Browne v Kirsh
[2004] VSC 306
•10 August 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 8835 of 2003
| JEFFREY MICHAEL BROWNE AND ANOTHER | Plaintiffs |
| v | |
| THEODORE KIRSH AND ANOTHER | Defendants |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 10 AUGUST 2004 | |
DATE OF JUDGMENT: | 10 AUGUST 2004 | |
CASE MAY BE CITED AS: | BROWNE v KIRSH | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 306 | |
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Mortgage – Mortgagees' statutory power of sale exercised – Mortgagees suing guarantors for balance of debt – Whether rejection by mortgagees of earlier offer to buy on 180 day terms was reckless – Appeal from Master's order giving summary judgment to mortgagees – Appeal dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr A.A. Nolan | Browne & Co |
| For the Defendants | Ms B. Evert | Fetter Gdanski |
HIS HONOUR:
This is an appeal from an order of Master Evans made on 7 July 2004 giving summary judgment to the plaintiffs in the sum of $230,218.36, together with costs on a party and party basis from the commencement of the proceeding to 16 April 2004 and indemnity costs thereafter.
The first issue is whether or not the appellants should have special leave to rely on further affidavits that were not in evidence before the Master. In my opinion, special leave should be granted so that all the material that has been prepared can be considered by the court on the hearing of the appeal.
The plaintiffs' claim against the defendants was pursuant to a guarantee given by the defendants to support the loan of $500,000 made by the plaintiffs to a company, Bouverie Properties Pty Ltd, in September 2001. A mortgage was granted by Bouverie Properties Pty Ltd to the plaintiffs over a property known as 111 Nott Street, Port Melbourne. In November 2002 the property was put up for sale by Bouverie, it would appear, although there was some suggestion that Mr Browne, the first plaintiff, was playing some role in that sale. The property was passed in without any offers being made other than vendor bids. The reserve price was $2 million.
The loan by the plaintiffs to Bouverie was repayable in December 2002 and in early 2003 the plaintiffs, or at least Mr Browne, became involved in attempts to sell the property to enable the debt, which the defendants had guaranteed, to be repaid. It would appear that in January 2003 there was a conditional offer of $1.7 million. Closer to the middle of the year there was an unconditional offer of $1.5 million, and on 10 June 2003 there was an unconditional offer made by a Mr Vitali of $1.6 million, with settlement on 180 days. There was a dispute as to whether or not Mr Browne accepted the 180-day time limit. I am satisfied on the material before me that he did not, and that he altered the contractual documents to require a 60-day settlement period. Otherwise, both he and Mr Kirsh, the first defendant, were content to receive the price of $1.6 million. Mr Vitali apparently was not prepared to accept this counter offer, and so the opportunity for that sale was lost.
The property was eventually sold in December 2003 at auction for $1.54 million, with settlement in February 2004. The proceeds of settlement available to the plaintiffs under their second mortgage were such that the sum of just over $200,000 remained outstanding from the $1.54 million purchase price, and it is that sum in respect of which these proceedings have been brought.
It seems to me that the parties have agreed that the real issue before me today is whether leave to defend should be given to the defendants on the basis that the rejection by Mr Browne of the offer of $1.6 million on 180-day terms was reckless in disregard of the mortgagor's and, implicitly, the guarantors' position.
Mr Nolan in a very helpful submission took me through the case law dealing with the responsibilities of mortgagees in selling properties, including the suggestion that there might be a different test between English and Australian authorities, but especially Victorian authorities. I refer in particular to the decision of Lush J in Henry Roach (Petroleum) Pty Ltd v. Credit House (Vic) Pty Ltd[1] and to the decision of Murphy J in Goldcel Nominees Pty Ltd (Provisional Liquidator Appointed) v. Network Finance Ltd & Ors[2].
[1][1976] V.R. 309 at 312-313.
[2][1983] 2 V.R. 257.
It was accepted, as I understood the position, by Ms Evert, who appeared on behalf of the defendants, that in order for the defendants to be granted leave to defend I had to be satisfied that there was credible evidence that there was a possible defence open to the defendants that the refusal of Mr Browne to accept the 180-day terms of the $1.6 million offer was reckless.
Before finally dealing with that issue, I note a rather unusual aspect of the factual situation. It would appear, not only from his affidavits and from the pleading of the defence, but also from contemporaneous correspondence, that Mr Kirsh seemed to be of the view that the offer which he had obtained and put to Mr Browne was an offer for a 120-day settlement, notwithstanding that he also recognised that the settlement date was 10 December 2003, which is clearly six months or 180 days after the date of the contract, being 10 June 2003. It is perhaps not relevant, but this misunderstanding may have affected his view of the reasonableness or otherwise of Mr Browne's attitude to the 180-day settlement period.
One of the extra affidavits that has been filed on behalf of the defendants is an affidavit of a valuer, Graham Leslie Biggs, sworn 5 August 2004. Mr Biggs deposed to the fact that in the second quarter of 2003 it was becoming obvious that there was an over-supply of development sites in inner Melbourne. That may well be accepted as being the case. He referred to the fact that the offer of $1.6 million had been obtained through the services of a third agent, in addition to the two agents who had acted in conjunction with the auction in November 2002, as reflecting the fact that the property had been offered widely in the intervening period; and he also referred to the fact that in the relevant time period there was talk of interest rate rises and that the property market for this kind of property had continued to decline. On the basis of that he expressed the opinion that it was imprudent of Mr Browne to have not accepted the offer made in the sum of $1.6 million in June 2003.
As Mr Nolan has persuasively argued, the question is whether it was reckless of Mr Browne to have refused to accept the $1.6 million offer on 180 day terms, and, as he pointed out, Mr Biggs expressed no view on that.
I am firmly of the view that, looking at the matter as at June 2003, which one must, and not with the benefit of hindsight, it was not unreasonable for the plaintiffs, through Mr Browne, to have considered that the offer of $1.6 million on 180-day terms was not acceptable and that an attempt should be made to see if the $1.6 million which was otherwise an acceptable price could be offered on what might have been thought were more usual terms of 60 days. It goes without saying that, of course, time in this context is money, and a period of settlement of six months considerably reduces the present-day value of the $1.6 million price.
In my opinion, therefore, there is no triable issue raised on the material before me on which the defendants should have leave to defend. If I had otherwise been persuaded that there was a triable issue, I would have given the defendants an opportunity to put before me some sort of calculation as to what the loss they claim they suffered was. It seems to me that it probably would not have exceeded the present claim by the plaintiffs, so that there would not have been leave to defend for the whole amount in any event, and I almost certainly would have only given leave to defend in the circumstances of this case on the basis that the amount in respect of which leave to defend was given would have been paid into court. However, those two issues do not arise because I am of the view that the appeal should be dismissed.
The appeal will be dismissed. I will order the defendants to pay the plaintiffs' costs of the appeal on an indemnity basis because of the plaintiffs' offer of compromise dated 16 April 2004.
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