Billinudgel Pastoral Company P/L v Westpac Banking Corporation

[1994] FCA 172

172           Cj)?

JUDGMENT NO. .n..n..-wJ -**.W-***

JN THE FED-	COURT OF AUSTRAL14	1
1 No. QG 28 of 1993
1

BETWEEN :  BILLINUDGEL P A S T O W CO PTY L'lQ

First Applicant/

First Cross-Respondent

AND :  -1AN TEA TREE ESTATES PTY LTQ

Second Applicant/

~eco;;d Cross-Respondent

AND :  COPPERFIELD P A S T O W CO PTY LTQ
Third ~pplicant/

Third Cross-Respondent

AND :  COLIN UEBERGANG. COLIN ROBERT U E B E R W G an4
CHRISTOPHER LEWIN UEBERGANG tradina as
C UEBERGANG & SONS la fiIlll1

Fourth Applicant/

Fourth Cross-Respondent

AND :  COLIN UEBERGANG and CHRISTOPHER LEWIN UEBERGANG

Fifth Applicant/

Fifth Cross-Respondent -

AND:  COLIN UEBERGANG

Sixth ~pplicant/

Sixth Cross-Respondent

AND :  WESTPAC BANKING CORPORATION

First Respondent/

Cross Claimant

AND :  LIONEL HENRY S T E W

Second Respondent

AND :  JCENNETH STRAHLEZ

Third Respondent

AND :  LINDSAY RICHARD DICKSON and ALAN RAPHAEL TUTTLE

13 APR 1994 Fourth Respondent

AND :  PHILIP ARTHUR HENNESSY and JAMES WARWICq
ARMSTRONG

m N a * u Fifth Res~ondent

AND:  KPMG PEAT WICK ta f i r m 1

Sixth Respondent

NOTE:	Settlement and entry of orders is dealt with in Order 36
of the Federal Court Rules.

MINUTES OF ORDER

JUDC* MAKING ORDER:	Spender J.
DATE OF ORDEq:	31 March 1994
WHERE:	Brisbane
THE COURT ORDERS THAT:

(i) the application for interlocutory injunction be dismissed;

(ii) the costs of the motion be reserved.

RAL COURT OF AUSTRALIA	1
) No. QG 28 of 1993
)

BETWEEN: 3 ~ i G t Cross-Respondent

AND :  TREE ESTATES PTY L m

Second Applicant/

Second Cross-Respondent

AND :  PAsTpBAL CO PTY Em Third Applicant/

~hi>d Cross-Respondent -

AND :  RT UEBERGANG a

CHRISTOPHER LEWIN W R r A N G trams as

UEBDGANG & SONS i a f i m L

Fourth Applicant/

Fourth Cross-Respondent

AND :  COLIN UEBERGANG and CHRISTOPHER LEWIN UEBERGANG

Fifth Applicant/

~ i f i h Cross-Respondent

AND :  U L I N UEBERGANG

Sixth Applicant/

Sixth Cross-Respondent

AND :  WESTPAC BANKING CORPORAT-

First Respondent/

cross- Claimant

AND :  LIONEL HENRY STEMP

Second Respondent

AND :  PENNETH ST-

Third Respondent

AND :  m

Fourth Respondent -

AND :  PHILIP ARTHUR HENNUSY and JAMES WARWIa
ARMSTRONG

Fifth Res~ondent - -

AND :  XPMG PEAT MARWICK la firm1

Sixth Respondent

a:  Spender J.

M: Brisbane

Q&m: 31 March 1994

REASONS FOR JUDGMENT

This is a notice of motion filed on 10 March 1994 by which the applicants seek an injunction restraining the first and fourth respondents, that is to say, Westpac Banking Corporation ('Westpac') and Lindsay Richard Dixon and Alan Raphael Tuttle ('the receivers') who are receivers appointed by Westpac on 10

December 1991 in respect of land which is described in the notice of motion. The injunction is to restrain the first and fourth respondents from selling, completing any contract of sale, or otherwise disposing of the land described as Lot 13 in Deposited Plan No. 828810 at McAuleys Lane, Shire of Byron, Parish of Brunswick, County of Roue ('the Mullumbimby land').

For the reasons which follow, I am satisfied that there are serious questions to be tried, both of fact and law, but that on the consideration of the balance of convenience, the injunctive relief sought in that motion should be refused.

The land the subject of the notice of motion is located at Mullumbimby and tenders have been called, which tenders remain open for acceptance until 5 pm today, 31 March 1994. The notice of motion was heard on 25 March and 28 March 1994.

The first applicant ( 'Billinudgel' ) is the owner of the

Mullumbimby land.	The second applicant, Australian Tea Tree
Estates Proprietary Limited ('ATTE'), conducted a business of tea

tree farming on that land and was itself the owner of certain agricultural and farming equipment usedto conduct that business. The third applicant was the owner of freehold land at Goondiwindi, which is referred to in the affidavit material as "the Mt Camel land". The fourth applicant is a partnership which conducted a wheat growing business on that land. The fifth and sixth applicants have certain claims in respect of methods of organic farming of wheat famed on the Mt Carmel land, and of tea tree oil farmed on the Mullumbimby land.

In 1987 there was an offer by Westpac of a financial facility of a not inconsiderable amount to Billinudgel and to the fourth applicant ('the partnership'). The offer was accepted. On 20 July 1987 Billinudgel executed two bills of mortgage over the Mullumbimby land. The first bill of mortgage was to secure the indebtedness of Billinudgel to the bank, and the second bill of mortgage was to secure the indebtedness of the partnership to the bank. On 4 December 1991 notice of default was sent to Billinudgel making demand for payment in the sum of $3.78 million for moneys due and owing by Billinudgel to the bank, and a notice Of default on the same day was served against ATTE, demanding payment of the same amount.

By 9 December 1991 the defaults had not been remedied, and on 10 December 1991 the bank appointed the receivers as receiver and manager of the Mullumbimby land under each of the first and second mortgages over that land. The receivers, on or about that date entered into possession of the property the subject of the various appointments.

There were earlier proceedings in this Court before Cooper J seeking to restrain the sale of the Mt Camel land. In those proceedings, Cooper J noted in his reasons for judgment at page 7:

"	I t i s contended i n the material f i l e d by the respondents that the rece ivers were appointed and entered i n t o possession o f the property, the
subject & = t h e s e c u r i t i e s , with the consent o f
the appl icants . - The applicants deny t h i s . "

That stance has a significance in respect of questions thrown up by the present application for injunctive relief.

The complicated history of related matters is referred to in his Honour's judgment and it is therefore unnecessary for me to repeat those factual matters here. There was also proceedings before Whitlarn J in respect of which he gave ex tempore reasons for judgment on 12 May 1993, and some of those findings in that proceeding are relevant for present purposes. At page 2 of his Honour's reasons, he said:

" This further evidence [being a reference to the evidence in addition to that before Cooper J]

establishes that (1) all the shares in the first and second applicants are beneficially owned by the sixth applicant; (2) the shares in the third applicant are beneficially owned by the fourth and sixth applicants; (3) the sixth applicant is a director of each of the corporate applicants; (4) one Suzanne Pearl Sorelle-Vebergang is a director of the second applicant; ( 5 ) that each of the applicants was impecunious; (6) that the first respondent intends to counter-claim against all the applicants in respect of debt outstanding to it; and (7) that the value of the security held by the first respondent is substantially less than the amount owed to it by the applicants. "

The validity of the two mortgages executed in 1987 is not challenged in the principal proceedings. The nub of the present case for the applicants (whom I might collectively describe as the Uebergang interests) is contained in a useful work by Christopher Lewin Uebergang, which is exhibit CLU2.1 to the affidavit of Mr Christopher Uebergang. In a summary schedule contained in that exhibit he lists the details in the following

UEBERGANG BANK DEBT
-

1 Total bank debt per Westpac on or about 4/12/91

2 Less interest accrued

to on or about 4/12/91
to be forgiven per

agreement with Westpac

Less funds received in
reduction of

liabilities per Westpac

4 Less net profits

derived from organic

grain, tea tree oil and

harry operations
durin the period

10/12%1 to 9/12/93

5 Less funds in sight

(from land sales and
tea tree oil sale

proceeds from the

~~r 1994 tea tree

harvest)

6 Total Uebergang bank

credit

I

I l

The schedule indicates that on the analysis of the

Uebergang interests, they are creditors of Westpac to the extent

of $748,626.25. However, a note to the schedule indicates that

-

*

the total bank credit does not include:

(i)    the receivers and managers' and legal fees end expenses for the period 10.12.91 to 9.12.93 of $692,128.90; and

(ii)   the estimated interest (subject to dispute) accrued from 1.7.92, which is said to be $418,149.00;

or
(iii)	the losses of income due to receivers' failure to harvest tea trees at proper harvesting times, which are said to be $550,000; and
(iv)	the loss of sale proceeds due to the receivers' failure to conclude the sale of quarry and effluent land valued at $395,000.

There are many factual disputes requiring resolution referred to in the affidavit material on this application. In particular, as that schedule indicates, there is an allegation of negligence against the receivers in a number of respects, both as to failure to harvest the tea trees at proper harvesting times and also for the loss of sale proceeds in respect of part of the Mullumbimby land. There are also allegations concerning the sale of the Mt Camel land and the receiver's conduct, leading to its "contamination" in the sense that it was no longer able properly to be sold as an organic farming entity. But in addition to those matters, which sound in damages only, there are, in my opinion, two serious questions touching the claim of the bank which are arguable.

The first is whether there was a concluded agreement by which Westpac agreed to forego interest up to the end of June 1992 ('the agreement'). That question has some very curious

features . First, it does not appear in any of the

contemporaneous material emanating from the Uebergang interests. There is no reference to the agreement in any of the quite numerous communications by the natural persons or by their advisers. Secondly, insofar as there was or might be a concluded and certain agreement, on the material it seems to me that the consent of the Ueberganginterests, or perhaps their co-operation to the appointment of a receiver was a necessary term or condition of the agreement. And that aspect of the matter is contrary to the position taken by the Uebergang interests before Cooper J, as is indicated by the passage from his Honour's judgment to which I have earlier referred.

The case for the Uebergang interests on the agreement appears from the affidavit material from the bank including, in particular, that from Mr Ian Alexander Searle, and some exhibits to his material. A Peter Poolman had been comissioned by Mr Colin Uebergang to prepare a report for discussions with the bank and in early October 1991 Mr Searle was provided with a copy of the report by Mr Poolman ('the Poolman report'). The Poolman report shows, on the third page, under the heading Uebergang Group Assets and Liabilities, that there was a deficiency of liabilities over assets of just over $3.2 million. The Uebergang Group for the Poolman Report comprised the first, second, third and fourth applicants.

The Poolman report offered two strategies. The first was to liquidate, and the second was to attempt to trade out of difficulties. Mr Searle, in an af fidavit filed on 15 March 1993 swears that after a meeting with M r Poolman and a number of others on 9 October 1991 he made a submission to the state manager credit and lending in which he recommended that Mr Poolman's second strategy be adopted. The recommendation appears in exhibit I to his affidavit and is in the following form:

W M y recommendations therefore are: ( 1 )

follow the workout plan,	i e -
-	A l l interest t o be forgiven t o 30 June
1992.
-	Non-income earning assets t o be sold a s
per projections.

- Normal interest rates t o apply from

1.7.1992 b u t subject t o appointment o f a

recei ver/mana ger	t o	control	the
situation. "

He further states that he recommended the appointment of a receiver because the applicant's businesses were obviously insolvent and that his submissions and recommendations were accepted. In a diary note which is exhibit J to his affidavit

he speaks o f a meeting on 29 November 1991 with Mr Colin

Uebergang as well as other bank officers, and he says:

" Advised Mr Uebergang that the bank could not continue t o follow them a s a t present. We rere prepared t o follow the 'Poolman' restructure plan but w e intended appointing a

Receiver/Manager. I advised Mr Uebergang that

i t was our a i m "if possible" t o have a t least one property retained by them but there were no guarantees. I t was preferable that we seek h i s

co-operation for the appointment and part o f the workout was for them t o continue t o operate the two properties. Mr Uebergang gave h i s consent

t o the appointment and	their commitment t o the
wrkou t .	"

In addition to that there is a letter from Mr Searle to

Messrs KPMG Peat Marwick of 28 February 1992 which, inter alia,

.m ; .

says, at point 8 of the second page:

" Mr C. Uebergang has requested the Bank's conf irma t ion o f previous verbal advices

regarding the Bank foregoing in teres t charges t o

30 June 1992. We confirm that t h i s i s the

Bank's intention. "

Westpac, however, says that there was no concluded agreement and that, in any event, there was a failure of a necessary condition subsequent. The bank says that there was a number of proposals, discussions and negotiations and various offers and counter offers but there was never any certain concluded agreement that it would forego interest until 30 June 1992.

There is also in Westpac's material references to the basis on which the discussions were occurring. In the last letter to which I have referred, immediately after the confirmation that it was the bank's intention to forego interest,

Mr Searle continued:

"

ve arranuements are subiect to the

nu o f the securitv documents now. They

advise that they now have no d i f f i cu l t i e s w i t h

th is request.	We have also advised Messrs
Uebergang the t we have no objec t i~n to a copy o f	this le t ter being made available to them.
Messrs Uebergang have been advised that the Bank's intentions for the future conduct of the above arrangements are an indication only of the
receivership and are subject to review on a regular basis. The Bank w i l l not guarantee to
Messrs Uebergang t h a t due to any change i n circumstances a change i n direction may not
eventuate. *

In the light of that material it seems to me that the question of whether there was a concluded and certain agreement is an arguable one with the consequences as reflected in M r Christopher Uebergangps schedule. However, also relevant to this is what appears in the statement of claim under the heading "The

-	Poolmans Reportn, including paragraphs 9A, B, C, D and E. The agreement on which the applicants seek to rely seems to be that
expressed by Mr Searle as being the acceptance o f his recom- mendation concerning the Poolmans' second strategy with the condition that a receiver/manager would be appointed. This,
however, contrasts with what i s pleaded i n paragraph 9D(e), which
says :

" When, subsequently, contrary t o the applicants'

understanding o f the agreement t o be imp1 ied from the Bank's acceptance o f the Poolmans report, the Bank purported t o appoint the fourth respondents receivers under i t s existing securities, did not then investigate whether they were entit led t o oppose those appointments,

conducted themselves a s a1 l eged i n paragraph 36,

and assisted the receivers i n the conduct o f those receiverships a s required b y the receivers and i n particular d i d not prevent the receivers

taking possession o f and/or se l l ing assets not

covered by those securities. "

There i s an inconsistency between the allegation there that the appointment by the receivers was not with the consent o f the Uebergang interests and what seems t o be the only possible certain agreement t o be derived from the communications with M r Searle .

The second serious question arises from a l e t t e r t o Mr

Uebergang from Mr Searle o f 24 August 1 9 9 0 . On the second page

o f that	l e t t e r under	the	heading	" In teres t" , the	following
appears :

" Indicator Lending Rate (currently 1 7 . 7 5 % p.a.)

plus margin o f 1 . 5 % p.a. w i l l apply.

We hereby n o t i f y you that a s a matter o f internal procedure only and without i n any way af fec t ing or reducing your overall l i a b i l i t y t o the Bank for interest on moneys owing by you, the bank may from time t o t i m e reverse a l l or part o f the entry for in teres t charges debited

or to be debited to yuur accounts in respect of
any period.

The foregoing action and the issue of statements of accounts made up in accordance therewith shall not in any way be a waiver of or restrict the Bank's right to recover interest at the current rates in force from time to time on the full balance owing by yuu to the Bank from day to day including (where any such interest remains unpaid) interest on the interest so unpaid and specifically such procedure and the statements of accounts issued to you shall not restrict or diminish the rights of the Bank under any security held by it in respect of your indebtedness. "

This aspect of the matter was raised by the Court and was not the subject of submissions in chief by Mr Harrison QC, senior counsel for the Uebergang interests. However, my having raised the matter prompted him in reply to submit that the interest charged or sought to be charged by the bank was Irrecoverable for illegality, the process adopted by the bank being intended to avoid bringing interest into account and thereby wrongly deferring tax on it until it was actually recovered, even though the bank would be properly taxable on an accruals basis.

It was submitted that at most the bank can recover the principal outstanding as at 24 August 1990 as all further advances were made and all interest claimed arose under the fraudulent arrangement set out in that letter and all recoveries since then should be applied to the earlier debt. It was submitted by W. Harrison that the proper way of accounting for interest, even where recovery may be doubtful, is to bring it to

account as income when it accrues. It may only be deducted under

S. 63 of the ucome Tax Assessment Act dealing with bad debts

when the debt becomes bad as opposed to doubtful. And it was submitted that the bank's so called "internal procedure" was contrary to the principles applied by the Full Court of the Federal Court in Federal Commissioner of Taxation v Fational

-ration of Australia Limited ( 1983) 72 FLR

116.

Mx Chesterman QC, senior counsel for Westpac and the receivers, took objection to the court having regard to the submissions by the applicants in reply on the understandable basis that the matter had not been the subject of evidence. The authorities establish that whether a debt is bad is a question of fact: Dinshaw v Bombav Commissioner of Income Taq (1934) 50 TLR 527.

However, it seems to me that at least for the purposes
of this interlocutory he-g, the question of illegality is one

that is arguable, that question being whether the erroneous

characterisation of debts as bad, made for the purpose of paying less tax than is otherwise properly payable, constitutes such	illegality as to preclude recovery by the bank of that interest.
The claims of the applicants which sound only in damages, including that which alleges contamination of the Mt Camel property, can be put to one side for present purposes. Affidavits going to the merits on both sides have been filed and clearly there is real dispute as to the facts. But that aspect
o f the m a t t e r i s n o t r e l e v a n t i n my o p i n i o n f o r t h i s
i n t e r l o c u t o r y a p p l i c a t i o n .

I n v -wealth Trad ina Bank o f A u s t r a l i a 126

CLR 161, Walsh J sa id a t 164:

" A general r u l e h a s l o n g been e s t a b l i s h e d i n

r e l a t i o n t o a p p l i c a t i o n s t o r e s t r a i n the exercise by a mortgagee o f powers g iven by a

mortgage and i n p a r t i c u l a r the exercise o f a	power o f s a l e , t h a t such an i n j u n c t i o n w i l l not
be granted u n l e s s the amount o f the mortgage d e b t , i f this be not i n d i s p u t e , be paid or
u n l e s s , i f the amount be d i s p u t e d , the amount

"

claimed by the mortgagee be paid i n t o c o u r t .

And l a t e r he s a i d :

" I n my o p i n i o n , the a u t h o r i t i e s which I have been

a b l e t o examine e s t a b l i s h t h a t f o r the purposes

o f the a p p l i c a t i o n o f the general r u l e t o which

I have r e f e r r e d , n o t h i n g s h o r t o f ac tua l payment

i s regarded a s s u f f i c i e n t t o e x t i n g u i s h the

mortgage d e b t .

H e quoted from the judgment o f McGarry J , a s he then was, from

Samuel Keller ( H o l d i n a s ) Ltd v Mar t ins Bank Limi ted [l9711 1 WLR

43 where His Lordship s a i d :

"

C e r t a i n l y the concep t o f the appropr ia t i on o f an

u n l i q u i d a t e d c l a i m t o a mortgage deb t by the

mortgagor w i l l a f f e c t a d i s charge n i s i of t h a t

deb t seems both novel and awkward. Unless and u n t i l the mortgage i n this c a s e i s discharged i n the a p p r o p r i a t e way upon ac tua l payment and acceptance o f the sum due, I t h i n k t h a t the mortgage remains a mortgage, and t h a t the mortgagee i s e n t i t l e d t o a n y s u r p l u s proceeds o f s a l e i n the hands o f the bank up t o t h e amount p r o p e r l y due under the mortgage. A d o c t r i n e o f

e x i s t e n c e or u n i l a t e r a l appropr ia t i on o f an	the d i s charge o f a mortgage deb t by the
u n l i q u i d a t e d c l a i m i s one t o which I g i v e n o
countenance. I regard i t a s n e i t h e r conven ien t
n o r j u s t . "

Walsh J, i n a passage a t page 1 6 6 , impor tan t f o r p re sen t

purposes , s a i d , i n the c o n t e x t o f a l l e g a t i o n s where it had been

s a i d t h a t the d e f e n d a n t had a c t e d w r o n g f u l l y :

" In my o p i n i o n the f a c t t h a t t h o s e charges have

been made and there h a s n o t been an a d j u d i c a t i o n

upon them i s not a r eason f o r r e s t r a i n i n g the

de f endan t from e x e r c i s i n g i t s powers under the

mortgage. As I have s t a t e d , i t i s not i n

d i s p u t e t h a t there was an i n d e b t e d n e s s under the

mortgage, t h a t i s t o s a y , t h a t there were

advances	o f money	which	were	not	r e p a i d .
Neither	the	existence	o f	d i s p u t e s	a s t o the

correct amount o f t h a t i n d e b t e d n e s s n o r the

c l a i m a l r e a d y ment ioned t h a t , whatever i t was, it had been coun terba lanced by the c l a i m o f the p l a i n t i f f s f o r damages i s a ground i n m y o p i n i o n

for p r e v e n t i n g the mortgagee from e x e r c i s i n g i t s

r i g h t s under the mortgage i n s t r u m e n t . "

I n c l a r k v JaDan Machines ( A u s t r a l i a ) P t v L t d No. 2

[l9841 1 Qd R 421, G . N . W i l l i a m s AJ, a s he t h e n was , r e f e r r e d t o

the general rule i n I n a l i s , and a t page 422 s a i d :

"	Meagher,	Gummow and Lehane,	E a u i t v Doc t r i ne s an$
Bemedies	(para .	3 1 6 ) , sugges t	t h a t there a r e two

e s t a b l i s h e d e x c e p t i o n s to the general r u l e : ( a ) where the amount c la imed by the mortgagee i s o b v i o u s l y wrong; and (b) where there i s a

q u e s t i o n a s t o whe ther the mortgagee 's	power	h a s
become e x e r c i s a b l e a t a l l .	They rely i n suppor t

o f the f irst e x c e p t i o n , on the d e c i s i o n o f the

Court o f Appeal i n Hickson v par low (1883) 23

Ch.D. 690 In t h a t c a s e the mortgage [sic]

contended	t h a t the mortgagor must p a y i n t o c o u r t
the whole amount he had c la imed .	The Court o f

Appeal (Jessel , L i n d l e y and Bowen L J J )

r e j e c t e d t h a t argument, J e s s e l MR s a y i n g a t 694:

" The o r d i n a r y p r a c t i c e i n c a s e s between

mortgagor and mortgagee Was to be fo l lowed , namely, t h a t on an a p p l i c a t i o n by the

mortgagor t o s t a y a s a l e , i f the mortgagee

swears t h a t an amount which, c o n s i s t e n t l y

w i t h the t e r m o f t h e mortgage, may be	due t o
him i s due ,	t h a t i s the amount which the
mortgagor m u s t b r i n g into Cour t .	"

m e y v BcWatters ( 1949 ) 49 S R ( N S W ) 173 e s t a b l i s h e s the

second e x c e p t i o n . I n t h a t c a s e , i n the judgment o f Sugerman J

a t 178,	he	s a i d :
"	There i s a d i s t i n c t i o n be tween what I have
c a l l e d the o r d i n a r y c a s e and the c a s e i n which
the existence o f the power o f s a l e o r the
question where it i s e x e r c i s a b l e a t a l l i s i n
q u e s t i o n . The p re sen t c a s e i s o f the second
c l a s s . What i s c a l l e d the o r d i n a r y r u l e a p p l i e s
t o c a s e s o f the f irst c l a s s , and t o those c a s e s
only. This f lows from the p r i n c i p l e s and
r eason ing upon which t h a t r u l e depends . Cases
o f the second c l a s s a r e , a s regards
i n t e r l o c u t o r y a p p l i c a t i o n s , governed by a r u l e
o f s i m i l a r t y p e . But it i s a r u l e r e s t i n g on
d i f f e r e n t p r i n c i p l e s and r eason ing . These
permi t o f a g rea t e r f lexibi l i ty . They do n o t
require t h a t i n every c a s e the whole amount
c la imed o r sworn t o by the mortgagee or s een
from the terms o f the i n s t r u m e n t t o be the
g r e a t e s t amount t h a t cou ld be due shou ld be paid
in. The terms may be moulded so a s t o require
payment i n o f so much o n l y a s s u f f i c e s t o g i v e
adequate p r o t e c t i o n t o the mortgagee . "

I n m Town o t d v

partner- Pacific (1988) 20 FCR 540, the Fu l l Court o f

the Federal Court sa id a t 545:

" A s a m a t t e r o f power r a t h e r t h a n a s a n exercise

o f d i ~ c r e t i o n	i n a	p a r t i c u l a r	c a s e the Court may
grant	i n t e r l o c u t o r y	o r f i n a l	i n j u n c t i v e	re l ie f

t h a t does n o t correspond w i t h what would f o l l o w

from the a p p l i c a t i o n o f the t r a d i t i o n a l r u l e s .

T h i s i s n o t t o s a y t h a t i n c a s e s such a s the

pre sen t the r u l e s d e v i s e d i n equity f o r

a p p l i c a t i o n i n d i s p u t e s between mortgagor and

mortgagee	may n o t prov ide	r e a d y guidance	f o r
what	i s appropr ia t e .	But	a s we have observed ,

the t r a d i t i o n a l r u l e was a p p a r e n t l y r e l a x e d

where the mortgagor a t t a c k e d the e n f o r c e a b i l i t y

o f the s e c u r i t y .	The powers	o f th is Court under
S .	87 o f the Ac t	enab l e the mortgagor t o o b t a i n

i n an appropr ia t e c a s e o r d e r s v a r y i n g the terns

o f agreements or d e c l a r i n g them v o i d a s a

consequence o f the c o n t r a v e n t i o n o f the

p r o v i s i o n s o f the Ac t by the mortgagee . T h i s

may s t r eng then the i n c l i n a t i o n o f the c o u r t i n

an appropriate case to refrain from requiring the applicant to provide adequate security for its indebtedness before restraining the mortgagee from exercising its powers. "

and then referred to the well-known cases of Elandore Ptv Ltd v. aders Finance and Investment Co. Ltd (1984) 4 FCR 130 and

v National Australia Bank (1987) 15 FCR 495 and contrasted them with Mainbanner Ptv Ltd v Dadincroft Ptv Ltd

(1988) ATPR 49,661.

I t is also relevant in the light of the submissions by

Mr Harrison to note that the High Court in Bunburv Foods Ptv Ltd

v National Bank of Australia Limited 58 ALJR 199 said at 204:

" It is of some materiality to note that it is not

essential to the validity of a notice calling up a debt that it correctly states the amount of the debt. Even a notice given to the 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. HUm~herp v.

Poberta ( 1 8 6 6 ) 5 S . C . R . ( N . S . W . 1 3 7 6 at 385,

- p~

3 8 7 ;	~arn~bell.	v. ~ommerci	a1 ~ankina	Com~anv	of
Svdney	( 1 8 7 9 ) 2	L . R .	( N . S . W . )	3 7 5 at	385;

pro~erties Ltd v. Tasker [ l 9 7 0 1 N . Z . L . R . 754 at

7 5 7 - 7 5 8 ; MIR Bros Projects Ptv Ltd v. 1924 Pty

[ l 9 8 0 1 2 N.S .W.L.R. 9 0 7 at 926. "

The difficulty which makes it impossible for me to grant

interlocutory relief in this case, is that, consistent with the

requirements expressed by Sugannan J in Harvey v McWattera and

to be found in many subsequent caaes,of which Glandore is one

-

example, it is not possible in this case to mould an order which will give adequate protection to the mortgagee. The balance of

convenience is all, unfortunately, one way. -

On the bank's case, the value of the property is less than the debt, and interest is accruing at the rate in excess of $400,000 per annum. I t is unlikely that the principal proceedings will be heard in the very near future. Mr Dickson, in an exhibit to his affidavit, has calculated the net cost to the bank of a delay in six months in the sale of the property at $340,000, of which $218,000 is interest. The applicants offer nothing by way of security for those losses, should the bank succeed. There is no worth in any undertaking as to damages.

On the other hand, if the applicants succeed, there is no argument but that they are able to be satisfied by the bank's resources in respect of every cent to which they are properly entitled.

-.

In these circumstances, it is not possible, in my opinion, to mould an order so as to protect the mortgagee's interest. In Jeanwest Cor~oration Ptv Ltd v JWD Ptv Lta Nicholson J found himself in a similar position to that in which

I find myself in this case. I adopt his observations (at 692): " The difficulty I have here is that . . . there is not on behalf of the plaintiff an offer of anything that would enable the court to mould an order so as to give adequate protection to the mortgagee. If the circumstances of Hanrey v BcWatters, (supra) itself are examined it is seen that the court was enabled on what was offered to secure protection to a certain extent. The same was the posi tion in Jucara Pty

L&$ v. Western Goldsmiths Ptv L a (SC(WA)

Library No. 851 1, 6 September 1990, unreported). In my view, where the position is that the plaintiff brings nothing into the court to enable it to mould an order to give some protection to the mortgagee, the court is simply not in a position to make such an order or to

apply the principle in Harvey v McWattere, supra. I say further that it is not open to the court to go beyond the authority and to act where there is no ability for it to protect the interests of the mortgagee, at least to a degree which may be appropriate in the circumstances of the matter. "

Finally, there was a submission made that there was a special value attaching to the Mullumbimby land personal to the applicants and that it was for that reason a matter which the court should take into account. I do not accept that that is the caee here, and that is supported in a large measure by the fact that one of the many proposals by the Uebergang interests was the floating of the tea tree interests to outside investors.

In all the circumstances, the balance of convenience dictates that I decline the relief sought in the notice of motion. The application for relief in terms of the notice of motion filed on 10 March 1994 is dismissed. As to costs of the motion, [after hearing counsel], I will reserve the question of costs of the motion. I will not make any order having the effect

of an interim or temporary stay.	I certify that this and the preceding
17 (seventeen) pages are a true copy of the reasons for judgment herein of the Honourable MK Justice Spender.
Date: 31 March 1994

Counsel for t h e a p p l i c a n t s : Mr L . Harrison QC

i n s t r u c t e d b y : Deacon Milani

Counsel for t h e first and

four th respondents :	Mr R .
J . Sheahan

W . Ches teman QC and M r

i n s t r u c t e d b y : Feez Ruthning

Date o f Hearing:  25, 28 March 1994