In National Australia Bank v Leon Nikolaidis & Ors [2011] NSWSC 506 the NSW Supreme Court held that in the circumstances of that case it was appropriate to suspend NAB’s obligation under Uniform Civil Procedure Rule 6.8(1)(b) to serve a claim seeking possession of land on the occupier of the land, together with a notice to the effect that the occupier may apply to the court for an order that they be joined as a defendant within 10 days or otherwise be evicted under a judgment entered in their absence.
The Facts
NAB commenced proceedings for possession of five properties, two of which were residential units consisting of 13 residential tenancies, and a third property which was leased to a corporation under a commercial lease. None of the occupiers of these properties were defendants to the proceedings. The two remaining properties were the homes of the defendants.
The defendants sought NAB’s agreement not to serve notices to occupiers on the basis that service of the notices at that stage in the proceedings was unnecessary and would cause financial difficulty to the defendants. NAB considered that it was obliged under the UCPR to serve the notices and invited the defendants to apply to the court for relief, which they did.
McCallum J agreed with NAB that it was obliged under the UCPR to serve the notices. The issues before the court were then:
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whether UCPR 6.8 requires that the notice be given at the time the proceedings are commenced
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if so, whether the court has power to suspend, dispense with or stay that requirement
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if so, whether it is appropriate to do so in the present case.
McCallum J noted that rule 6.8 did not make specific reference to the time the notice had to be served, but said that the plain intention of the rule was that it should be served at the commencement of proceedings. However, neither common sense nor authority dictated that the requirement of the rule should be unbending.
McCallum J said in appropriate cases the court may suspend or even dispense with the requirement to serve a notice to occupier and when determining that issue, the court should have regard to a number of factors including the objects of UCPR 6.8 (i.e. to protect the interests of occupiers and to enable the plaintiff to meet any adverse claims they may bring in a timely and cost effective manner).
The evidence before the court was that there was at least a risk that service of a notice on the commercial tenant may jeopardise negotiations for a new lease and result in the loss of that tenant. The evidence relating to the residential tenants also fixed on the risk of the tenants leaving, and the likely stress and worry that might be occasioned, unnecessarily, to residents who had been in occupation of the units in some instances for more than 20 years. The other basis for the application was that the defendants argued that the service of notices to occupiers was not necessary at that stage in the proceedings as they proposed to file a cross claim alleging that NAB had no right to possession, which was an entirely discrete issue that could and should be determined separately from any question raised by any occupier.
The Decision
McCallum J held that in the circumstances it was appropriate to defer service of the notices until after the defendants had filed their cross claim and a defence. At that stage NAB could consider the appropriateness of having the cross claim determined, prior to any claim by an occupier.
The court moulded the relief so that NAB was only required to serve notice on those persons in occupation of the land at the time that the requirement to serve the notices was enlivened, noting that there may be a change in occupiers between the commencement of proceedings and the time at which the notices are served.
The service of the notices was suspended on the understanding that the court would, in due course, if the occasion arises, direct the plaintiff to serve the claim upon and give notice to any person not joined as a defendant who is then in occupation of the land. McCallum J said she did not suggest that the requirement to serve notices to occupiers should be suspended in every case in which a cross claim is brought. The dictates of justice will vary according to the circumstances of the case. In the present case it was relevant that:
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there was evidence that NAB had ample security for the debt
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the defendants were not suggested to be recalcitrant debtors in the sense that they had defaulted in the regular payment of amounts due, and
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the principal contest between the parties appeared to be a discrete and arguably anterior issue (i.e. whether the security held by NAB was enforceable).
The period of the order was however limited to when the defendants filed their defence and cross claim and the parties had an opportunity to address the court as to the appropriate course of proceedings from that point.
Conclusion
Such an approach could mean that any claim made by an occupier is delayed so that the mortgagee could, in theory, have to deal with a further claim by an occupier after having dealt with any discrete and/or anterior claim from the mortgagor, but subject to how far into the proceedings the suspension on service of notices on occupiers is lifted. In the event that such a claim was delayed, the result may be that at least one of the objects of the rule is not met i.e. to enable the mortgagee to meet any adverse claims brought by an occupier in a timely and cost effective manner.
