Spencer v Bamber [2011] NSWSC 141

A sister lent her brother money on the security of farming property. The loan was not repaid and the sister successfully sought possession. The property was passed in at auction. The sister then sought an order for foreclosure pursuant to section 61 of the Real Property Act 1900. Personal service of the notice to apply for foreclosure to the brother was not given but nevertheless an order was made pursuant to section 170(1) of the Conveyancing Act to permit substituted service on the brother’s solicitor and the foreclosure order was made. The brother sought to have the foreclosure order set aside on the ground that the pre-conditions were not satisfied and lodged a caveat.

The court found that the first question is whether there was a serious question to be tried that the brother was entitled to set aside the order for foreclosure. The court held yes because there was a serious question as to whether the order authorising substituted service was properly obtained and whether such an order satisfied section 61(2)(d) of the Real Property Act. The second is whether the balance of convenience favours extending the caveat. The court held no and refused to extend the caveat in relation to the land sold, taking account of the following:

  1. The brother did not offer to pay the debt that would be payable upon the mortgage debt reviving and the foreclosure order being set aside;
  2. The sister was owed a very substantial debt for almost four years;
  3. There was no evidence to impugn the sale negotiated by the sister;
  4. If the sister was restored as mortgagee, she would not be restrained from exercising a power of sale; and
  5. The fact that the sister may have sold a plough belonging to the brother and be liable in damages for conversion is not a ground for setting aside the order or a reason to retrain the sale.

However the court did permit the brother to lodge a fresh caveat in relation to that part of the land not the subject of the contract of sale unless:

  1.  the sister gave an undertaking not to sell the land (not the subject of the contract of sale) until the final determination of the proceedings upon the brother tendering the debt payable or
  2.  in the event that such land was sold, the sister gave an undertaking not to deal with the surplus proceeds (over and above the amount of the debt) except as the court directs.

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