Naturelink pursuant to s 12 of the Conveyancing Act 1919 (NSW). The procedural history of these proceedings 1. By statement of claim filed on 22 January 2016 Leda claimed (against Naturelink) an order for possession of the Property and costs (these proceedings). In support of its claim it alleged various defaults on the part of Naturelink under the Westpac Mortgage, including: first, the defaults in payment to Westpac as at 8 January 2015; secondly, the failure to remedy the defaults notified by the notices served pursuant to s 57(2)(b) of the Real Property Act; and, thirdly, the appointment of a liquidator to Naturelink. 2. A notice to Mr Barnes, as occupier of the Richmond Property, was served on 4 February 2016. On 19 February 2016 Mr Mitchell, filed a notice of appearance dated 16 February 2016 on behalf of Mr Barnes, as "occupier". 3. On 4 March 2016 Leda filed a notice of motion seeking default judgment (no defence having been filed by Naturelink). The motion was made returnable on 18 March 2016 before Registrar Bradford. 4. On 17 March 2016 Mr Kalde wrote to Mr Mitchell (after he received the notice of appearance referred to above under cover of letter dated 17 March 2016). He noted that Mr Barnes had failed to apply to be joined as a defendant in the 2015 Proceedings and had not provided any basis on which he ought be joined to these proceedings. Mr Mitchell responded on the same day, informing Mr Kalde that Mr Barnes had been attempting since 12 February 2016 to obtain the consent of the liquidator of Naturelink to challenge the Leda Mortgage (which he described as "the consent application"). The letter continued: "However, on the basis of the asserted value of the land and the amounts claimed by your client pursuant to these two mortgages, there is no apparent equity in the land available for those costs or to satisfy any creditor claims. Should the second mortgage be set aside then there is a significant equity in the land available to the liquidator for the satisfaction of his costs and the claims of creditors. Counsel has been briefed as to the bringing of the consent application and in respect of the pleadings seeking to impugn the second mortgage the subject of proceedings 2015/277616. The drafting of documents necessary to support the consent application has been commenced." 1. At the hearing of the notice of motion on 18 March 2016 Mr Kalde instructed Mr Casselden of counsel. Ms Rogers of counsel appeared on behalf of Mr Barnes. Mr Caramanalis appeared on behalf of Naturelink (instructed by its receivers). There were discussions between legal representatives, in the course of which Ms Rogers indicated that Mr Barnes needed eight weeks to vacate the Property. Ms Rogers did not inform Mr Kalde (or anyone in his presence), or the Court, that Mr Barnes intended to claim an interest in the Property. 2. Following those discussions, draft consent orders were agreed and handed to the Registrar who made orders that Naturelink give possession of the Property; a writ of possession to issue forthwith; and that Naturelink pay Leda's costs. 3. By notice of motion filed on 22 March 2016 Leda sought the Court's leave for the issue of a writ of possession of the Property and that such a writ be issued. The affidavit filed in support of the notice of motion referred to an affidavit of service which established that Mr Barnes had been served by a notice to occupier as required by Uniform Civil Procedure Rules (UCPR), r 6.8. 4. By notice dated 30 March 2016, the Sheriff's Officer informed Mr Barnes (as the occupier of the Property) of the writ and his obligation to vacate the Property by 10am on Tuesday 10 May 2016. 5. At 3.30pm on 9 May 2016 Ms Craven telephoned Mr Kalde informing him of Mr Barnes' intention to apply to the Duty Judge for a stay of the writ of possession. The parties' submissions Mr Barnes's submissions 1. Mr Cheshire submitted that Mr Barnes has, by reason of a trust, an equitable interest in the house and the land immediately surrounding it, located within the larger area that comprises the Property (which includes further land not the subject of the trust). He also submitted that Mr Barnes had an interest in the enforceability of the Leda Mortgage, since his position as guarantor gave him standing to challenge that mortgage; or, alternatively, he could bring a derivative action (with the consent of Naturelink's liquidator) on behalf of Naturelink. 2. Mr Cheshire informed me that the reason Naturelink had gone into liquidation was that Leda had enforced its claim for damages under the sale contract that was secured by the Leda Mortgage. He said that it was Naturelink's liquidation which caused Westpac to issue default notices under the Westpac Mortgage (since the liquidation of the mortgagor constituted a breach of the mortgage). He argued that, by seeking to enforce the Westpac Mortgage (on the basis of the assignment), Leda was, effectively, profiting from its own breach, or the conduct which Mr Barnes contended was a breach, arising from the Leda Mortgage. Mr Cheshire informed me of his instructions that the initial default under the Westpac Mortgage occurred when Naturelink went into liquidation and that this led to all of the monies outstanding under the mortgage becoming due and owing, which, in turn, led to the default notices served by Westpac on Naturelink on 8 January 2015. 3. According to Mr Cheshire, Naturelink's liquidator has challenged the Leda Mortgage on the basis that it is an unfair preference. I understand this challenge to be by way of cross-claim in the 2015 proceedings. 4. Mr Cheshire submitted further that, although Mr Barnes was present at the hearing of Leda's application for a writ of possession before the Registrar, the orders made by the Court on that occasion would not bind him, because he was not a party to the proceedings. Leda's submissions 1. Mr Casselden submitted that, irrespective of whether the Leda Mortgage could be challenged, Leda was entitled to possession by reason of Naturelink's breaches of the Westpac Mortgage, which was relevantly unassailable (and pre-dated the assignment to Leda of the Westpac Mortgage). 2. Mr Casselden disputed Mr Cheshire's instructions as to the reason for Naturelink's liquidation. Mr Casselden's instructions were that Naturelink had taken out a deposit bond to use on the purchase of a parcel of land in Queensland. The bond was called on by the vendor. QBE, which had issued the deposit bond, then sought to recover under the indemnity provisions against Naturelink. Naturelink did not pay QBE, which moved for it to be wound up. On this basis, he submitted that Leda had nothing to do with the winding up of Naturelink. 3. Mr Casselden submitted that, in circumstances where there is no challenge to the Westpac Mortgage and no challenge to the assignment to Leda, there was no basis to order a stay. He also relied on Mr Barnes' delay. Further, Mr Casselden contended that the undertaking as to damages proffered by Mr Barnes has not been shown to have any value. Consideration 1. I was not persuaded that there were any proper grounds on which to grant a stay of the writ of possession of the Property. Whatever rights Mr Barnes has to challenge the Leda Mortgage do not appear to affect Leda's right to possession of the Property under the Westpac Mortgage, of which it is assignee. Leda is entitled to the priority afforded by a first registered mortgage. 2. The arguments advanced by Mr Cheshire in support of the stay depend, substantially if not wholly, on the proposition that Leda's rights under the Westpac Mortgage are infected by any unconscionable conduct associated with the Leda Mortgage. Although various connections were alleged (including that the default under the Leda Mortgage had led to the winding up of Naturelink, which in turn had been relied on by Westpac as a default of its mortgage), the evidence does not bear out any such connection. In any event, Westpac issued default notices in respect of Naturelink's failure to pay which were independent of its right to rely on Naturelink's liquidation as a separate default. 3. Furthermore, there is no particular reason why the enforcement of the writ should be deferred or disrupted for any period in circumstances where, as the narrative set out above discloses, Mr Barnes has positively collaborated in the making of consent orders which led to the writ of possession and has not acted to protect his asserted position with any degree of alacrity. Orders 1. For the foregoing reasons, I made the following orders on 10 May 2016: 1. Dismiss the Notice of Motion for a stay of the writ of possession. 2. Order Mr George Barnes to pay the plaintiff's costs of the Notice of Motion. ********** 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: 13 May 2016