The Trust Company (PTAL) Limited v Penna [2019] NSWSC 1883

Supreme Court New South Wales

Medium Neutral Citation: The Trust Company (PTAL) Limited v Penna [2019] NSWSC 1883 Hearing dates: 20 December 2019 Date of orders: 20 December 2019 Decision date: 20 December 2019 Jurisdiction: Common Law Before: Beech-Jones J Decision: Prayers 2 and 3 of the Notice of Motion filed in Court on 20 December 2019 are refused. The notice of motion is otherwise dismissed. Catchwords: Stay of execution of Writ of Possession – no question of principle Legislation Cited: Civil Procedure Act 2005 Cases Cited: The Trust Company (PTAL) Limited v Penna (2019) NSWSC 189 Category: Procedural and other rulings Parties: The Trust Company (PTAL) Limited (Plaintiff) Giulia Penna (First Defendant) Representation: Counsel: MW Young (Plaintiff) A McQuillan (First Defendant)

Solicitors: Summer Lawyers (Plaintiff) Nicholas Vasta & Company (First Defendant) File Number(s): 2019/100619

EX TEMPORE Judgment 1. Before the Court is a Notice of Motion filed in Court today, the principal claim for relief being that the execution of a writ of possession over the defendant's property at 13 Cove Street, Haberfield be stayed until completion of a sale pursuant to a Contract for Sale dated 18 December 2019. 2. As I will explain, the basis for the application for the stay is said to arise from the necessity by the first defendant to complete that sale. 3. The background to the matter is set out in a judgment of Lonergan J given on 13 December 2019 (see The Trust Company (PTAL) Limited v Penna (2019) NSWSC 189). With the benefit of that judgment, some material on the Court file and the affidavits read on the motion it is, however, necessary to repeat part of that history. 4. At some time in 2017 a loan of $3 million was secured over two properties in Haberfield, 11 Yasmar Street and 13 Cove Street. Based on the Statement of Claim it appears that the principal debtor was a company and the three defendants were guarantors of the loan. The loan went into default in early 2019 and then on 1 April 2019 a Statement of Claim was filed seeking possession of those two properties. One of those properties, 11 Yasmar Street, Haberfield, was at least part‑owned by the first defendant, Ms Penna. It has since been sold and the proceeds applied in reduction of the indebtedness. 5. No Defence was filed to the Statement of Claim. A Notice of Motion seeking default judgment was filed in May 2019. 6. On or about 1 August 2019, judgment for possession was given in respect of the property at 13 Cove Street, Haberfield. A writ of possession was issued but for various reasons, not apparent on this application, the writ was stayed for a number of months. 7. Ultimately, a Deed of Release dated 4 November 2019 was entered into under which the plaintiff agreed to stay the execution of its rights on condition that the sale of the land in Yasmar Street would be applied in reduction of the indebtedness and that there would be a refinance of the balance of the loan. 8. Towards the end of November 2019, refinancing was due to occur. It appears that a solicitor in the office of the solicitors acting for the plaintiff was separately acting for the financier. 9. In an affidavit sworn 12 December 2019, that solicitor explains that shortly prior to the proposed settlement she notified her client of a media release issued by ASIC indicating that Ms Penna had been banned from acting as a provider of financial services and had also been the subject of convictions for fraud offences in July 2010. The solicitor records that she received instructions not to proceed with the settlement of the proposed loan necessary to refinance the plaintiff's debt. For the sake of completeness, I note that in an affidavit sworn on this application Ms Penna disputes the fact of the banning, or what is stated by ASIC about the banning order. However, she ultimately accepted she had been convicted of fraud offences. 10. The withdrawal of the offer of finance effectively brought to an end the forbearance that the plaintiff had contractually agreed to provide. This gave rise to the potential for the execution of the writ of possession and the eviction of Ms Penna from the property in Cove Street, Haberfield, which I note she owns with another person. 11. This led to a series of applications before Lonergan J culminating in the judgment to which I have referred. In that judgment, her Honour recorded that on 11 December 2019 she was approached by Ms Penna seeking a stay which her Honour, with some reluctance, granted. Her Honour ordered a stay of the eviction until Monday, 16 December 2019. 12. In the meantime her Honour heard, on 13 December 2019, a contested application for an extension of the stay at which the plaintiff was represented by Senior Counsel, Mr Young SC. In her judgment, her Honour addressed in some detail the circumstances surrounding the collapse of the refinance proposal. Her Honour refused any extension of the stay. 13. Apparently the eviction was at least tentatively scheduled for midday on 16 December 2019. I was sitting as the Duty Judge on that day. At 11.45am an ex parte application was made to me to seek a further stay. Needless to say the making of that application ex parte in circumstances where a contested application had been heard the previous Friday was a matter of some concern. 14. The basis of the application that was made included some attempt to relitigate the matters determined adversely to Ms Penna by Lonergan J. However, it was also submitted that since her Honour had refused to extend the stay on 13 December 2019 Ms Penna had been able to negotiate a sale of the property. The Court was provided with a letter that bore the date 13 December 2019 signed by a Mr Boris Dutina which referred to his confirmation of an offer to purchase the property at 13 Cove Street Haberfield for $2,050,000, his willingness to provide Ms Penna with a deposit of $102,500, being five percent of the purchase price, and that he was ready, willing and able to exchange contracts "ASAP". 15. The purchase price of $2,050,000 appears to be well above the amount owing to the plaintiff, although there appears to be some dispute as to what that amount is in that it appears to have increased from the amount stated in the Deed. 16. On 16 December 2019, I refused the application especially having regard to the paucity of the material available to me concerning the sale and the fact that it was, as I have said, largely attempting to relitigate the matters decided by Lonergan J. 17. On 19 December 2019 a further application was made for a stay before Walton J who on that day was the Common Law Duty Judge. Remarkably, the application was also made ex parte. There appears to have been an attempt to develop the application for a stay based on the existence of a contract concerning the proposed sale of the property in Cove Street, Haberfield. 18. A transcript of the proceedings before his Honour is not yet available, but it appears that the effect of what his Honour determined was that it would not be considered in the absence of a notification to the plaintiff. As some form of notification was given, the matter was then re-listed before me today, being the last day of term. 19. I note that at some stage a text message was sent from Ms Penna's solicitor to the plaintiff's solicitor asserting that Justice Walton has "stated that the Sheriff can take no action until he decides" the application before him. As I said, the transcript is not available. However, the e-mail messages between His Honour's Associate and the Supreme Court Registry and the Sheriff provide no support for that assertion. Instead, all that was stated and all the Sheriff appears to have been advised is that the matter was before his Honour. There is no record of his Honour granting any stay even for a short period. 20. As noted, the matter came back before me today. There was read on the application an affidavit of Ms Penna dated 18 December 2019 which annexed various documents. The affidavit and its annexures had not been served on the plaintiff's solicitors before this morning. Even today, a copy of that was not made available to them. Instead, they were forced to share a copy with the copy in the possession of Counsel for Ms Penna. 21. As best as I can ascertain all that the plaintiff's solicitors were told previously was that there had been a sale. They had only been given a single page of the sale contract signed by the proposed purchasers and a bank receipt for a deposit said to have been paid to Ms Penna. 22. This morning there was tendered what is said to be the exchanged contracts which bear the date 18 December 2019, one signed on behalf of the vendors and one signed by the purchasers. The contracts confirm the sale price as $2,050,000. The contracts consist of a reasonably bare front page to which is attached the standard terms and conditions for the sale of a residential property. They do not include any special terms or the usual annexures concerning sewerage diagrams, Council certificates and the like. 23. Not surprisingly, the plaintiff was inherently suspicious of the entire process, including the alleged contract. Ms Penna was cross-examined about the circumstances in which the contract came to be formed. It suffices to state that her explanation in oral evidence was particularly unsatisfactory. Her initial version was that following the rejection of her stay application on 13 December 2019 by Lonergan J she made various contacts with persons who might know of other people who might be interested in purchasing the home in Haberfield. She said she met the relevant purchasers the following morning who made an offer and then the contracts were signed on 18 December 2019. 24. At this point the letter dated 13 December 2019 that was provided on the ex parte application on 16 December 2019 was provided to Senior Counsel for the plaintiff. When cross-examined on that document, Ms Penna gave a different version of events which involved her having spoken to the proposed purchaser, Mr Dutina, on the evening of 13 December 2019 at which time he obtained details of the information and apparently made some form of verbal offer, for $2,050,000. She said he ultimately attended the property the next day and provided her with the letter. 25. Having heard that, and without summarising all the various inconsistencies, and bearing in mind the relevantly unsatisfactory evidence Ms Penna gave about her fraud conviction, I was left with considerable doubt that any aspect of the alleged transaction was genuine. 26. However, after the morning tea adjournment Mr Dutina gave evidence. He stated that he has an interest in property development and became aware of the possibility of purchasing a substantial block of land in Haberfield close to the City. He thought he could pursue for some form of subdivision and development. He determined that there was an opportunity for a reasonably quick and, not his words, cheap sale. He says he spoke to Ms Penna on the evening of Friday, 13 December 2019, indicated a purchase price and that Ms Penna said that she at least needed a letter recording an offer which he prepared on that day and provided to her on the following day. 27. Mr Dutina was asked about the date that he signed the contract for sale. He appeared to have a less than impressive recall of that occasion but did nominate 18 December 2019, being two days ago. He stated that he signed his version of the contract at a coffee shop in the city across the road from his place of work. 28. On this application Senior Counsel for the plaintiff put to both witnesses, and submitted to me, that it should be concluded that the agreement is effectively a sham designed to allow Ms Penna the ability to later walk away from the agreement and thereby continually extend her occupation by obtaining a stay for whatever reason. Senior Counsel pointed to what was said to be either the inherently implausible or at least reasonably remarkable circumstances in which the contract for sale came into existence, the fraud conviction and the general, for want of a better phrase, shabbiness of the Contract for Sale. 29. Were it simply a matter of having regard to Ms Penna's evidence I would, even on this truncated and interlocutory basis, accept that submission. However, Mr Dutina's evidence was far more persuasive than Ms Penna's evidence. The end result is that the only relevant finding I could make is that there is reason to doubt the genuineness of the agreement, although I would certainly not go as far as to find that it is a sham. Perhaps, more importantly, there are significant reasons to doubt the enforceability of the agreement against Mr Dutina given the form in which the contract has been prepared. 30. On the application it was submitted on behalf of Ms Penna that Mr Dutina wishes to have a short period before settlement and he indicated as such in his evidence. He indicated that he had access to finance and that he was willing to complete the contract and that he was confident he would have the funds to do so. 31. It is important to recall exactly what power the Court is exercising. There is no doubt whatsoever that there has been a long-standing default under the relevant mortgage entitling the plaintiff to an order for possession. The Court's power to stay a writ of possession appears to be simply an aspect of its discretion in s 135 of the Civil Procedure Act which confers a power to give directions with respect to the enforcement of its judgment and its orders. 32. There is, at least to my mind, considerable uncertainty as to the scope of that discretion in a case such as the present where there is a long-standing default under a mortgage. The factors that appear to be relevant to the exercise of that discretion would, on the most favourable view to Ms Penna, appear to be the respective prejudice to the parties and perhaps third parties that would be occasioned by the granting or the refusal of relief, as well as matters such as delay affecting whether a party should be entitled to relief in the form of a stay. Nevertheless, the discretion has to be considered in the circumstance that what is being undertaken is the prevention of a party such as the plaintiff from enforcing its legal rights. 33. What is the prejudice to either party from the grant or refusal of a stay of a writ of execution? Having been unsuccessful in pursuing a refinancing, Ms Penna now seeks a stay to pursue a sale. However, for my part I have difficulty in seeing how it is that the refusal of her application for a stay will truly prejudice the pursuit of the sale with Mr Dutina. In the witness box Mr Dutina was clear in stating that he is indifferent as to whether it is in fact Ms Penna who is in possession of the property or somebody else prior to his sale completing provided that it does. 34. There is nothing commercially that would prevent the plaintiff from effectively completing the sale to Mr Dutina if the writ of possession was executed subject, as Mr Young SC noted, to the owner's consent, a matter that they could hardly reasonably withhold given that it was they who negotiated the sale in the first place (and the sale price corresponds with the valuation of property that they tendered). 35. The only real prejudice to Ms Penna that I can ascertain from a refusal of the stay is, of course, the dislocation that will come in the following weeks between now and when it is proposed to complete the sale to Mr Dutina. That potential prejudice was not put with much force and, in any event, it has to be considered in the circumstance where the occupants of the premises have been living at the premises for a period of in excess of six to eight months while they were in default of their mortgage. The potential for them to have to leave must have been apparent for a long time and would have been extremely acute in the last few weeks. 36. On the other hand, if a stay was to be granted it would, to my mind, have the real potential to prejudice the plaintiff. I have already referred to my misgivings about whether the contract for sale is a genuine contract. I have also referred to my misgiving about the enforceability of the contract. If either of those misgivings reflect the true position, then the grant of the stay would, it seems to me, create a significant risk to the plaintiff that it would not be able to enforce its rights for a considerable period because, as the contract for one reason or another unravelled, it is likely that there would be further applications of this kind. The Sheriff's process of arranging execution of its writs would be put back in the usual way. 37. I am firmly of the view that the best means to ensure a sale in the short term of the premises at Cove Street, Haberfield, is to refuse a stay of the writ of execution. This will then allow the plaintiff control over possession of the property and control over the sale process. If, events transpire that the contract for sale with Mr Dutina and his mother is genuine and enforceable and at a price that the owners wish to adhere to, then I cannot see any genuine commercial reason why the plaintiff would not pursue it. If, however, that is not the case then the onus will then be on the plaintiff to effect the sale at a fair price in the appropriate way. 38. On the other hand, if the writ of execution was to be stayed for a further period there is, in my view, a reasonable likelihood that the orderly sale of the property and the satisfaction of the mortgage debt will be significantly disrupted. 39. Accordingly, I refuse Prayers 2 and 3 of the Notice of Motion dated filed in Court today, 20 December 2019. The Notice of Motion will be otherwise dismissed.