Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank Ltd

ANDREW GARRETT WINE RESORTS PTY LTD
ACN 064792221 & ANOR v
NATIONAL AUSTRALIA BANK LIMITED ACN 004044936
[2004] SASC 60
Appeal from a Master

BESANKO J: This is an appeal against an order made by a Master of this Court. The Master made an order for possession of land under Part 17 of the Real Property Act 1886 (SA) (“RPA”). The order required Andrew Garrett Wine Resorts Pty Ltd (“Resorts”) and Mrs Averil Gay Garrett, who are the registered proprietors of a property known as “Springwood Park” (“the property”) to give up possession of the property to the National Australia Bank Limited within 14 days. Mrs Garrett and her husband, Mr Andrew Garrett, live on the property. Mr Garrett is the sole director and secretary of Resorts.
The Bank asserted default under a mortgage (Registered Memorandum of Mortgage No 9374752) granted by Resorts and Mrs Garrett to the Bank in relation to Springwood Park on 21 June 2002 (“the mortgage”). Except where it is necessary to distinguish between the two, I will refer to Resorts and Mrs Garrett as “the mortgagors”, and to the Bank as “the mortgagee”.
The mortgagors appeal to a single Judge of this Court pursuant to s 50(2) of the Supreme Court Act 1935 and r106.05 of the Supreme Court Rules 1987 (“SCR”). My powers on appeal are set out in r97 of the SCR. I am to conduct a rehearing (r97.17) and I may, in my discretion, receive further evidence on any question of fact (r97.18(b)).
The Master heard the application in chambers and decided it on affidavit evidence. He did not deliver reasons for his decision which was made on the first occasion the summons came before the Court. It was open to him to make the order he did in the event that he was satisfied that there was no triable issue raised by the evidence. If he was satisfied that there was a triable issue, he could have directed that pleadings be exchanged between the parties and referred the summons and any associated proceedings into the ordinary civil list for determination (Moonta Town Corporation v Rodgers (1980) 26 SASR 143 per Cox J at 160; Rodgers v Moonta Town Corporation (1981) 55 ALJR 710 per Gibbs CJ at 712). It may be assumed that the Master did not consider that the evidence raised a triable issue.
The Case before the Master
The Mortgagee’s Case (the Bank)
The mortgage between the mortgagee and the mortgagor was not in dispute. The mortgagee said that there was a credit contract dated 3^rd January 2003 between it and Mr Andrew Garrett and Mrs Garrett whereby it lent the sum of $2,100,000 under a bill facility granted to Mr and Mrs Garrett. The credit contract was not in dispute. The mortgagee said that Resorts gave a guarantee and indemnity whereby it guaranteed the repayment of $2,100,000, interest and other expenses by Mr and Mrs Garrett to the mortgagee. The guarantee and indemnity was not in dispute. The mortgagee asserted that the bill facility matured on 20^th June 2003, and no payment was made. That was not disputed.
The mortgagee asserted that Mrs Garrett was in default under the mortgage because she was in breach of the credit contract. That fact was not disputed, although there is a dispute as to whether the whole amount owing under the credit contract is secured by the mortgage. The mortgagee asserted that Mrs Garrett was also in default as a guarantor of the debts owed by other companies in the Andrew Garrett Group of Companies – Sunburst Properties Pty Ltd (liquidators appointed) (receivers and managers appointed) (“Sunburst Properties”) and Sunburst Holdings Pty Ltd (liquidators appointed) (controllers appointed) (“Sunburst Holdings”) – totalling in excess of $7,000,000, and that those debts, in addition to the amount due under the credit contract were secured by the mortgage. As will be seen, the assertion that the mortgage secures those other debts is disputed.
The mortgagee asserted that a notice of termination of the credit contract dated 14^th July 2003 was served on Mr and Mrs Garrett, that the credit contract was terminated, and that as at 14^th July 2003 Mr and Mrs Garrett owed the mortgagee approximately $2,100,000. Those facts were not disputed. On 14^th July 2003, the mortgagee also demanded payment from Resorts under the guarantee and indemnity of the sum of $2,100,000. Resorts did not pay that sum. Those facts were not disputed. The mortgagee asserted that Resorts was in default under the mortgage, and that fact was not disputed, although as with Mrs Garrett, there is a dispute as to whether the whole amount owing under the credit contract is secured by the mortgage.
The mortgagee asserted that Notices of Default under the mortgage were served on Resorts and Mrs Garrett respectively, on or about 27^th August 2003 requiring them to remedy the default under the mortgage by paying the sum of $2,100,000. That sum was not paid. Those facts were not disputed.
The Mortgagors’ Case (Resorts and Mrs Garrett)
Three affidavits were put before the Master. The first affidavit is an affidavit of Mr Garrett on behalf of Resorts. He admits the existence of the mortgage. He asserts that it was given to secure the sum of $1,500,000 advanced by the mortgagee to his wife and himself as trustees of the Andrew Garrett Family Trust. Later, further funds were required and that led to the credit contract dated 3^rd January 2003. Mr Garrett says that the effect of the credit contract dated 3^rd January 2003 was to provide further credit of $600,000. Mr Garrett asserts that the maximum liability that Resorts intended to secure by the mortgage was the sum of $2,100,000 advanced in January 2003. He asserts in his affidavit that Resorts and Mrs Garrett had an offer of finance of $2,400,000 from a financier, H G and R Finance Ltd (“H G and R”), and that Resorts wished to repay the sum of $2,100.000 to the mortgagee at the earliest possible date, and if possible, prior to 15^th December 2003. He exhibits to his affidavit a letter from his solicitors to the mortgagee’s solicitors offering to repay the sum of $2,100,000 with finance to be provided by H G and R. That company would provide the finance subject to security over the property. There is an assertion in the letter that the mortgage is only security for the sum of $2,100,000. Before me it is asserted by the mortgagors that the mortgage is security only for the sum of $1,500,000 or, in the alternative, for the sum of $2,100,000. I will explain in due course how it is that despite the statements in Mr Garrett’s affidavit, the mortgagors submit that the mortgage is security for no more than the sum of $1,500,000.
The second affidavit is an affidavit from Mrs Garrett. She deposes to the fact that she was not involved in the day-to-day operations of the businesses conducted by the Andrew Garrett Group of Companies, and that she left business matters involving the companies to her husband. She states that she did not intend the property to be security for all monies lent by the mortgagee. She too deposes to a desire that the mortgagee be repaid the sum of $2,100,000, and that the mortgage over the property be discharged.
The third affidavit is an affidavit from the mortgagors’ solicitor. The solicitor exhibits correspondence which passed between him and the mortgagee’s solicitors from the day before the summons for possession was issued on 29^th October 2003 to the date of the swearing of the affidavit. In essence, that correspondence reveals that the solicitor for the mortgagors was attempting to negotiate an overall settlement of all claims between Mr and Mrs Garrett and Resorts on the one hand, and the mortgagee on the other. Those attempts to negotiate an overall settlement failed.
The Master’s Decision
The Master did not deliver reasons for his decision and there is no transcript of the hearing before him. There is a statement by the mortgagors’ solicitor in an affidavit sworn after the hearing that he submitted to the Master that the mortgage was limited to a principal sum of $2,100,000 which the mortgagors were able to repay, and that the summons for possession should be adjourned.
If the mortgagee’s claim under the mortgage was limited to the sum due under the bill facility, and the mortgagors admitted (as they appeared to do) that that sum was secured by the mortgage, then the case was relatively straightforward. An amount of $2,100,000 was owing and had been for some time. There was an admission by the mortgagors that the mortgage secured repayment of that amount. The Master might have given the mortgagors a further short period to pay that amount, but he was not bound to do so. In fact, his order gave the mortgagors the right to redelivery of possession of the property on payment of the monies due under the mortgage. However, the matter was not that straightforward because the mortgagee was claiming that the mortgage secured the repayment of a much larger amount than $2,100,000. I note at this point that although from time to time I will refer to the amount as the sum of $2,100,000, the amount is in excess of that when interest and costs are added. The mortgagee would have accepted the repayment of the sum of $2,100,000 and interest and costs, but would not have given the mortgagors a discharge of mortgage unless the much larger sum it claimed was paid. The other point to note is that at the time of the hearing before the Master, the offer of finance from H G and R was not yet unconditional.
The Appeal
On appeal, the mortgagors applied to put further evidence before the Court. They applied to tender the following affidavits:
1. Affidavit of Mr Garrett sworn on 2^nd January 2004.
2.Affidavit of Mr Richard Beissel (the mortgagors’ solicitor) sworn on 2^nd January 2004.
3. Affidavit of Mrs Garrett sworn on 5^th January 2004.
4.Affidavit of Mr Garrett sworn on 4^th February 2004 in Action Number 127 of 2004 in this Court.
5.Affidavit of Mrs Garrett sworn on 4^th February 2004 in Action Number 127 of 2004.
The mortgagee opposed the receipt of further evidence. In the alternative, it submitted that if further evidence is received, it wished to rely on an affidavit of Mr Timothy French sworn on 3^rd February 2004. Mr French is a manager in the credit restructuring department of the mortgagee.
Neither party sought to cross-examine on the affidavits, and neither objected to a course whereby I ruled on the tender in my reasons for judgment. Before doing so, I will briefly summarise what is contained in the above affidavits.
In his affidavit sworn on 2^nd January 2004, Mr Garrett deposes to a dispute between the mortgagee on the one hand, and Resorts and Mrs Garrett on the other, about the pay-out figure under the mortgage. The mortgagors say that the figure is $2,244,622.99 being the principal amount due under the bill facility plus interest and costs. The mortgagors assert that they can pay that figure with the finance provided by H G & R subject to that financier being given a first registered mortgage over the property. The mortgagee asserts, according to Mr Garrett, that the mortgage secures debts in excess of $9,000,000.
Mr Garrett asserts that the property is unique, given its location as the largest single private landholding in the Adelaide metropolitan area, and that it has capacity for re-alignment of titles and/or re-zoning which has commercial value. Mr Garrett asserts that the ejection of his wife and himself will result in significant publicity which will harm their reputations, and that there will be substantial cost, embarrassment and inconvenience to his family and himself.
In his affidavit sworn on 2^nd January 2004, Mr Beissel deposes to the fact that the mortgagors intended to issue proceedings against the mortgagee seeking declaratory relief as to the indebtedness secured by the mortgage, and a subsequent mortgage which I will mention shortly. Mr Beissel also deposes to the fact that the day after the hearing before the Master, he wrote to the mortgagee’s solicitors offering to pay the sum of $2,250,000 in exchange for a discharge of the mortgage. That offer was rejected.
In her affidavit sworn on 5^th January 2004, Mrs Garrett confirms some of the matters deposed to by Mr Garrett.
On 4^th February 2004, the mortgagors issued an action in this Court against the mortgagee (Action No 127 of 2004). In essence, the mortgagors sought various declarations and orders as to the extent of their indebtedness under the mortgage and under a second mortgage over the property granted by the mortgagors to the mortgagee in late May 2003. As I understand it, no demand has been made under the second mortgage, but the mortgagors anticipate that they will face a similar demand under the second mortgage, even if they are successful in their claim as to the extent of the indebtedness under the mortgage.
It is convenient to summarise in point form the proceedings in Action No 127 of 2004 and the two affidavits in that action (ie., the affidavit of Mr Garrett sworn on 4^th February 2004 and the affidavit of Mrs Garrett sworn on 4^th February 2004).
1.The property was encumbered by a mortgage to Bank SA (Registered Memorandum of Mortgage No 8213956) registered on 17^th January 1997 (“the Bank SA mortgage”). A discharge of the Bank SA mortgage was registered on 24^th July 2002.
2.The property is encumbered by the mortgage and the second mortgage. The second mortgage is dated 29^th May 2003 and is Registered Memorandum of Mortgage No 9374752. It was registered on 5^th July 2003.
3.The Bank SA mortgage secured a debt of $1,500,000 to Bank SA as at 22^nd June 2002. On 28^th June 2002, the mortgagee advanced the sum of $1,500,000 pursuant to the provisions of a bill facility to Mr and Mrs Garrett. Those monies were used to satisfy the debt to Bank SA, and to enable the discharge of the Bank SA mortgage. As I have said, the discharge of that mortgage was registered on 24^th July 2002.
There was a representation by the mortgagee that the mortgage would only secure repayment of the sum advanced to pay out the Bank SA mortgage. Furthermore, there is a term or condition of the mortgage to the same effect. The mortgage provides:
“For the consideration aforesaid the Mortgagor
(1)     …
(2)     covenants and agrees with the Mortgagee as follows:
(a)     …
(b)   Notwithstanding any other provisions of this Mortgage it shall be security only for the payment to the Mortgagee of the moneys which are purported to be secured by Memorandum of Mortgage No 7752654 dated 30^th June 1994 given by Andrew Morton Garrett and Averil Gaye Garrett for which this document is given in substitution.”
As I understand it, it is asserted that this clause refers to the Bank SA mortgage.
4.The mortgagee’s claim in July 2003 that there was default under the mortgage by the failure to pay the sum of $2,100,000 in circumstances in which the amount secured by the mortgage was limited to the sum of $1,500,000 was misleading or deceptive conduct within s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”) and/or constituted false or misleading representations within s 12DB(1)(g) of the ASIC Act. Furthermore, the notices were void and of no effect having regard to s 55A of the Law of Property Act 1936 (SA) and various provisions in the mortgage. The mortgagors claim that the notices should be set aside and they refer to ss 12GD and 12DM of the ASIC Act.
5.In early January 2003 the bill facility was in effect increased from $1,500,000 to $2,100,000. Mrs Garrett signed a guarantee and indemnity for the sum of $2,100,000, but she did not understand that it would increase her liability under the mortgage.
6.The mortgagee represented to the mortgagors that the mortgage would secure the additional $600,000. However, as a matter of law, the bill facility dated 3^rd January 2003 was ineffective to increase the amount secured under the mortgage from $1,500,000 to $2,100,000.
The guarantee and indemnity given by Mrs Garrett in January 2003 was induced by misleading or deceptive conduct within s 12DA of the ASIC Act and/or unconscionable conduct within s 12CA or s 12CC of the ASIC Act and/or s 51AA of the Trade Practices Act 1974 (Cth).
7.The second mortgage over the property was executed by Resorts and Mrs Garrett in late May 2003. At that time the mortgagee made a further advance of $47,000. For various reasons which I do not think it is necessary to relate, it is alleged that the second mortgage is not enforceable against Resorts or Mrs Garrett.
8.In the alternative to the argument that the amount secured by the mortgage is no more than the sum of $1,500,000 and interest and costs, the mortgagee has engaged in misleading or deceptive conduct and/or has made a false or misleading statement and/or has engaged in unconscionable conduct in refusing to discharge the mortgage and the second mortgage on payment by Resorts and Mrs Garrett of the sum of $2,250,000. The mortgagee represented to the mortgagors that the sum secured by the mortgage was $2,100,000.
9.The mortgagors claim various forms of declaratory and injunctive relief which recognise that their liability under the mortgage is limited to the sum of $1,500,000 and interest and costs, or, in the alternative, the sum of $2,100,000 and interest and costs, and that their liability under the second mortgage is limited to the sum of $47,000 and interest and costs.
In Action No 127 of 2004, the mortgagors have issued an application seeking an interlocutory order in the following terms:
“An order restraining the defendant from taking any steps to enforce its rights under the provisions of the memorandum of mortgage given by the plaintiffs to the defendant dated 21^st June 2002 registered number 9374752 until the plaintiffs’ claim in this action has been determined.”
Mr French’s affidavit sworn on 3^rd February 2004 contains details in support of the mortgagee’s assertion that the mortgage secures all debts owed by Resorts and Mrs Garrett and that those debts total a much larger sum than $2,100,000. In the case of Resorts, it is alleged that it owes the sum of $7,684,812.67 to the mortgagee, and in the case of Mrs Garrett, it is alleged that she owes the sum of $10,800,837.65 to the mortgagee. The mortgagee asserts that the mortgage secures all monies for which the mortgagors are liable and refers to the definition of “amount owing” in clause 1.1 of the mortgage. In relation to the reason for the insertion of clause (2)(b) in the mortgage, Mr French asserts on behalf of the mortgagee:
“The purpose of inserting that clause in the mortgage document was so as to enable the stamp duty paid in respect of that other mortgage to be used to be counted against its stamp duty due on this mortgage to Revenue SA.”
Mr French also asserts that the Bank SA mortgage was an all monies mortgage.
I propose to receive the further evidence put forward by the mortgagors. In that event, I will also receive the affidavit of Mr French. I have a discretion to receive further evidence, and in considering the exercise of the discretion, I should have regard to the interests of justice. A relevant factor in the exercise of the discretion will be whether the parties seeking to tender the further evidence could have put the evidence before the court below. Sometimes that will be a highly relevant factor, but in other cases the circumstances will be such that it will not be so significant. Although the circumstances in Lewis v Holder (2003) 229 LSJS 103, and on appeal, Holder v Lewis [2003] SASC 397, were quite different, the case does provide general support for the approach I propose to take.
It might be said that the Master was placed in a somewhat difficult position because at the time of the hearing before him the mortgagors’ ability to obtain the finance to pay out the amount which they said was secured by the mortgage (ie., $2,100,000) was not clearly established in the sense that the offer of finance was conditional, and because the issue which was in fact the reason the matter could not be resolved without an order for possession, namely, the mortgagee would not give a discharge without the payment of a much larger sum than $2,100,000, was the subject of little, if any, evidence before him. Both matters are the subject of the further evidence before me in that the offer of finance is now unconditional and the mortgagors’ claims are clearly identified in both in the Statement of Claim/Orders Sought and the affidavits. Action No 127 of 2004 was commenced after the hearing before the Master, although it is not clear why the action could not have been commenced and the affidavits filed before the hearing before the Master. Nevertheless, I think it is appropriate to receive the further evidence so that the real issues between the parties are identified and determined. In reaching that conclusion, I have had regard to the fact that the Master was not required to make what might be called final findings of fact, and the respondent to the appeal has had the opportunity to answer the further evidence put forward by the appellants. I might have exercised my discretion differently if I had formed the view that the further evidence had been held back for strategic reasons, or, possibly, if there had been gross incompetence in failing to put the evidence before the Master. In this case there is no evidence of either of these things having occurred.

Before I leave the question of further evidence, I should mention that after the main hearing before me an affidavit of Mr Garrett sworn on 12^th February 2004 was filed and served. That affidavit deals, inter alia, with the mortgagors’ ability to comply with any conditions as to payment into court or to the mortgagee should I be minded to allow the appeal and/or grant interlocutory relief to the mortgagors. I received the affidavit at a subsequent hearing. The effect of the affidavit is that the mortgagors have the ability, if directed, to pay the sum of $70,000 into court, or at the direction of the court. I excluded from the tender a paragraph in the affidavit containing an opinion as to the value of the property and the likelihood of fluctuations in that value in the future. In my opinion it was too late to put that material forward, and it was likely to lead to an application by the mortgagee to put forward further evidence.
There are two issues on the appeal. First, on all the evidence is there a triable issue as to the exercise of the powers pursuant to, and/or the amount due under, the mortgage between the mortgagors and the mortgagee? Secondly, if the answer to the first question is yes, what, if any, conditions should form part of an order which has the effect of restraining the mortgagee from exercising its powers under the mortgage?
A Triable Issue
The issues between the mortgagee and the mortgagors reduced to the bare essentials are as follows.
As I understand it, there is no dispute between the mortgagors and the mortgagee that there is a large amount due and owing by the mortgagors to the mortgagee. The mortgagors’ first argument is that the amount secured by the mortgage is no more than the sum of $1,500,000 and interest and costs, and that before the mortgagee can enforce a right to enter into possession under the mortgage, it must comply with s 55A of the Law of Property Act 1936 (SA) (“LPA”). That section provides as follows:
55A. (1) A right of sale or foreclosure in respect of mortgaged land, a right to enter into possession of mortgaged land or a right to appoint a receiver in respect of mortgaged land shall not be enforceable by the mortgagee under a mortgage to which this section applies against the mortgagor by action or otherwise unless--
(a) the mortgagee has served upon the mortgagor a notice in writing--
(i) alleging a breach of a covenant or condition of the mortgage by the mortgagor; and
(ii) if the breach is capable of remedy, requiring the mortgagor within one month after service of the notice, or such longer period as may be stipulated in the notice, to remedy the breach; and
(iii) if the mortgagee seeks compensation for the breach, requiring the mortgagor within one month after service of the notice or such longer period as may be stipulated in the notice, to pay to the mortgagee the amount of the cost and expenses, stipulated in the notice, that the mortgagee has reasonably incurred in consequence of the breach; and
(b) where requirements are made of the mortgagor in the notice, he has failed to comply with those requirements.
(2) Where a mortgage to which this section applies contains a provision by virtue of which a liability to repay moneys under the mortgage falls due in the event of a breach of a covenant or condition of the mortgage at an earlier date than if there were no such breach, that provision shall be inoperative unless a notice has been served upon the mortgagor in conformity with the provisions of subsection (1) of this section and where requirements are made of the mortgagor in the notice, he has failed to comply with those requirements.
(2a) Upon the application of a mortgagee, a court may dispense, upon such terms and conditions as it thinks fit, with the requirement of notice under this section.
(2b) Where such a dispensation has been granted, the provisions of subsection (1) and subsection (2) of this section shall not apply in respect of the mortgage.
(3) In any proceedings brought by a mortgagee for the recovery of a mortgage debt or for the enforcement of a mortgage, or in proceedings instituted by a mortgagor within twenty-one days after service of a notice under this section, a court may, upon such fair and equitable terms as it may determine, grant relief to a mortgagor against the enforcement of rights of a kind referred to in subsection (1) of this section, and may reinstate the position of the mortgagor in all respects as if no breach of a covenant or condition of the mortgage had occurred.
* * * * * * * * * *
(5) This section applies to a mortgage of land (whether or not the land has been brought under the provisions of the Real Property Act where--
(a) the mortgagor is a natural person; and
(b) the land is appropriated for domestic or agricultural use.
(6) For the purposes of this section--
(a) land shall be deemed to be appropriated for domestic or agricultural use unless the mortgagor has made a statutory declaration that during the currency of the mortgage--
(i) no part of the land is to be used as a place of dwelling for the mortgagor's own personal occupation; and
(ii) in the case of land exceeding two hectares in area, no part of the land is to be used by the mortgagor for the business of primary production; and
(b) where such a declaration has been made it shall be conclusively presumed that the land is not appropriated for domestic or agricultural use.
(7) In this section--
"business of primary production" means the business of agriculture, pasturage, horticulture, viticulture, apiculture, poultry farming, dairy farming, forestry, or any other business consisting of the cultivation of the soil, the gathering in of crops, or the rearing of livestock.
(8) This section shall not apply to any mortgage granted before the commencement of the Law of Property Act Amendment Act (No. 2) 1972.”
It is not disputed by the mortgagee that s 55A applies to the mortgage, at least as far as Mrs Garrett is concerned.
The mortgagee purported to serve a notice in writing under s 55A of the LPA, but in the notice it was claimed that the default was the failure to pay the sum of $2,100,000. The mortgagors submit that the notice was therefore invalid, and the right to enter into possession of the property is not presently enforceable because s 55A had not been complied with. In effect, the mortgagors argue that the right to enter into possession will not be enforceable unless and until a notice in writing claiming a breach in failing to pay the sum of $1,500,000 and interest and costs on that sum is served on the mortgagors by the mortgagee.
As to the first limb of the first argument of the mortgagors, I am satisfied that there is a triable issue. I have hesitated before reaching that conclusion because the mortgagors in their affidavits put before the Master admitted that the sum of $2,100,000 was due and owing and that repayment of that sum was secured by the mortgage. In addition, I recognise the strength of the mortgagee’s arguments by reference to the provisions of the mortgage, and in particular, the definition of “amount owing”. Nevertheless, I think the presence of clause (2)(b) in the mortgage raises a triable issue as to whether the mortgage secures any greater sum than the sum owing under the Bank SA mortgage at the time the mortgage was executed. That sum was said to be $1,500,000 and interest and costs.
As to the second limb of the first argument of the mortgagors, there is surprisingly little authority on the point of whether a notice under s 55A is invalid if it claims a greater sum than is subsequently found to be due and owing by the mortgagors to the mortgagee. The significance of the point is that if it is arguable, then it is arguable that the right to enter into possession has not arisen in the sense of not being enforceable, and, therefore the case does not fall within the general rule identified in Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 which I discuss in detail below.
I have not been able to find authority dealing directly with the point in relation to a notice under s 55A of the LPA. In Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491 at 504, the High Court said that even a notice given to a mortgagor by the mortgagee as a condition precedent of a power of sale is not rendered invalid because it demands payment of more than is due. The issue was discussed at some length by Powell J in MIR Bros Projects Pty Ltd v 1924 Pty Ltd (1980) 2 NSWLR 907. The authorities his Honour referred to suggest that as far as the notice required by s 132 of the RPA is concerned an overstatement of the amount due to the mortgagee will not invalidate the notice (Cockell v Bacon (1852) 16 Bevan 158; 51 ER 737; Humphery v Roberts (1866) 5 SCR (NSW) 376; Stephenson Developments Pty Ltd v Finance Corporation of Australia Limited [1976] Qd R 326; Circuit Finance Pty Ltd v Glenauchen Pty Ltd (2001) 212 LSJS 338). The mortgagee submits that there is no obvious point of distinction between a notice under s 132 of the RPA and a notice under s 55A of the LPA. There is a good deal to be said for that submission. The decision of Legoe J in National Australia Bank Ltd v Zollo (1992) 59 SASR 76 does deal with a notice under s 55A and it does suggest that a serious defect in the notice may lead to the conclusion that the notice is invalid. However, the defects in that case were of a different kind, and arguably more serious than an overstatement of the amount due.
In addition to the submission that the principle enunciated in the line of cases of which Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (supra) is an example means that a notice under s 55A is not invalid because of an overstatement of the amount due, the mortgagee will no doubt say that the acceptance of the mortgagors’ submission would mean that there would be a significant exception to the general principle referred to in Inglis v Commonwealth Trading Bank of Australia (supra). The exception would arise in those cases in which the mortgagee was required to serve a notice under s 55A of the LPA and there was an overstatement of the amount due.
Despite these submissions and not without some hesitation, I have concluded that the mortgagors’ submission that an overstatement of the amount due leads to the invalidity of a notice under s 55A is arguable, and therefore raises a triable issue. I think the point is arguable having regard to the terms of s 55A and the purpose of the section which I think is to provide a clear opportunity to owners of property used for a particular purpose (ie., domestic or agricultural) to avoid the exercise of certain powers under a mortgage. Furthermore, I cannot exclude the possibility that evidence of what might have happened had the correct amount due been stated may be relevant to the outcome of the issue.
The mortgagors’ second argument is an alternative argument to the first argument and is that the mortgage secures no greater sum than the sum repayable under the bill facility (ie., $2,100,000 and interest and costs). The mortgagee asserts that the mortgage secures all liabilities of the mortgagors, which in the case of Resorts presently total in excess of $7,600,000, and in the case of Mrs Garrett presently total in excess of $10,000,000. I think that there is a triable issue in relation to the amount secured by the mortgage. I make it clear that I am not at this stage making findings of fact. There has not been a hearing at which both parties will have the opportunity to present their evidence and to cross-examine witnesses. On the material before me there is a triable issue having regard to the evidence of Mr Garrett that representations were made as to the amount secured by the mortgage. At present those representations are unchallenged. Furthermore, it might be said that the fact that the mortgagee took the second mortgage provides support for the view that the amount secured under the mortgage is and was limited.
In relation to the second mortgage, I think there is a triable issue on the evidence before me as to the extent of the liability of the mortgagors secured by the mortgage.
Conditions
The summons issued by the mortgagee sought an order for possession which is the exercise of a power pursuant to the mortgage. The sale of the property is the exercise of a power pursuant to the mortgage and the RPA (s 133). In an application by a mortgagor to restrain the exercise of the power of sale pending the determination of a dispute between the mortgagor and the mortgagee, consideration must be given to the conditions which should be imposed on any grant of interlocutory relief. A number of principles relevant to that question have been established by the authorities. In my opinion, the same principles apply to the grant of interlocutory relief restraining the exercise of the power to enter into possession of property, and I did not understand the mortgagors to suggest otherwise. In Salerno v Saunders and Saunders (1993) 173 LSJS 362 at 364, Judge Burley said that in the absence of an application for interlocutory relief by the mortgagors, the same principles apply to a consideration of whether directions should be made on a summons for possession once it has been determined that there is a triable issue, and that conditions may be imposed on the directions. In this case, there is a summons for possession by the mortgagee, and an application for interlocutory relief by the mortgagors and I will hear the parties as to the appropriate orders.
In Inglis v Commonwealth Trading Bank of Australia (supra), mortgagors sought an injunction restraining the mortgagee from exercising its powers under the mortgage until an action commenced by the mortgagors against the mortgagee had been determined. Walsh J referred to a general rule to the effect that an injunction would not be granted unless the amount of the mortgage debt, if this is not disputed, is paid or unless, if the amount of the mortgage debt is disputed, the amount claimed by the mortgagee is paid into court. Walsh J said (at 164-165):
“In my opinion, the authorities which I have been able to examine establish that for the purposes of the application of the general rule to which I have referred, nothing short of actual payment is regarded as sufficient to extinguish a mortgage debt. If the debt has not been actually paid, the Court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due.”
Walsh J observed that the benefit of having the security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee was allowed to prevent any enforcement of the security until after the litigation of those claims had been completed.
Walsh J said that a dispute as to the existence of the correct amount of the indebtedness under the mortgage, or an assertion that whatever the amount due under the mortgage it was counter-balanced by a claim for damages by the mortgagors against the mortgagee was not a ground for preventing a mortgagee from exercising its rights under the mortgage. An appeal from Walsh J was dismissed by Barwick CJ, Menzies and Gibbs JJ who expressed the view that the case fell fairly within the general rule identified by Walsh J.
In Harvey v McWatters (1948) 49 SR (NSW) 173, Sugerman J referred to the general rule and its application to the ordinary case. The ordinary case is one where there is no dispute that the power of sale is presently exercisable, but there is a dispute about the amount due, or a challenge to the mode in which the mortgagee proposes to exercise the power. Sugerman J did not consider that the case before him was the ordinary case because the dispute in the case was whether the power of sale was presently exercisable at all. In such a case different considerations from those relevant in the ordinary case must be considered. Sugerman J said (at 177):
“The considerations which arise where it is sought to restrain a mortgagee from exercising an undoubted legal power do not appear to arise where the existence of the power is itself the subject matter of the dispute. Rather does the matter seem to rest, and the reference to the mortgagees being put in safety and to its being an interlocutory application (see also per James LJ) seem to make it rest, upon the possible inadequacy of the ordinary undertaking as to damages in a suit as between mortgagor and mortgagee. For, if the interlocutory order should turn out to have been wrongly made, the mortgagee (proceeding under a power which, on the face of the mortgage, could have become exercisable) may not merely suffer some loss compensatable by damages, or lose some right in personam, but he may also lose wholly or partly the benefit of a security. The underlying principle, therefore, in such a case appears to be that of compensating the mortgagee by some security equivalent to that which is put in risk.”
In Harvey v McWatters (supra) the mortgagee was in possession, and the only order sought was an order restraining the mortgagee from selling. In discussing the risks to the mortgagee in such a case, Sugerman J said (at 177):
“He runs no more risk than that of losing some particularly advantageous sale and that of possible depreciation of the security pending the hearing. It is obvious that the maximum possible loss is not the amount sworn to be due or the amount in fact due under the mortgage, but the value of the security itself, and the evidence here suggests a strong possibility that this is a good deal less than the amount secured by the mortgage. But while this is the maximum in any case, the greatest loss possible in a given case may be much less.”
In Glandore Pty Ltd v Elders Finance and Investment Co Ltd (1984) 4 FCR 130, Morling J concluded that the case before him fell more easily into the second class of case discussed by Sugerman J in Harvey v McWatters (supra). In other words, it was not the ordinary case or put another way, a case which called for the application of the general principle identified in Inglis v The Commonwealth Trading Bank of Australia (supra). Morling J said (at 135):
“This being so I am not constrained by authority to require the applicants to pay into court the whole amount of the mortgage debt as a condition of obtaining interlocutory relief. Rather I think the proper approach is to mould an order so as to ensure adequate protection to the mortgagee and to otherwise do justice between the parties during the period pending the final hearing.”
In Linnpark Investments Pty Ltd v Macquarie Property Development Finance Ltd [2002] WASC 272 the mortgagee alleged that the mortgagor owed it a total amount of $7,673,735.26, whereas the mortgagor alleged that it owed the mortgagee no more than $7,083,926.04. In other words, the sum in dispute was $590,000 in round figures. Barker J referred to the general rule as stated by Walsh J in Inglis v Commonwealth Trading Bankof Australia (supra). Barker J identified two exceptions to the general rule, namely, where the amount claimed by the mortgagee was obviously wrong and possibly when, there is a question as to whether the mortgagee’s power has become exercisable at all. In the result, his Honour saw no reason why the general rule should not be applied in the circumstances of that case.
In discussing the general principle, the learned authors of Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (4^th ed) make the following observations (at para [3–080]):
“This is a rule which can, obviously, operate somewhat harshly if, for example, the mortgagee is exercising his power of sale in an improper manner. Yet, so far, the rule has been applied almost inflexibly: a mortgagor in default who is unable to repay the moneys secured is almost invariably denied equitable relief and relegated to his pecuniary claim …
But Walsh J made it clear that there was no challenge to the general rule as to payment. To this the only established exceptions are (a) where the amount claimed by the mortgagee is obviously wrong, or (b) possibly, when there is a question as to whether the mortgagee’s power has become exercisable at all.
…
The equitable doctrine does not apply in its full vigour wherein injunctive relief is sought under s 80 of the Trade Practices Act 1974: Town and Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific (1988) 20 FCR 540, 97 ALR 315.”

As to this last matter, I am prepared to proceed on the basis that this Court has the power to grant injunctions under the Trade Practices Act 1974 (Cth) and the ASIC Act, and I am prepared to accept that in exercising that power I am not necessarily confined by principles observed in courts of equity in their traditional jurisdiction (Town and Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific (1988) 20 FCR 540 at 545; ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 per Gummow J at 266). However, I see no reason in the circumstances of this case not to apply, or substantially apply, the equitable principles.
For the reasons I have already given, I think that there is a triable issue that the amount secured by the mortgage is limited to the sum of $1,500,000 and interest and costs on that sum, and that the notice served by the mortgagee pursuant to s 55A of the LPA claiming the sum of $2,100,000 is invalid. It follows that there is an arguable case that the right to enter into possession has not become enforceable. In those circumstances, the general rule identified in Inglis v Commonwealth Trading Bank Limited (supra) does not apply, and it is open to me to mould an order that will ensure adequate protection to the mortgagee and will otherwise do justice between the parties during the period pending the final hearing (Glandore Pty Ltd v Elders Finance and Investment Co Ltd (supra) per Morling J at 135). I see no reason why interest or the equivalent of interest should be allowed to accumulate, and I think past interest (or the equivalent thereof under a bill facility) should be paid by the mortgagors and that they should pay the interest (or the equivalent thereof) that falls due in the future. In the exercise of my discretion I have decided that the interest should be calculated on the sum of $2,100,000. I will also make an order for an early trial so as to reduce as far as possible the risk of the mortgagee being adversely affected by fluctuations in the value of the property.
In short, I think the following should be conditions of a refusal of the order for possession or the grant of the interlocutory relief sought by the mortgagors:
1.All amounts of interest, or the equivalent thereof, on the amount advanced under the bill facility (ie., $2,100,000) which have fallen due to date are to be paid and future instalments of interest under the facility are to be met by the mortgagors as and when they fall due. In other words, the mortgagors should pay all amounts of interest, or the equivalent thereof, under the bill facility past and future. I will hear from the parties as to whether the amounts should be paid to the mortgagee or into court.
2.That the appellants take all necessary steps for an early trial and that there be an early trial.
3. The appellants should give the usual undertaking as to damages.
I will hear the parties as to the appropriate orders and as to the precise wording of the conditions.
In light of the above conclusions, it is unnecessary for me to consider the mortgagors’ alternative argument. However, I do so in case there is an appeal. The mortgagors submit that the liability under the mortgage is limited to $2,100,000 and that they have finance with which to pay that sum. However, the finance is conditional upon a discharge of the mortgage, and the mortgagee will not give a discharge unless a much larger sum is paid. Without a trial and a determination of the issues, it cannot be said that the mortgagee is not entitled to refuse to provide a discharge except upon payment of the larger sum. In those circumstances, I think the case is an ordinary case for the purposes of the general principle, and that any relief granted to the mortgagors would be conditional upon payment in by the mortgagors of the amount claimed by the mortgagee. It is clear that the mortgagors do not have the capacity to pay a large sum of money into court, so that however the figure was fixed, the mortgagors could not comply with an appropriate condition, and they would not be granted interlocutory relief. In other words, had the mortgagors’ only argument been the alternative argument, I would have dismissed their appeal and declined interlocutory relief.
Conclusion
As I have said, I will hear the parties as to the appropriate orders and as to the precise wording of the conditions.

[2004] SASC 60

2 March 2004