Australian Executor Trustees Ltd v Glensun Nominees Pty Ltd
[2007] WASCA 229
•9 OCTOBER 2007
AUSTRALIAN EXECUTOR TRUSTEES LTD v GLENSUN NOMINEES PTY LTD [2007] WASCA 229
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASCA 229 | |
| THE COURT OF APPEAL (WA) | 31/10/2007 | ||
| Case No: | CACV:67/2007 | 9 OCTOBER 2007 | |
| Coram: | STEYTLER P McLURE JA BUSS JA | 9/10/07 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed | ||
| B | |||
| PDF Version |
| Parties: | AUSTRALIAN EXECUTOR TRUSTEES LTD (ABN 84 007 869 794) GLENSUN NOMINEES PTY LTD (ACN 080 483 156) GLENSUN NOMINEES PTY LTD (ACN 080 483 156) as trustee for WESTCOAST PROPERTY DEVELOPMENT UNIT TRUST DOUGLAS WINSTON MILLAR N G DEVELOPMENT CORPORATION PTY LTD (ACN 008 787 317) MILLAR ADMINISTRATION PROPRIETARY (ACN 008 900 847) |
Catchwords: | Practice and procedure Grant of interlocutory injunction restraining sale by mortgagee Whether a serious question to be tried Turns on own facts |
Legislation: | Nil |
Case References: | Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : AUSTRALIAN EXECUTOR TRUSTEES LTD v GLENSUN NOMINEES PTY LTD [2007] WASCA 229 CORAM : STEYTLER P
- McLURE JA
BUSS JA
- Appellant
AND
GLENSUN NOMINEES PTY LTD (ACN 080 483 156)
First Respondent
GLENSUN NOMINEES PTY LTD (ACN 080 483 156) as trustee for WESTCOAST PROPERTY DEVELOPMENT UNIT TRUST
Second Respondent
DOUGLAS WINSTON MILLAR
N G DEVELOPMENT CORPORATION PTY LTD (ACN 008 787 317)
MILLAR ADMINISTRATION PROPRIETARY (ACN 008 900 847)
Third Respondents
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : SIMMONDS J
File No : CIV 2210 of 2006
Catchwords:
Practice and procedure - Grant of interlocutory injunction restraining sale by mortgagee - Whether a serious question to be tried - Turns on own facts
Legislation:
Nil
Result:
Appeal allowed
Category: B
Representation:
Counsel:
Appellant : Mr B Dharmananda
First Respondent : Mr J G Hanly
Second Respondent : Mr J G Hanly
Third Respondents : Mr J G Hanly
Solicitors:
Appellant : Gadens Lawyers
First Respondent : Hotchkin Hanly
Second Respondent : Hotchkin Hanly
Third Respondents : Hotchkin Hanly
Case(s) referred to in judgment(s):
Nil
(Page 4)
1 STEYTLER P: I have read the reasons for judgment prepared by McLure JA. They reflect my own reasons for joining in the decision to uphold the appeal and make the orders to which she has referred.
2 McLURE JA: The appellant appealed from orders made by Simmonds J on 5 and 10 April 2007 granting and extending an interlocutory injunction restraining the appellant, in its capacity as a mortgagee, from selling land owned by Glensun Nominees Pty Ltd, being the first and second respondent (Glensun). At the conclusion of the hearing the court allowed the appeal, set aside the orders made by Simmonds J on 5 and 10 April 2007, dismissed the respondents' application for an interlocutory injunction and ordered the respondents to pay the appellant's costs of the application and the appeal to be taxed. These are my reasons for joining in the making of those orders.
3 Glensun is the registered proprietor of land on the corner of Reserve Street and West Coast Highway, Scarborough, being 3, 5 and 7 Reserve Street and 177 West Coast Highway (together referred to as the land). There are four 2-storey residential units on the property at 177 West Coast Highway with the balance of the land being vacant. Glensun is in the business of investing in, and developing, land.
4 The appellant is the first registered mortgagee of the land. By an agreement in writing made on or about 24 November 2005 between the appellant and Glensun, the appellant agreed to advance to Glensun an amount up to $4.365 million (the facility) on the security, inter alia, of a first ranking mortgage over the land (the loan agreement). It was an interest only loan for the first three years of the 11-year term of the facility. It was an express written term of the loan agreement that Glensun was obliged to make monthly repayments of interest in arrears at an agreed variable rate, being the sum of the bank bill swap rate together with a margin of 3%. The loan agreement expressly entitled the appellant to impose a higher or default rate of interest on unpaid amounts and to accelerate Glensun's obligations to repay the principal and all other amounts owing in the event of default.
5 In accordance with the loan agreement, Glensun granted to the appellant a mortgage of the land. The mortgage also contained an acceleration provision whereby the money secured by the mortgage became immediately payable without the need for any demand or notice if, inter alia, Glensun failed to pay any amount that was due and payable by it under the loan agreement or the mortgage.
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6 The third respondents guaranteed Glensun's obligations under the loan agreement and mortgage. The first-named third respondent, Douglas Millar, is an accountant who carried on an accountancy practice trading as Millar Management Services and was the sole director of Glensun.
7 Glensun drew down part of the facility in mid-January 2006. From the outset Glensun failed to comply with the express written terms of the loan agreement for the payment of interest. By notice dated 27 September 2006 the appellant demanded repayment of all moneys secured by the mortgage which was identified in the notice as $3,965,777.54. That amount included default interest. Glensun failed to pay the amount secured under the mortgage. Its attempts to refinance the facility elsewhere have been unsuccessful.
8 The appellant commenced proceedings for, inter alia, possession of the land for the purpose of exercising its power of sale under the mortgage. The respondents applied for and obtained an interlocutory injunction restraining the sale of the land. The primary judge concluded that the evidence established that there was a serious question to be tried as to whether there was an express or implied agreement or at least conduct that constitutes misleading or deceptive conduct which had the effect of preventing the appellant from insisting on its rights under the loan agreement and mortgage. The primary judge also concluded that Glensun would suffer irreparable injury if the appellant exercised its power of sale under the mortgage and that the balance of convenience favoured the grant of interlocutory relief.
9 The appellant contended in its grounds of appeal that the primary judge erred in concluding that there was a serious question to be tried and that the balance of convenience favoured Glensun.
Serious question to be tried
10 The respondents did not seek to uphold in the appeal the primary judge's conclusion that there was a serious question as to whether there was an express or implied term or agreement that excused Glensun from its obligations relating to the payment of interest. There was no evidentiary basis for such a finding. The only issue in the appeal was whether there was a serious question to be tried as to whether the appellant engaged in misleading or deceptive conduct. The sole factual basis for the respondents' claim was the provision by Mr Millar to the mortgage originator, Easy Living Commercial Finance Pty Ltd (Easy Living), of a spreadsheet headed 'MMS Group'. Easy Living arranged the facility for Glensun. Easy Living had been approached by WMP Finance
(Page 6)
- Pty Ltd (WMP) for finance for Glensun. WMP had an Introducer Agreement with Easy Living pursuant to which WMP marketed Easy Living's loan products to WMP's clients. Allan Culbertson of WMP dealt with John Punch of Easy Living in relation to the proposed facility.
11 Easy Living was party to an Origination and Management Agreement with Seiza Mortgage Company Pty Ltd (Seiza) who acted as the trust manager of the Seiza mortgage securitisation trusts of which the appellant was the trustee. Seiza appointed Easy Living to refer borrowers, and submit applications, to Seiza and service the completed loans.
12 In November 2005 Mr Culbertson of WMP had communications with Mr Punch of Easy Living seeking funding with respect to properties owned by Glensun and NG Development Corporation Pty Ltd, one of the third respondents. NG Development, a company controlled by Mr Millar, was seeking to refinance moneys owing on the land. In mid-November 2005 Easy Living provided an indicative funding proposal addressed to NG Development (indicative proposal). The indicative proposal outlined the terms and conditions under which Easy Living believed it could secure funding. The proposal expressly provided for payment of interest on the loan monthly in arrears and identified the documents and information it would require for assessment purposes. If the proposed borrower wished to proceed on the terms outlined in the indicative proposal, it was required to sign an acceptance instructing Easy Living to proceed with the application for finance as detailed in the proposal. The indicative proposal letter was amended to show Glensun as the borrower and was signed by Mr Millar on behalf of Glensun. There was no amendment to the term relating to the payment of interest monthly in arrears.
13 By an email dated 15 November 2005 from Mr Punch to Mr Culbertson, Mr Punch requested the provision of a signed statement of assets and liabilities from Mr Millar, the provision of an accountant's letter confirming the ability of the borrower to meet interest commitments and any other supporting data to assist in demonstrating the ability to meet interest commitments. In an affidavit sworn on 4 April 2007 Mr Punch states:
19. At or around 15 November 2005, I received a number of telephone calls from Millar regarding the information that I had sought via Culbertson. I did not speak with Millar about the structure of the proposed loan or proposed terms and conditions of the loan. Our conversations were only about the further information that I had requested. Millar did not say to me that the loan had to be
- structured such that interest and other payments could only be made on asset sales.
- 20. On or about 17 November 2005, I received a fax from Millar providing a document entitled 'GL Transaction Details Report' for Millar Administration Pty Ltd and a spreadsheet for the MMS Group …
21. I vaguely recall receiving this document. The document is an internal general ledger extraction with what appears to be a very basic cashflow. However, in the absence of any covering advices the document didn't otherwise mean anything to me. I did not request the information contained in the document and didn't consider it relevant to the loan proposal. Neither Millar, nor anybody else on behalf of the defendants, explained the content of the document to me or the purported significance of the document. No-one spoke to me about the document.
22. Consequently, the document was not even included as part of the final loan submission to Seiza … Had I requested the information contained in the document or otherwise considered it relevant to the final loan proposal I would have included the document in the proposal.
23. The loan submission was specific in covering loan serviceability based on historical financial information and the cashflow from Mr Douglas Millar's accounting firm …
14 In an affidavit sworn on 3 April 2007 Mr Millar deposed that:
11. … At all times, in the course of my loan application and the provision of financial information in support of that loan application the plaintiff [appellant] knew that the defendants' [first, second and third respondents] capacity to service interest payments on the plaintiff's loan was dependent upon the sale of various pieces of real estate by the defendants.
12. During the course of providing documents to the plaintiff in support of the loan application, I provided a cashflow spreadsheet document which set out a time line for the purpose of demonstrating to the plaintiff how the defendants proposed to meet the monthly interest payments of approximately $29,000 per month.
15 Mr Millar did not respond to the matters in Mr Punch's affidavit. Based on the generality of Mr Millar's unsubstantiated assertions as to the appellant's knowledge and the uncontradicted evidence of Mr Punch it can be inferred that the sole basis for the appellant's alleged knowledge was the provision by Mr Millar to Mr Punch of the spreadsheet which was
(Page 8)
- supplied without explanation or elaboration as to its meaning or purpose. The spreadsheet itself, which is Annexure A to these reasons, contains no express statement as to its meaning or purpose. The spreadsheet, accurately described by Mr Punch as a very basic cashflow, shows the timing of settlement of the sales of land owned by Glensun.
16 By letter dated 18 November 2005 Mr Punch forwarded to Mr Dean Italia at Seiza a mortgage proposal reflecting the terms of the indicative lending proposal. There is nothing in the mortgage proposal prepared by Mr Punch and forwarded to Seiza that supports the misleading and deceptive conduct claim. To the contrary, Mr Punch explains and supports his conclusion that the borrower would have the necessary cashflow to fund the proposed loan commitments.
17 By letter dated 24 November 2005 Easy Living informed Glensun that the appellant was prepared to make a facility available on the terms and conditions set out in an enclosed Letter of Offer. It was a term of the offer that Glensun pay interest monthly in arrears. Glensun, by its director Mr Millar, executed the Letter of Offer without amendment which became the loan agreement. Mr Punch says he received the signed letter of offer on or about 5 December 2005.
18 The mortgage was executed on 12 January 2006. The statement of account shows that the amount of $3,718,250 was advanced to Glensun on 6 January 2006.
19 The respondents and the primary judge did not clearly identify the terms of the misleading and deceptive conduct said to give rise to the serious question to be tried. When pressed at the hearing of the appeal, counsel for the respondents disavowed any claim that the appellant represented that Glensun was only required to make interest payments as and when cash was available from the sale of other land owned by Glensun. Such a representation is simply not open on the evidence. Counsel contended that the conduct as a whole supported Mr Millar's 'reasonable expectation that the lender was aware that [Glensun's] ability to meet interest commitments on a regular monthly basis depended upon the sale of some assets as set out in the spreadsheet'.
20 It can be assumed for present purposes that Easy Living was the appellant's agent in communicating with Glensun in relation to the proposed facility. The uncontradicted evidence was that Mr Punch and Easy Living were not aware that Glensun's ability to meet interest payments was dependent on the sale of assets. More importantly, the
(Page 9)
- information in the spreadsheet does not support an inference that Glensun's ability to comply with its interest payment obligations was dependent on the sales. The spreadsheet goes no further than conveying the borrower's intention to liquidate the nominated assets in the stated timeframe which would further bolster its cashflow. Further, even if the spreadsheet in isolation was capable of conveying a representation by Glensun to the appellant that Glensun's ability to pay interest was dependent on sales, there was nothing done by or on behalf of the appellant that was capable of misleading Glensun and the other respondents into believing that Glensun's obligations were other than those expressly stated in the loan agreement and mortgage. That is clear from the context in which the spreadsheet was provided including the signed indicative proposal, the email of 15 November and the express terms of the loan agreement (agreed to by Glensun without demur). The primary judge erred in concluding that there was a serious question to be tried and ought to have refused the application.
21 BUSS JA: For the reasons published by McLure JA, I joined with the other members of the court, on 9 October 2007, in allowing the appeal and making the other orders made on that date.
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