AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd
[2020] VSCA 236
•3 September 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S EAPCI 2020 0090
| AE BRIGHTON HOLDINGS PTY LTD (ACN 166 492 306) | Applicant |
| v | |
| UDP HOLDINGS PTY LTD (Subject to Deed of Company Arrangement) (Receivers and Managers Appointed) (ACN 167 100 692) | Respondent |
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| JUDGES: | KYROU, KAYE and SIFRIS JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 3 September 2020 |
| DATE OF JUDGMENT: | 3 September 2020 |
| DATE OF REASONS: | 11 September 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 236 |
| JUDGMENT APPEALED FROM: | [2020] VSC 564 (Moore J) |
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INTERLOCUTORY INJUNCTION – Residential property – Mortgage – Mortgagee sale – Settlement on 4 September 2020 – Application for injunction refused by judge in Trial Division – Application for interlocutory injunction pending filing, hearing and determination of application for leave to appeal – Application dismissed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr J Levine | The Law Professionals |
| For the Respondent | Mr C Young SC with Mr P Annabell | Ashurst |
KYROU JA
KAYE JA
SIFRIS JA:
Following an urgent hearing at 6:00 pm on 3 September 2020, the Court made an order later that evening dismissing an application by the applicant, AE Brighton Holdings Pty Ltd (‘AE’), for an interlocutory injunction to prevent the sale of two properties in Brighton from being completed on 4 September 2020. We also ordered that AE pay the costs of the respondent, UDP Holdings Pty Ltd (‘UDP’). These are our reasons for making those orders.
Facts
On 2 December 2013, AE became the registered proprietor of the property at 2 Kinane Street, Brighton. On 10 September 2014, AE became the registered proprietor of the adjoining property at 92 Esplanade, Brighton. Westpac Banking Corporation (‘Westpac’) was the first registered mortgagee of the Kinane Street property and JM Nominees Pty Ltd (‘JM’) was the second registered mortgagee of that property. JM was the first registered mortgagee of the Esplanade property.
Although the two properties are on separate titles, they became functionally integrated. There is a house and half a tennis court on the Kinane Street property and a swimming pool and the remaining half of the tennis court on the Esplanade property. There is a restrictive covenant on the title to the Esplanade property prohibiting the construction of ‘any form of dwelling, residence or habitable building’.
On 1 July 2017, UDP lodged a caveat on the titles of both properties claiming an interest under ‘an implied, resulting or constructive trust’. AE applied to the Trial Division for an order that the caveat be removed (‘caveat proceeding’). On 15 October 2019, Ginnane J dismissed the application.[1] On 11 September 2020, this Court refused AE leave to appeal against Ginanne J’s decision.[2]
[1]AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2019] VSC 688.
[2]AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2020] VSCA 235.
On 18 November 2019, JM assigned its mortgage (‘JM mortgage’) to UDP. Notice of the assignment was provided to AE.
Also on 18 November 2019, Westpac and UDP — which has been in receivership for several years — executed a priority deed in respect of the properties. We were not provided with a copy of the priority deed. However, we were informed that it conferred priority to the Westpac mortgage over the JM mortgage in respect of the Kinane Street property and also contained a provision by which Westpac dispensed with the need for it to give consent to JM taking enforcement action.
On 19 November 2019, UDP obtained a warrant of possession in respect of the properties. UDP took possession of the properties on 12 March 2020. UDP commenced marketing the properties in mid-2020. AE was aware of UDP’s marketing activities.
On 21 July 2020, UDP sold the properties for a combined amount of $16,500,000. The contract of sale allocated $10,995,600 of the sale price to the Kinane Street property and $5,504,400 to the Esplanade property. Settlement was scheduled for 4 September 2020. On 31 July 2020, UDP notified AE of the contract of sale.
On 25 August 2020, the applicant filed a writ with a general indorsement of claim and a summons seeking an interlocutory injunction to prevent the completion of the contract of sale on 4 September 2020. That application was heard by a judge in the Trial Division on 2 September 2020. Shortly before 6:00 pm on that day, the judge made an order dismissing the application. He published his reasons for doing so at around midday on 3 September 2020.[3]
[3]AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2020] VSC 564 (‘Reasons’).
In the afternoon of 3 September 2020, AE made an urgent application to this Court for an interlocutory injunction to prevent the completion of the contract of sale on 4 September 2020 until the filing, hearing and determination of an application for leave to appeal against the judge’s decision. As we have already stated, we heard that application at 6:00 pm on 3 September 2020 and made the orders that are the subject of these reasons later that evening.
Before discussing the grounds upon which AE sought the injunction and the judge’s reasons for refusing them, it is convenient to refer to two additional facts.
Prior to the execution of the priority deed between Westpac and UDP, AE made a complaint against Westpac to the Australian Financial Complaints Authority (‘AFCA’) alleging wrongdoing by Westpac. That complaint was resolved on 13 January 2020.
Prior to July 2020, AE made three attempts to sell the properties. One of those attempts resulted in the signing of separate contracts on 9 February 2019 for the sale of the properties to a Ms Yang for a combined sum of $15,006,789. That sum comprised a price of $10,000,000 for the Kinane Street property and a price of $5,006,789 for the Esplanade property. UDP, as assignee of the JM mortgage, rescinded those contracts.
AE’s grounds for an injunction and the judge’s reasons for rejecting them
The judge summarised AE’s claims in its general indorsement of claim as follows:
(a)That [UDP] breached its duty to provide a payout figure in respect of the JM mortgage upon request and to accept a tender of any amount due and owing pursuant to that mortgage;
…
(c)That [UDP] wrongfully exercised its power of sale in selling the Brighton properties;
(d)That, by entering into the contracts of sale, [UDP] breached the mortgagee duties to which it was subject because:
• it should have only sold 92 The Esplanade, Brighton;
• the Brighton properties were sold at an undervalue;
• the Brighton properties should have been sold separately;
•the Brighton properties should have been sold to an independent person;
•[UDP] failed to properly advertise the Brighton properties;
•[UDP] failed to pursue all of the expressions of interest to maximise the sale price;
•[UDP] failed to obtain expert advice and valuations; and
• [UDP] failed to follow expert advice and valuations;
(e)[UDP] sold the Brighton properties for an ulterior purpose including the third party enforcement of a registered mortgage over the Brighton properties held by … Westpac …; to impact upon an application for leave to appeal brought by [AE] in [the caveat] proceeding and to have any surplus funds placed in court to secure [UDP’s] claim for the said funds pursuant to [a] constructive trust;
(f)By reason of its conduct outlined above, [UDP] engaged in unconscionable conduct in contravention of s 20(1) of the Australian Consumer Law and/or s 12CB of the Australian Securities and Investments Commission Act 2001.[4]
[4]Reasons [6] (citations omitted). We have deleted sub-para (b) of para 6 of the judge’s reasons because it is not presently relevant.
In footnote 1 of his reasons, the judge stated the following:
A total of 10 affidavits were relied on by the parties in the hearing of [AE’s] claim for interlocutory relief, which affidavits extended over more than 1,000 pages including exhibits. In the time available … it is not possible to address all of the detailed arguments advanced by the parties orally and in their written submissions …
In relation to AE’s claim that UDP failed to provide AE with a payout figure in respect of the JM mortgage and to accept a tender of the amount due under that mortgage, the judge stated that this appeared to be the case between 12 March 2020 and 23 April 2020. However, he held that on 14 May 2020, UDP advised AE that the amount owing under the JM mortgage was ‘approximately $3.234 million, exclusive of enforcement costs’.[5] He rejected AE’s contention that the exclusion of enforcement costs rendered this communication as meaningless. He did so on the basis that the obligation to provide a payout figure may be satisfied by the provision of an estimate.[6]
[5]Reasons [18].
[6]The judge relied upon Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868, [514].
The judge also found that the evidence did not establish that AE itself had made an offer to redeem the JM mortgage but rather an offer had been made by ‘an unnamed third party (whose identity [AE’s] solicitor refused to disclose to [UDP’s] solicitor) to pay out the JM mortgage’.[7] The judge held that only AE, as mortgagor entitled to the equity of redemption, could make good tender of the mortgage money and that a stranger could not do so.[8]
[7]Reasons [15].
[8]The judge referred to Fisher and Lightwood’s Law of Mortgage (3rd Australian ed, 2013) 760 [32.48]; Pearce v Morris (1869) LR 5 Ch App 227; Rowe v National Australia Bank Ltd [2019] WASCA 140, [116].
For the above reasons, the judge concluded that, on these issues, AE had not established that there was a serious question to be tried as to its entitlement to relief at trial.
The main focus of AE’s submissions before the judge was its claims that UDP wrongly exercised its power of sale in selling the properties and breached its duties as mortgagee by entering into the contract of sale. Despite the urgency with which the judge had to decide the injunction application, his reasons in dealing with these claims are a model of clarity and succinctness. Accordingly, we will quote extensively from them:
The principal matter relied on by [AE] in support of its allegation that [UDP] failed to comply with its obligations in exercising the power of sale over the Brighton properties was the failure of [UDP] to obtain separate valuations for each of the Brighton properties and to sell them separately. The evidence before the Court is that, on 13 July 2020, [UDP] obtained a formal valuation of the Brighton properties which identified them as having (as a single property) a current market value of $15.2 million.
…
[AE] argued that [UDP] acted wrongfully in failing to obtain a market appraisal of the value of the Brighton properties considered separately. [UDP] was therefore not in a position to properly evaluate the fairness of offers made to purchase the properties. The obtaining of a market appraisal for the Brighton properties separately as well as jointly was said to be necessary in order to evaluate the proper method to proceed with the sale of the Brighton properties and to determine whether both properties had to be sold.
In support of these contentions, [AE] referred to the Receivers’ current estimate of the apportionment of the sale proceeds following the settlement of the sale of the Brighton properties. That apportionment indicated that the total amount of the JM mortgage together with enforcement costs is approximately $4.2 million, with the sale proceeds attributed to 92 The Esplanade being $5.5 million. It was therefore submitted that the sale of 92 The Esplanade alone would have been more than sufficient to pay out the JM mortgage and the relevant enforcement costs. It followed, so it was submitted, that there was no need for [UDP] to sell 2 Kinane Street.
There are a number of difficulties with these submissions.
First, the Receivers’ apportionment assessment relied on by [AE] was exactly that: the apportionment of a sale price of the Brighton properties and costs across the two properties. It was not a valuation of either of the properties and, on the current state of the evidence, I am unpersuaded that one can infer reliable estimates of value from it. This in part reflects the unusual nature of the Brighton properties and in particular the property at 92 The Esplanade. There is no habitable structure on that property, only a swimming pool and part of a tennis court. Significantly, it is also subject to a restrictive covenant …
Secondly, evidence was given by Grant Sutherland, a licenced estate agent and certified practicing valuer who has had extensive professional experience as a valuer. Mr Sutherland’s evidence was that, in his opinion, it was more appropriate to sell the Brighton properties as a single, combined property notwithstanding that they were made up of two titles. His reasons for that opinion were cogent and persuasive:
(a)the existence of a restrictive covenant over 92 The Esplanade had a significant impact on the property in that it prevented the construction of any ‘dwelling, residence or habitable building’, giving it a greatly reduced value on its own;
(b)92 The Esplanade has a swimming pool and one half of a tennis court straddling both titles. Marketing a property for sale with a swimming pool and half a tennis court and a covenant preventing the construction of a dwelling would, in Mr Sutherland’s opinion, have attracted limited interest;
(c)92 The Esplanade could continue to be utilised in conjunction with the adjoining property at 2 Kinane Street and had the benefit of strongly contributing to its value by increasing the overall land area and providing an outdoor swimming pool and a usable tennis court, whereas in isolation 92 The Esplanade had limited utility, given the existence of the covenant.
Although Mr Sutherland had been engaged on behalf of the Receivers, I have no reason to doubt that, in providing his evidence, he has done so in accordance with the expert witness code of conduct (which he deposed to having read and agreeing to be bound by).
Thirdly, Mr Sutherland’s opinion is also consistent with the evidence that, on two occasions in about the past 18 months when [AE] has purported to sell the Brighton properties, it has done so on the basis of selling both of the properties. In one of those instances, a variation in the contract terms appeared to indicate that the purchaser attributed zero value to the 92 The Esplanade property.
Fourthly, the evidence before the Court said to support a conclusion that the two Brighton properties should have been sold separately is, I consider, weak and problematic. I have already referred to [AE’s] reliance on the Receivers’ apportionment analysis. In addition to that evidence, [AE] relied on a statement made by Matthew Pillios a director and auctioneer with the real estate agency Marshall White. Relevantly, Mr Pillios told Mr Esposito on about 13 August 2020 that a market appraisal for the Brighton properties sold individually ‘would be $18 million plus’. He also sent an email to Mr Esposito saying ‘My accurate appraisal of 2 Kinane Street, Brighton would be $12.5m – $13.5m. For the separate title of 92 The Esplanade alone it would be $5.5m to $6.5m for the land’.
There are various difficulties associated with relying on Mr Pillios’ communications with Mr Esposito to establish that the Brighton properties should have been sold separately, or that a separate valuation of them should have been obtained. Unlike Mr Sutherland, Mr Pillios is not a qualified real estate valuer and has only six years’ experience as a real estate agent. He did not purport to provide a formal valuation of the Brighton properties. Mr Pillios has deposed that, in his communications with Mr Esposito, Mr Esposito did not ask him to give an opinion about whether the Brighton properties should be sold separately and he did not give such an opinion. Further, Mr Pillios’ evidence was that his estimates of the value of the two properties was in the context of the market having had recovered, that is, at a future point in time.
Fifthly, having regard to the matters to which I have referred, the following response by the solicitors for [UDP] to a claim made by [AE’s] solicitor that 92 The Esplanade should be sold separately, has an apparent logical and practical appeal:
... 92 Esplanade is inextricably linked to 2 Kinane Street. There is a covenant restricting construction on 92 Esplanade, meaning that it cannot be sensibly sold other than in conjunction with 2 Kinane Street. It is one property on two titles. AE … itself did not pursue this option. Both purported sales were for both titles. It makes no commercial sense to sell them separately. Indeed the most recent purported and allegedly arms-length sale of the two titles attributes no value at all to 92 Esplanade (the first contract provided to us by you related only to 2 Kinane Street for a value of $12.5m, when we wrote asking about 92 Esplanade a further contract was provided for both titles with no change to the purchase price).
Sixthly and further to the above, my general impression from the voluminous materials filed by [UDP] relating to the sale of the Brighton properties since it took possession of them in March 2020 is that the process which has been adopted to sell the properties and to maximise the return from the sale has been professional and thorough. The criticisms advanced on behalf of [AE] about [UDP’s] evaluation of the offers made on the Brighton properties lack substance.
Two measures of the success of the process which has been adopted by [UDP] in selling the Brighton properties are that, notwithstanding the uncertainty created by COVID-19, the price of the Brighton properties under the contracts of sale ($16.5 million) is:
(a) $1.3 million more than their current valuation; and
(b)significantly more than the price obtained for the properties when [AE] sought to sell them in February 2019 (for a sale price of $15,006,789) and then in March 2020 (for a sale price of $12.5 million).
For the above reasons, in relation to [AE’s] principal claim that [UDP] acted wrongfully in failing to obtain a market appraisal of the value of the Brighton properties considered separately and by failing to sell them, I do not consider that [AE] has established a prima facie case with a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending trial.[9]
[9]Reasons [20], [22]–[34].
There were three limbs to AE’s claim that UDP sold the properties for an ulterior purpose, namely:
(a)‘the third party enforcement of a registered mortgage over the Brighton properties held by [Westpac]’;
(b)‘to impact upon an application for leave to appeal brought by [AE] in [the caveat] proceeding’; and
(c)‘to have any surplus funds placed in court to secure [UDP’s] claim for the said funds pursuant to [a] constructive trust’.[10]
[10]See [14] above.
The judge did not expressly deal with limb (a) above. He rejected limbs (b) and (c) above for the following reasons:
Neither do I accept that [AE] has established a prima facie case in relation to the other grounds upon which it sought to impugn [UDP’s] exercise of the power of sale. [AE] submitted that [UDP] had demonstrated a lack of good faith in exercising the power of sale by engaging in tactics designed to undermine [AE’s] prospects of obtaining leave to appeal in the caveat proceeding. [AE] relied upon the contents of a letter sent by [UDP’s] solicitor on 31 July 2020. The letter relevantly stated as follows:
[AE’s] application for leave to appeal in the [caveat] proceeding concerns [UDP’s] constructive trust claim over 2 Kinane Street.
Given that AE … will not receive any surplus of the sale of the 2 Kinane Street property there appears to us to be little point in AE … pursuing the appeal. For that, and the following reasons, we consider the appeal is rendered nugatory:
(a)The sale of the Brighton Properties to Ms Yang for $15,006,789 has been superseded;
(b)The underlying factual basis in relation to the appeal has changed in a substantial manner;
(c)A superior price has been achieved by the receivers and due to the mortgagee’s ability to ‘sell through’ the caveats on title, all caveats will be removed over the Brighton Properties upon settlement; and
(d)The finding of Ginnane J relating to a prima facie entitlement in relation to UDP’s caveat in the context of the sale to Ms Yang, and any finding of the Court of Appeal, whilst persuasive, will not be binding upon the court in the … caveat proceeding.
It therefore makes sense if you conferred with counsel and [AE] in the next 7 days and advise us whether you wish for the appeal to be pursued in light of the above circumstances. We think the court would expect us both to reconsider the utility of the appeal given that developments traversed above.
In the interim we will be preparing a further affidavit and providing a memorandum to the court concerning the matters raised in the correspondence. We will be submitting that given the matters have progressed to such a significant extent since the appeal was filed, there is little utility served in the appeal being pursued. If [AE] decides to withdraw the appeal our client will not seek costs. We will be exhibiting this letter to the foreshadowed further affidavit including any response if a decision is made to continue with the appeal.
No improper purpose on the part of [UDP] is revealed by this correspondence. There is nothing improper in the parties to litigation informing the Court about changes in the factual background in which the litigation is conducted. To the contrary, in many circumstances, such communications will be consistent with the parties’ obligations under the Civil Procedure Act 2010.
It was also submitted by [AE] that [UDP] sought to exercise the power of sale for the ulterior purpose of improving its position in respect of its caveats over the Brighton properties by seeking to have all funds paid into court. There is no substance to this allegation. [AE’s] solicitors had in fact proposed the same course to the solicitors for [UDP] on 2 March 2020.[11]
[11]Reasons [35]–[37].
The judge did not expressly deal with AE’s claim that UDP had engaged in unconscionable conduct.
The judge found that the balance of convenience weighed against the grant of an injunction and rejected AE’s contention that damages were an inadequate remedy. He concluded that, even if he had been satisfied that AE had established a prima facie case and the balance of convenience favoured the grant of an injunction, he would have refused AE’s application because of its delay in bringing the proceeding. He stated that, subject to any further submissions by the parties, he proposed to make an order that AE pay UDP’s costs of its summons on the standard basis. The judge’s reasons on these issues were as follows:
Even if, contrary to my view, [AE] had established a prima facie case justifying the grant of interlocutory relief of the type it seeks, the balance of convenience is decisively against the grant of such relief.
The principal foundation of [AE’s] submissions on the balance of convenience was that the sale of 2 Kinane Street would involve the sale of Mr and Ms Esposito’s family home; once it was sold, it would be gone forever.
This submission is fundamentally at odds with the evidence before the Court that [AE] has … actively sought to sell the Brighton properties over the last 18 months. This reveals that, in truth, the controversy is not about the retention of something with intangible value such as a family home; it is about money. In that regard, the position is clear. As I have noted, the sale price under the contracts of sale not only exceeds the valuation of the properties, it is also significantly greater than the amounts which [AE] had purported to contract to sell the Brighton properties in the last 18 months.
In light of these considerations, [UDP’s] submission that [AE] will not suffer any harm if the injunction is not granted is irresistible. The Brighton properties will be sold. [UDP] has confirmed that it will pay any surplus funds into court pending the outcome of the caveat proceeding of which [AE] is a party.
By contrast, if the injunction was granted, the completion of the contracts of sale would be delayed pending the outcome of the proceeding and [UDP] would be prevented from exercising its rights to security as mortgagee. As [UDP] submitted, that course cannot be justified where, amongst other things, [AE] does not contest [UDP’s] interest as mortgagee, where [UDP] has confirmed that it will pay any surplus funds into court and where [AE] itself has sought to sell the Brighton properties.
Furthermore, the interests of third parties, namely the purchaser of the Brighton properties under the contracts of sale, as well as the various persons who have caveats over the Brighton properties, also weigh against the grant of interlocutory relief
…
[AE] submitted that damages are an inadequate remedy because 2 Kinane Street is the family home and because there can be no confidence in the capacity of [UDP] to pay damages given that it is subject to a deed of company arrangement and has had receivers and managers appointed. The first of these points is rejected for the reasons I have already given; [AE’s] interests in the Brighton properties is fundamentally economic in light of its efforts to sell the properties. The second point advanced by [AE] is also rejected. The Receivers have secured an indemnity from Rabobank which has very substantial assets.
…
In Bradto Pty Ltd v State of Victoria, the Court of Appeal stated that ‘the issue of delay is usually regarded as a matter going to the court’s discretion once the grounds for the grant of an interlocutory injunction (including balance of convenience) have been made out’.
[AE’s] delay in commencing this proceeding and filing its summons for interlocutory relief is extraordinary and unexplained.
[AE] was notified that [UDP] was taking steps to conduct a mortgagee sale of the Brighton properties on 19 November 2019. Since then the parties, through their solicitors, have engaged in extensive correspondence in relation to the exercise of the [UDP’s] powers of sale. On 26 March 2020 and on 9 April 2020, [AE’s] solicitors threatened that an application would be made for an injunction following [UDP’s] continued efforts to sell the property and its refusal to provide a payout figure for the mortgage. [AE] could have then readily brought a redemption proceeding in relation to its complaints about [UDP’s] refusal … to provide it with a payout figure in respect of the JM mortgage. No such application was filed. Neither was any application for injunctive relief brought until the present summons was filed some 4 months later on 25 August 2020, about a week before the settlement of the contracts of sale for the Brighton properties. In that period, there can be no doubt that [AE], through Ms and Mr Esposito, was well aware of the public marketing campaign to sell the Brighton properties which proceeded over 6 weeks.
[AE] has not provided any evidence to explain its delay in commencing the proceeding. The reasons advanced from the bar table were, with respect, vague and unpersuasive.
For these reasons, even if I was satisfied that [AE] had established a prima facie case and that the balance of convenience favoured the grant of interlocutory relief, in the exercise of my discretion, I would have refused [AE’s] application given the unexplained and extensive nature of the delay in bringing this proceeding.
Subject to any submissions the parties may wish to make, I propose to order that [AE] pay [UDP’s] costs of the summons on a standard basis, to be taxed in default of agreement. An order in those terms will be made in the absence of any submissions which are to be filed within seven days.[12]
[12]Reasons [38]–[50] (citations omitted).
Basis for the application to the Court of Appeal for an injunction
Due to the urgency with which AE made its application to this Court for an interlocutory injunction, the Court did not have the benefit of a draft application for leave to appeal, with proposed grounds of appeal, or a written case in support of those grounds. In its application, AE stated that it was seeking the injunction ‘because the trial judgment contains numerous errors, and the appeal may be rendered nugatory if the injunction is not granted’.
AE filed short written submissions in support of its application for an interlocutory injunction. In those submissions, AE contended that the Court has power to grant an interlocutory injunction as part of its inherent powers to enable it to perform its functions, and in particular for the purpose of: preserving the subject matter of litigation; preventing the frustration of its processes; and preventing an application for leave to appeal being rendered nugatory. AE relied upon Williams v Minister for the Environment and Heritage,[13] Falkingman v Peninsula Kingswood Country Golf Club Ltd[14] and Murphy v Victoria[15] for this proposition. UDP did not contend that the Court lacked jurisdiction to grant an interlocutory injunction. We were satisfied that we had jurisdiction.
[13](2003) 199 ALR 352, 356 [16], 359 [25]; [2003] FCA 627.
[14][2014] VSCA 235, [2]–[6].
[15][2014] VSCA 236, [2], [22].
AE submitted that there was an arguable case that its proposed application for leave to appeal will be successful, and that an injunction should be granted to prevent the appeal from being rendered nugatory, for the following reasons:
(a)The Trial Judge states ‘In the time available … it is not possible to address all of the detailed arguments advanced by the parties orally and in their written submissions …’ (footnote 1).
(b)The Trial Judge failed to make any decision on the allegations of third-party enforcement or the allegations of unconscionable conduct which were referred to in paragraph 6 (e) or 6 (f) respectively of the trial judgment.
(c)The Trial Judge failed to consider all of the affidavit material properly (footnote 1), some of which the trial judge did not have time to read or have access to prior to the hearing and instead relied upon impressions (at [32]).
(d)[AE] was seeking to redeem the equity of redemption by arranging for third party finance, which is permitted by the authorities (per Lindsay J in Huizhong Investment Group Pty Ltd v Westpac Banking Corp Ltd [2019] NSWSC 524 at [52] – [61], per Robb J in Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868 at [507], [508] and [512], per Murphy and Sofronoff AJA in Rowe v National Australia Bank Limited [2019] WASC 140 at [113] – [123]).
(e)[UDP] did not provide a proper payout figure as no estimate of the enforcement costs was provided which were significant and in the sum of $800,000 (approximately);
(f)The evidence of Mr Sutherland should not have been accepted as an independent witness who merely justified his own failure to obtain a separate valuation of the Brighton properties;
(g)The finding on delay was irrelevant in relation to the allegations of third party enforcement as [AE] did not have the deed of priority, and was of limited weight, as [AE] had put [UDP] on notice that their conduct in relation to the payout figure was improper, and [AE] changed their mind as to the need to sell the Brighton properties.
(h)A costs order (subject to further submissions) should not have been made when [UDP] did not make such an application but reserved their right to consider doing so.
The above contentions provide a useful framework for considering the parties’ submissions.
Failure to consider all of the affidavit material (issues (a) and (c))
AE submitted that the judge’s decision was vitiated because he did not consider all of the affidavit material that was filed and he relied on his impressions in relation to some of the evidence rather than properly considering it.
AE’s submission must be rejected. As discussed in more detail below, notwithstanding that AE knew about the contract of sale since 31 July 2020, it delayed filing its application for an interlocutory injunction until 25 August 2020, six business days before the scheduled settlement on 4 September 2020. The judge heard the application on an urgent basis on 2 September 2020, made orders that evening and published his reasons on the following day. The conduct of AE in delaying its application left the judge with little time to absorb the voluminous material that the parties filed and to decide AE’s application prior to the scheduled settlement. In our opinion, in the time available to him, the judge acted with admirable efficiency in coming to terms with the complex issues raised by the parties and in delivering clear and succinct reasons for his decision. No arguable basis for an error has been demonstrated.
Failure to decide third party enforcement and unconscionability (issue (b))
AE submitted that the judge erred in failing to deal with its allegations that UDP had engaged in unconscionable conduct and that it had sold the properties for an ulterior purpose, namely, ‘the third party enforcement’ of the Westpac mortgage.
The issue of unconscionable conduct can be disposed of briefly. The particulars of unconscionability in AE’s indorsement of claim were identical to the particulars of wrongful exercise of the power of sale. The judge rejected the factual basis for those particulars in the context of considering the allegations of wrongful exercise of the power of sale. Accordingly, the judge necessarily rejected AE’s allegations of unconscionable conduct for the same reasons that he rejected its allegations of wrongful exercise of the power of sale.
As we understood them, AE’s contentions regarding third party enforcement of the Westpac mortgage were as follows:
(a)Pending resolution of AE’s complaint to AFCA regarding Westpac’s conduct, Westpac was precluded from taking any step to enforce the Westpac mortgage.[16]
(b)Prior to the resolution of the complaint, in breach of the AFCA Complaint Resolution Scheme Rules (‘AFCA Rules’), Westpac took a step to enforce the Westpac mortgage. That step was the execution of the priority deed with UDP, as the deed dispensed with the need for UDP to obtain Westpac’s consent to taking enforcement action in respect of the Kinane Street property.
[16]See AFCA Complaint Resolution Scheme Rules r A7.1.
In our opinion, if this were a ground of appeal in an application for leave to appeal against the judge’s decision, it would not have a real prospect of success for three reasons.
First, in response to a question from the bench, AE was not able to point to any legal requirement for UDP to obtain Westpac’s consent in order to exercise its power of sale. Accordingly, it is to be doubted that the execution of the priority deed constituted a breach of the AFCA Rules on the part of Westpac. However, even if it did, there was no evidence that UDP was aware of the complaint to AFCA while it was extant. Accordingly, even if there was wrongful conduct on the part of Westpac, there was no evidence of wrongful conduct on the part of UDP.
Secondly, the complaint to AFCA was resolved on 13 January 2020, well before UDP began its sales campaign in relation to the properties. The power of sale was exercised by UDP in its own right under the JM mortgage. There was no direct or indirect exercise of the power of sale in the Westpac mortgage.
Thirdly, in response to questions from the Bench, AE was not able to identify any tangible loss suffered by it as a result of the execution of the priority deed.
Frustration of the exercise of AE’s equity of redemption (issues (d) and (e))
AE submitted that the judge erred in finding that UDP’s provision of an estimate of the payout amount of $3,234,000 exclusive of enforcement costs was a sufficient estimate for the purpose of enabling it to exercise its equity of redemption. It contended that without an estimate of enforcement costs, it was prevented from seeking funding for an amount that would be sufficient to discharge the JM mortgage. AE also submitted that the judge erred in finding that the offer to redeem the JM mortgage was not made by it but by a stranger. That was said to be because the third party whose identity AE declined to disclose was a financier who was willing to provide finance to AE to redeem the JM mortgage.[17]
[17]AE also submitted, on the basis of Huizhong Investment Group Pty Ltd v Westpac Banking Corporation Ltd (2019) 19 BPR 39313, 39328–30 [52]–[61]; [2019] NSWSC 524, that a third party can redeem a mortgage. However it contended that, in the present case, the third party was providing finance to enable AE to redeem the JM mortgage. Accordingly, it is not necessary for us to discuss whether a third party can redeem a mortgage.
UDP submitted that the judge did not err. It contended that if AE genuinely intended to redeem the JM mortgage, it would have made a follow-up request to UDP for details of enforcement costs and commenced redemption proceedings. According to UDP, AE failed to take either of these steps.
We accept UDP’s submissions. Accordingly, we are not satisfied that if AE had relied upon these matters as a ground of appeal in an application for leave to appeal, that ground would have a real prospect of success. Even if it did, for the reasons set out below, the judge was clearly correct to refuse to grant an interlocutory injunction on the basis of the balance of convenience — including damages being an adequate remedy — and AE’s inordinate delay.[18]
[18]The Court of Appeal can refuse an application for leave to appeal notwithstanding that the applicant demonstrates that the proposed appeal has a real prospect of success. See Molonglo Group (Australia) Pty Ltd v Cahill [2018] VSCA 147, [96].
Evidence of Grant Sutherland (issue (f))
AE submitted that the judge erred in accepting the evidence of Grant Sutherland because he was not an independent witness and also because his evidence was in conflict with the evidence of Matthew Pillios.
We reject AE’s submission. As the judge’s decision involved the exercise of a discretion, in order to succeed in an application for leave to appeal, AE must demonstrate error of the type referred to in House v The King.[19] Such errors include acting upon a wrong principle, allowing extraneous or irrelevant matters to guide or affect the decision, mistaking facts, and failing to take into account a material consideration. Questions regarding the weight given by a judge to evidence does not involve error of this type.
[19](1936) 55 CLR 499, 505; [1963] HCA 40. See Tymbook Pty Ltd v Victoria (2006) 15 VR 65, 67 [4]; [2006] VSCA 89.
In any event, Mr Sutherland’s evidence was the best evidence as to the value of the properties. Notwithstanding that he was not independent, he was a qualified valuer who provided a valuation. AE did not file any evidence from a valuer. There was no conflict between Mr Sutherland’s evidence and the evidence of Mr Pillios. The only conflict in evidence was between that of Mr Pillios and that of Antonio Esposito (the former director of AE and the partner of its present director) as to the content of a conversation between them. The judge was entitled to accept the direct sworn evidence given by Mr Pillios as to his opinion of the value of the properties. The judge was also entitled to give less weight to Mr Esposito’s evidence of what Mr Pillios had previously said to him, and to an email that Mr Pillios had previously sent to Mr Esposito, once Mr Pillios explained the email on oath.
Delay and the adequacy of damages as a remedy (issue (g))
AE submitted that the judge gave inappropriate weight to the question of delay. It relied on the fact that it did not receive a copy of the priority deed — which was said to be relevant to its contention regarding third party enforcement of the Westpac mortgage — until 2 September 2020. AE also relied upon UDP’s failure to provide it with a payout figure. On the question of whether damages were an adequate remedy, AE stated that although it had previously made attempts to sell the properties, Mr and Ms Esposito had changed their minds about selling them and now wished to resume occupying them.
AE’s submissions must be rejected. As an injunction is a discretionary remedy, delay on the part of the person seeking it is highly relevant to a court’s exercise of its discretion. In the present case, AE knew: in November 2019 that UDP had become the assignee of the JM mortgage; in March 2020 that UDP had taken possession of the properties; in mid-2020 that UDP had commenced marketing the properties; and on 31 July 2020 that UDP had signed a contract of sale dated 21 July 2020, with settlement being due on 4 September 2020. Having regard to AE’s knowledge of these matters, the judge was clearly correct in finding that AE’s delay in seeking an interlocutory injunction until a few days prior to settlement was ‘extraordinary’, ‘unexplained and extensive’.[20] Contrary to AE’s submission that the delay was irrelevant, in our opinion it was a powerful consideration militating against the exercise of the judge’s discretion to grant the injunction.
[20]Reasons [46], [49].
The judge was also clearly correct in deciding that, in the light of AE’s own attempts to sell the properties, they did not have any intangible value and that the issue was purely monetary. AE’s contention that Mr and Ms Esposito had changed their minds was not supported by any evidence. It was insufficient to demonstrate any error on the part of the judge.
Costs (issue (h))
The last paragraph in the judge’s reasons gave leave to the parties to file written submissions on costs if they disagreed with the judge’s proposed order that AE pay UDP’s costs on the standard basis. The proposed costs order has not yet been made and both parties have an opportunity to make submissions before it is made. Accordingly, there is no real prospect of AE succeeding in demonstrating that the judge made any error on the issue of costs.
Conclusion
As AE failed to persuade us that there was any arguable basis for it to succeed in any application for leave to appeal against the judge’s decision, we dismissed its application for an interlocutory injunction.
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