Readers will be familiar
with a series of 3 posts I wrote about priority disputes between a registered
mortgagee and a tenant.
To refresh your memory, the posts can be
read here: http://bit.ly/2ntwt5T, http://bit.ly/2n4DMQP, and http://bit.ly/2n4DHwv
Despite the lack of
success in these cases by tenants, that has not stopped tenants from trying to
restrain a mortgagee from exercising its rights to possession of the mortgaged
property after the borrower/landlord’s default.
In Annesley
v Westpac Banking Corporation [2016] VSC 323, Derham As J, dealt with such
a case.
In that case, Westpac, as mortgagee in
possession, sought to dismiss the tenant’s claim summarily pursuant to ss 62 and 63 of the Civil Procedure Act 2010. Alternatively, it
sought judgment, a permanent stay or that the claim be struck out pursuant to
the Supreme Court (General Civil Procedure) Rules 2015.
The registered proprietor
and the previous registered proprietor of the property at 349 Nepean Highway,
Brighton East, Victoria (‘the Property’) had borrowed
moneys from Westpac secured by a mortgage over the Property.
The borrowers defaulted
under the mortgage and on 2 April 2014 the Victorian Supreme Court ordered that Westpac
recover possession of the Property. Appeals from that order were unsuccessful.
The Sheriff executed a
warrant for possession on 10 February 2016 and obtained possession of the
Property for Westpac. The Sheriff’s reports reveal the Property was then, and
for a considerable period before that date had been, uninhabited and
uninhabitable.
The next day, the
plaintiff, (‘Mr Annesley’), commenced a VCAT proceeding, seeking
an order under s 472 of the Residential Tenancies Act 1997 ('RTA') restraining Westpac from evicting him from
the Property without obtaining a possession order from VCAT. Attached to
the application was what purported to be a residential tenancy agreement for
the Property dated 8 August 2015 between Mr Annesley and the previous
registered proprietor of the property. The residential tenancy agreement relied
upon by Mr Annesley contained a code ‘RT1(11/15)’ which an officer of
Consumer Affairs Victoria swore means the document was last updated in
November 2015. In other words, the pro forma residential
tenancy agreement used was not available until November 2015.
On 11 February
2016, VCAT’s Residential Tenancies List heard Mr Annesley’s application in
the absence of the landlord and Westpac.
The Tribunal made interim orders
on the basis that it found that the landlord and tenant were parties to a
tenancy agreement subject to the RTA. The landlord and the Westpac Banking
Corporation were required to take certain action in performance of duties under
the tenancy agreement or the RTA.
At a further hearing on 29 March 2016,
the Tribunal dismissed Mr Annesley’s application and set aside the orders
made on 11 February 2016.
On 11 May 2016,
Robson J granted Westpac a further warrant of possession in respect of the
Property as a result of the previous registered proprietor of the Property re-entering the Property without
permission. In addition, Robson J granted injunctions restraining
Mr Annesley, the registered proprietor of the Property and the previous registered proprietor of the Property from seeking to re-enter
the Property once Westpac was restored to possession of it.
Federal Court Proceedings
As an aside, on 25 March 2015, registered
proprietor and the previous registered proprietor of the property had commenced
proceedings against Westpac in the Federal Court of Australia. The
proceeding concerned the same matters that had arisen in the Supreme Court proceeding
in which Westpac had obtained an order for possession of the Property in 2014. The
registered proprietor and the previous registered proprietor of the property sought,
amongst other things, orders restraining Westpac from enforcing its mortgage over
the Property and seeking payment of damages. On 24 April 2015, Westpac
made application for summary dismissal of the proceeding and on 27 October
2015, Beach J summarily dismissed the proceeding. The
reasons for judgment published by Beach J on 27 October 2015 reveal a
long and arduous process between the time of the making of the application by
Westpac and the time of judgment. That long and arduous process was a product
of a variety of applications made by registered proprietor and the previous
registered proprietor of the property, and a series of adjournments and
extensions of time as well as applications for leave to appeal from orders made
by his Honour of an interlocutory kind. The account given by Beach J of
these events shows a determination by registered proprietor and the previous
registered proprietor of the property to delay and obfuscate.
The Course of the current Proceeding
The writ was issued on
1 April 2016 but not served. Nevertheless, Westpac entered an appearance
to the writ on 5 April 2016.
Westpac filed its
summons seeking summary judgment on 12 April 2016. The summons was
returnable on 2 May 2016. On 28 April 2016, Westpac’s solicitors
emailed the Associate Justice’s chambers, and copied the email to
Mr Annesley, the registered proprietor and the previous registered proprietor
of the property, attaching electronic copies of the affidavits and their
exhibits for the convenience of the Court.
The registered
proprietor and the previous registered proprietor of the property did not participate in the hearing or appear in court on that
date.
An email response was
received from Mr Annesley on 29 April 2016. He said in his email,
among other things:
… I have not served notice of this action
on any of the defendants as detailed in my writ and statement of claim.
…
I do
not wish to be dragged into these proceedings at the present time.
The Associate Justice’s
chambers responded to all the parties confirming that the proceeding had been
listed before him on 2 May 2016 at 2.15 pm.
On the particular facts
of the case, the Associate Justice found that Mr Annesley had no real
prospect of establishing that he was a tenant at the Property pursuant to the alleged
residential tenancy agreement.
His Honour went on to
find that the indicia also provided substantial grounds to infer, as a matter
of fact, that the tenancy agreement was not a genuine transaction entered into
between Mr Annesley and the previous registered proprietor of the property.
It appeared to be a device established to frustrate the rights of Westpac under
its mortgage and its judgment for possession.
In this case, Westpac did not submit that its
registered mortgage over the Property and its judgment against the registered
proprietor for possession, each of which pre-date any purported tenancy
agreement to which Mr Annesley is a party, has the result that Westpac’s
proprietary interest as mortgagee is not subject to the interest of a tenant in
possession under s 42(2)(e) of the TLA.
It did not so submit
because of the operation of the terms of s 216 of the RTA, which provides:
Despite
any Act or law to the contrary, a tenancy agreement does not terminate and must
not be terminated except in accordance with this Division or Part 7 or 8.
His Honour concluded
that this provision, and all the provisions to which it points, are premised on
the assumption that there is a valid and enforceable tenancy agreement.
At paragraphs 88 to 89,
Derham As J held:
As a general proposition, it is an essential element of a present demise
or grant of a lease (a letting) by contract that the tenant is given exclusive
possession, and quite enjoyment, of the premises in
question. That is, if another person is lawfully in possession, or has the
present right to possession, of the premises there can be no valid demise or
grant of exclusive possession to another.
[89] In my view, if the tenancy agreement was entered into as alleged by
Mr Annesley, there is no real prospect of him establishing that the
tenancy agreement ever had any force or effect as a demise or grant of
exclusive possession of the Property for the term of 12 months. That is because
when the previous registered proprietor of the property purported to enter into
the tenancy agreement he had no right to possession to grant to Mr Annesley.
He held, at best, an equitable interest in the fee simple which was subject to
Westpac’s legal mortgage and to its right to possession pursuant to the
judgment of the Court.
Conclusion
After a very lengthy
delay, due to the number of obstacles placed in the way of the mortgagee by the
players, and apart from having some interest as a result of finding
apparent misconduct by the former registered proprietor and the alleged tenant,
the claim ultimately otherwise went the same way as those referred to in my
previous posts: the mortgagee prevailed over the interest of the alleged
tenant.
WG Stark
Hayden Starke Chambers
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