Castle Constructions Pty Ltd v Esanda Finance Corporation Limited
[1993] FCA 428
•30 JUNE 1993
CASTLE CONSTRUCTIONS PTY. LIMITED and VICTOR LAHOUD v. ESANDA FINANCE
CORPORATION LIMITED; BENJAMIN YIP SHING LO; CONNIE CHIU YING LO and BIREMAL
PTY. LIMITED
No. G946 of 1992
FED No. 428
Number of pages - 12
Trade Practices
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Beazley J(1)
CATCHWORDS
Trade Practices - interlocutory injunction to restrain mortgagee exercising power of sale - validity of s57(2)(b) notices - effect of acceleration clause in loan documentation, not mortgage - balance of convenience - whether applicants guilty of laches - whether damages an adequate remedy - worth of undertaking as to damages
Real Property Act (1900) s.57(2), (3) and (5)
Trade Practices Act (1976) s.52
Turnbull and Ors. v. National Mutual Royal Bank Ltd (1992) 26 NSWLR 361
Websdale and Ors. v. S. and J.D. Investments Pty. Limited (1991) 24 NSWLR 573
Blundell and Anor. v. Associated Securities Ltd. and Ors. (1971) 19 FLR 17
Forsyth and Anor. v. Blundell and Anor. (1973) 129 CLR 477
George v. Commercial Union Assurance Co-op Australia Ltd. (1977) 1 BPR (97072)
HEARING
SYDNEY, 3 and 5 May 1993
#DATE 30:6:1993
Counsel for the Applicant: K. Lindgren QC with R. Sofroniou
Solicitors for the Applicant: Andrew Thorpe Solicitors
Counsel for the First Respondent: J. W. Stevenson
Solicitors for the Second Respondent: Hickson Lakeman and Holcombe
Counsel for the Third Respondent: D. Davies
Solicitor for the Third Respondent: Smallwood Cathcart
ORDER
Upon the applicants giving the usual undertaking as to damages, the Court orders that, until further order:
1. The first and third respondents be restrained from completing the Agreements for Sale dated 21 December 1992 between the first respondent and the third respondent of the land contained in Folio Identifiers 1, 2 and 3/826366.
2. The costs of the motion be costs in the cause.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
BEAZLEY J This is an application for an interlocutory injunction to restrain the first respondent ("Esanda") from completing three contracts for sale entered into with the third respondent ("Biremal") of property situated at Bertha Road and Bennett Street, Neutral Bay, being the land contained in Folio Identifiers 1-3/826366 ("the land"). The first applicant ("Castle Constructions") is the registered proprietor of the land, which Esanda is seeking to sell as mortgagee.
This is the second application brought by Castle Constructions for an interlocutory injunction to restrain Esanda as mortgagee from selling its property. The first application was in respect of land at Cremorne and Wollstonecraft. Biremal had no connection with those properties or with the first application.
I delivered judgment in the first application on 8 March 1993, granting the injunction. Save in respect of one matter, namely the validity of the notices issued pursuant to s.57(2)(b) of the Real Property Act 1900 ("the RPA"), Esanda and Biremal concede in this application that there is a serious issue to be tried, but that the balance of convenience lies in their favour such that the injunction ought to be refused. The affidavits in the first application were relied upon in this application, and the parties took the same approach to the evidence of the second applicant, Mr Lahoud, as was taken there, namely that his untested evidence should be accepted for the purposes of the interlocutory application. Additional affidavit evidence was read by all parties in the present application on the same basis, except to the extent that there was affidavit evidence in response. There was no cross-examination of any witness.
Shortly before the conclusion of the hearing of this application, I was advised that Esanda, without admitting any deficiency in the original notice, proposed to issue a new s.57(2)(b) notice and that at the expiry thereof it intended to novate the contracts for sale with Biremal Pty. Limited. I gave leave to counsel for Castle Constructions to challenge the validity of any such new notice, should it desire to do so. That leave was exercised and the applicants allege there is a serious issue to be tried in respect of the validity of the second notice.
I dealt with the relationship between Castle Constructions and Esanda in my earlier judgment, and as those matters are not in issue for the purposes of this application, it is only necessary to refer briefly to the background of the matter. The land was mortgaged to Esanda as part of the security for a loan to develop a site comprising four properties at Bennett Street and Bertha Road, Neutral Bay, of which the land forms part. Esanda had lent Castle Constructions the moneys to acquire the site ("the land facility"), but contrary to its expectations, and in circumstances allegedly giving rise to contraventions of s.52 of the Trade Practices Act (1976) ("the TPA"), Esanda only lent further funds ("the development facility") to develop one block of land, and not the four which Castle Constructions proposed to develop. Castle Constructions also alleges that Esanda is estopped from denying its obligation to advance funds in respect of the whole development.
Esanda issued a s.57(2)(b) notice in respect of the land on 29 June 1992. On 21 December 1992, unbeknown to the applicants, Esanda entered into the contracts for sale of the land. The applicants ascertained later that day that the contracts had been entered into. On 22 December 1992, by letter to Esanda from its then solicitor, Castle Constructions protested as to the action which had been taken. On the same day, Castle Constructions commenced these proceedings. On 8 January 1993, Castle Constructions' then solicitors wrote to Biremal, disputing the validity of the s.57(2)(b) notice. On 9 February, 1993, Castle Constructions caused caveats to be lodged on the Bennett Street properties. Its solicitor advised Esanda's solicitors of this action by letter dated 9 February 1993, at the same time asserting that the land should not be sold.
Biremal is a property development company. Mr. Russell Lyons, its Managing Director, became aware of the site's possible availability for sale in the middle of 1992. Between then and the time of exchange of contracts on 21 December 1992, Mr. Lyons investigated the development feasibility of the site. He did certain of this work himself, including having discussions with the National Australia Bank in relation to the financing of the purchase of the site and its development, and engaging the services of an architect. Subsequent to exchange of contracts, Mr. Lyons continued the negotiations with the National Australia Bank and undertook other preliminary tasks associated with the proposed development of the site, including consulting with numerous experts and with North Sydney Council, and obtaining a quote from a building company. Biremal has expended approximately $23,000 on the development project since the date of exchange. In addition, Mr. Lyons and his wife have spent approximately 180 hours up till March 1993 (including time spent before exchange of contracts) in dealing with various aspects of the proposal.
On 2 April 1993, Biremal lodged a development application in respect of the land with North Sydney Council. Mr. Lyons estimates that if approval is given to the development application, the profit on the development will be in the vicinity of $800,000 to $1 million. More significantly however, for Mr. Lyons and his wife, is their intention to reside in one of the residences within the proposed development. Mr. Lyons states that he and his wife have been looking for property in Bennett Street as their intended home for a number of years. At the moment, they are residing in rental accommodation and have been doing so since May 1992 when they sold their own home.
There was at least one objection by a neighbour to Biremal's development application, as a consequence of which Biremal has lodged an amended application. In the latter part of April 1993, an officer of North Sydney Council Town Planning Department advised Mr. Lyons that it would be 8 or maybe 10 weeks before the development application would be approved. Once the development application is approved, the building application has to be lodged and approved. Biremal has already briefed engineers to commence the drawings for the building application, which Mr. Lyons anticipates will be approved within 2 to 4 weeks of receiving development approval.
In April 1993, Mr. Lahoud also had discussions with an officer of North Sydney Council in respect of Biremal's development application. He was told that the average period of assessment of a development application by the Council is about 12 weeks, although some applications take longer. Mr. Lahoud gave evidence that in his opinion the minimum period for a development application to be approved by North Sydney Council is somewhere between 3 and 6 months and another 4 to 8 weeks for the approval of a building application.
Validity of the Section 57(2)(b) notice
11. Counsel for Esanda submitted that I should reconsider my finding that there was a serious issue to be tried in relation to the validity of the original s.57(2)(b) notice. He referred to the New South Wales Court of Appeal's decision in Turnbull and Ors. v. National Mutual Royal Bank Ltd (1992) 26 NSWLR 361 where Priestley JA held that s.57(5) relates only to a provision in the registered security document and does not affect acceleration clauses in other documents. In order to determine whether Turnbull affects the conclusion which I originally reached, it is helpful to refer again to the s.57(2)(b) notice and the provisions of the loan documentation and the mortgage relating to the advance. The s.57(2)(b) notice alleged default in a sum of $6,574,060, which amount comprised the moneys advanced under the land and development facilities, which together became the subject of Esanda's loan advance set out in Esanda's letter of 19 February 1991. The documentation in respect of the loan advance included a Deed of Loan dated 31 March 1987, a Deed dated 5 March 1991 in respect of the advance, and a Deed of Variation dated 5 March 1991. The relevant provisions of those Deeds are:
Deed of Loan dated 31 March 1987 ("the Deed of Loan"): A. It is envisaged that from time to time the Borrower will make application to the Lender for various loans advances and financial accommodation.
B. The parties agree that all such applications as may be approved by the Lender shall be subject to inter alia the various terms and conditions hereinafter set out. ...
3. The Borrower covenants to repay the Principal Sum or so much thereof as shall remain unpaid upon the expiration of not less than three (3) months written notice by the Lender upon the Borrower (sic) (Lender) requiring the Borrower so to do. ..."
"13. Notwithstanding any other provisions of this Deed the whole of the Principal Sum then outstanding together with accrued interest thereon and any other amounts payable hereunder shall at the option of the Lender and notwithstanding any delay or previous waiver of the right to exercise such option become immediately due and payable:
(a) if the Borrower defaults in making any payment on the due date pursuant to this Deed;
...."
Deed dated 5 March 1991 ("the Deed"):
"A. The Borrower and the Lender have entered into a Deed of Loan dated 31st March 1987 ("the Deed of Loan") whereby it was envisaged that from time to time the Borrower would make application to the Lender for various loans, advances and financial accommodations and it was agreed that such loans, advances and financial accommodation made or granted by the Lender would be subject to inter alia various terms and conditions therein set out.
B. The Lender has at the request of the Guarantor (that is Lahoud) advanced to the Borrower funds pursuant to the Deed of Loan to enable the Borrower to purchase the property known as 43 and 45 Bent (sic) Street, and 22 and 24 Bertha Street, Neutral Bay ...".
The sum referred to in the Deed was $580,000, which was a portion only of the February 1991 loan advance. The Deed made provision that Castle Constructions properly complete the project and for Esanda to enter and complete the same should specified events occurred.
Deed of Variation dated 5 March 1991 ("the Deed of Variation"):
"B. The Guarantor has requested the Lender to lend to the Borrower the sum of FOUR MILLION FOUR HUNDRED THOUSAND DOLLARS ($4,400,000) ("the advance") for a fixed term of one
(1) year commencing on 5th March 1991 which the Lender has agreed to do pursuant to the terms of the Deed of Loan but varied in respect of the advance as hereinafter set out.
1. The Borrower covenants to repay the advance or so much thereof as shall remain unpaid on 4th March 1992."
The sum of $4,400,000 was the substantial balance of the moneys in the February 1991 loan advance.
The mortgage contains the following relevant provisions:
"1. AMOUNTS SECURED
The Mortgagor will pay to the Mortgagee all amounts for which the Mortgagor or the Customer is indebted or otherwise liable to the Mortgagee on any account ... ...
12. POWERS
(a) That upon default being made in payment at the respective times and in the manner mentioned in this Mortgage of the principal moneys or other moneys repayable to the Mortgagee under this Mortgage or any part thereof or of the interest thereon or any part thereof or upon default being made in the observance or performance of any of the covenants agreements or conditions contained in this Mortgage or implied by the Real Property Act, 1900 or the Conveyancing Act, 1919 the Mortgagee shall (notwithstanding any omission neglect or waiver of the right to exercise all or any of such powers on any former occasion) be at liberty -
(1) to exercise all or any of the powers of a Mortgagee under the said Acts immediately upon or at any time after default as hereinbefore mentioned without the necessity of giving the Mortgagor (or the Customer) any notice whatsoever required by the said Acts or otherwise other than such notice as is required by such Acts upon default being made in payment at the respective times and in the manner in this Mortgage mentioned of the principal moneys or interest or other moneys payable to the Mortgagee under the Mortgage or any part thereof.
14. MONEYS PAYABLE TO MORTGAGEE ON DEMAND ON THE HAPPENING OF CERTAIN EVENTS
(1) The principal moneys or other moneys payable to the Mortgagee under this Mortgage or so much thereof as shall remain unpaid (together with interest thereon accrued and unpaid to the date of demand therefor in writing by the Mortgagee) shall become forthwith payable to and recoverable by the Mortgagee and the Mortgagor will pay the same on demand therefor in writing by the Mortgagee in the event of-
(a) default being made in payment at the respective times and in the manner mentioned in this Mortgage of the principal moneys or other moneys payable to the Mortgagee under this Mortgage or any part thereof or of the interest thereon or any part thereof; or
(b) default being made in the observance or performance of any of the covenants obligations or provisions contained or implied in this Mortgage and on the part of the Mortgagor (or the Customer) to be observed or performed; or ..."
As at 31 March 1992, being the date specified in the original s.57(2)(b) notice, there was default in respect of payment of the amount of $4.4 million, due and payable on 4 March 1992 under the Deed of Variation. The balance of the moneys referred to in the notice were the balance of the monies owing under the February loan advance, the repayment date for which was 31 March 1992.
In the first application, it was effectively conceded by the applicants that the 3 month notice provision contained in clause 3 of the Deed of Loan did not apply in respect of the advance of $4.4 million. However, the applicants argued, and I accepted, that s.57(5) gave protection against the provisions of an acceleration clause such as clause 13 of the Deed of Loan: Websdale and Ors. v. S. and J.D. Investments Pty. Limited (1991) 24 NSWLR 573 especially at 576-577 per Clarke JA. Websdale was a case where the acceleration clause under consideration was contained within the mortgage document.
In Turnbull, the court was concerned with an agreement with the debtor ("the agreement") which operated independently of the mortgage, although the agreement called for the provision of the mortgage as security. The agreement contained an acceleration clause. The mortgagee was not seeking to exercise its power of sale, but was suing on the personal covenants contained in the mortgage for the balance of the moneys outstanding. Priestley JA (with whom Meagher and Sheller JJA agreed) found that under the agreement, if the debtor failed to pay any instalment when due, all drawings would become immediately due and payable on the Bank's demand, irrespective of any rights the Bank had under the registered mortgage. His Honour noted that the s.57(2)(b) notice under consideration contained within its text more than notice under the Real Property Act and referred not only to the mortgage but also to the agreement including the provisions of the acceleration clause. His Honour held that the notice was invalid as a s.57(2)(b) notice. However it was effective as a demand within the meaning of the acceleration clause. As his Honour said at p 370
"(the notice) recites quite plainly all the matters necessary to bring to Barnspine's attention that a demand is being made ... and then makes a demand which is very specifically in terms of (the acceleration clause)
In my opinion upon the service of that demand, (the acceleration clause) operated to make the full amount of all drawings then immediately due and payable to the Bank by Barnspine. Those moneys were not paid so that Barnspine made default in the due and punctual payment of them all ... so that that amount then became payable pursuant to that condition by the guarantors to the Bank without further demand."
His Honour held that s.57(5) did not deprive the acceleration clause in a document, not being the registered mortgage, of any force or effect until a valid notice had been served.
In the present case there was default in the payment of the sum of $4.4 million. If Esanda's submission is correct as to the application of Turnbull to this case, default in the payment of that sum had the effect of accelerating payment of all moneys due and owing (clause 13 of the Deed of Loan). No notice was necessary for the acceleration clause to take effect. It is submitted therefore that I should not be satisfied that there is a serious question to be tried on the issue of the validity of the original s.57(2)(b) notice.
However, the Court in Turnbull was not considering a notice under s.57(2)(b) as a prerequisite to the exercise of the power of sale. In my opinion, in circumstances where the validity of a s.57(2)(b) notice relates to its status as such, namely as the statutory prerequisite to the exercise of the power of sale provided for in the mortgage, where the relevant default occurs under a document which operates independently of the mortgage, but where the effect of that default is to enliven the provisions of the mortgage, it is arguable that the reference in sub-section (2)(a) to "any covenant, agreement or condition expressed or implied in the mortgage" includes a reference to moneys which become due under the provisions of the non-security loan documentation, incorporated into the mortgage by virtue of the "all moneys" provision thereof.
In any event, there is the further argument relating to the issue of whether Esanda on 31 March 1992 exercised its option under clause 13 of the Deed of Loan. In the first application I found that question raised a serious issue to be tried. Nothing new has been submitted as to this issue and accordingly, in my opinion, there remain serious issues to be tried in relation to the original s.57(2)(b) notice.
Validity of the new s.57(2)(b) Notice
24. The validity of the new notice issued on 5 May 1993 is also challenged. The notice was in the following form:
"NOTICE PURSUANT TO SECTION 57(2)(b) OF THE REAL PROPERTY ACT 1900 AS AMENDED REQUIRING RECTIFICATION OF DEFAULT UNDER MORTGAGE TO: CASTLE CONSTRUCTIONS PTY. LIMITED ACN 001 602 188, Suite 1,
4th Floor,
3 Carlingford Road,
EPPING, NSW 2121.
WHEREAS:
A. Pursuant to the terms of Deed of Loan dated 31st March, 1987 made between yourself as Borrower, Esanda Finance Corporation Limited ("Esanda") as Lender and Victor Wadih Lahoud and Joseph Lahoud as Guarantors as varied by Deed of Variation dated 5th March, 1991 the sum of $4,400,000.00 was repayable on 4th March, 1992.
B. Mortgage registered number Y166390 dated 27th January, 1989 ("the Mortgage") from yourself to Esanda secures repayment to Esanda of all amounts for which you are indebted to Esanda on any account whatsoever.
NOW TAKE NOTICE THAT you are hereby required to pay Esanda the said sum of $4,400,000.00 AND unless that sum is paid within one
(1) month from the date of service upon you of this notice then Esanda proposes to exercise its power of sale in respect of the property the subject of the Mortgage such property now being known as 22A Bertha Road, Neutral Bay and 43 and 45 Bennett Street, Neutral Bay being the land comprised in Folio Identifiers 1- 3(incl)/826366.
DATED the 5th day of May, 1993.
........ ........ ......
Alan Sydney Osburg
Solicitor for Esanda Finance Corporation Limited"
The applicants contend that s.57(3)(b) of the Real Property Act 1900 requires that a notice to be valid must "specify the default made". It is contended that this notice does not comply with the section because it does not "specify the default made"; it only "recites" that the sum of $4,400,000 was repayable on 4 March 1992 and that the relevant mortgage secured all moneys for which the first applicant might be indebted to Esanda; that whilst a demand for payment of the $4.4 million is made, no default is specified. It is further alleged that if the non-payment of $4.4 million was intended to be the specified default, the notice does not indicate how such default under the Deed of Loan and Deed of Variation respectively becomes a default in terms of the mortgage. It is said that merely to allege that "the mortgage secures payment of the sum of $4,400,000" does not do so. It is further alleged that the provision in clause 1(1) of the mortgage does not amount to the "mention" of a "time" or "manner" of payment in the mortgage as contemplated by the provisions of clause 12 of the mortgage. It was submitted that clause 1 of the mortgage is sufficient to indicate when the mortgagor would be liable under the personal covenant in the mortgage, but that clause 12 lays down a special requirement for the exercise of the mortgagee's statutory powers. It was said therefore that it was necessary for Esanda to make a demand for payment prior to the service of this new notice. Non-compliance with such a demand would have constituted default which could then form the foundation for the giving of a new notice. I do not consider the applicants' submission is correct. Section 57(3) does not require that a notice use the specific word "default." Rather, in referring to "default", the subsection is identifying or describing that in respect of which the notice is to be given.
I am not aware whether Esanda has elected upon which s.57(2)(b) notice it proposes to rely as the basis for its exercise of the power of sale. If it elects (or has elected) to rely upon the new notice, it will have done so, and Biremal will have elected to enter into contracts for sale in respect of the land, in circumstances where each is on notice of Castle Constructions' claims in these proceedings. That claim is such that it arguably impeaches Esanda's title, as I found previously. Should Esanda elect, or if it has elected, to rely on the new notice then notwithstanding that I consider it is valid, I am also of the opinion that the circumstances in which the notice was given and more particularly the time when it was given is a substantial factor in favour of the applicants so far as the balance of convenience is concerned.
Biremal's case
27. Biremal supported the submissions of Esanda and made the following further submissions: the applicants have been guilty of laches and delay; damages are an adequate remedy; Biremal will suffer hardship as an innocent third party if the injunction is granted and any undertaking as to damages is worthless. I shall deal with each submission in turn.
Laches
28. Biremal submitted that although the applicants knew on 21 December 1992 that contracts had been exchanged between Biremal and Esanda, they took no action to restrain the sale until they filed a notice of motion on 27 April 1993, and this was despite having sought interlocutory relief in respect of three of the other properties by notices of motion filed 20 January 1993 and 18 February 1993. It is submitted that the third respondent has carried out a considerable amount of work pursuant to its intention to develop the properties and money has been expended. Further, the directors of Biremal intend to reside in one of the residences to be built on the land. They have been living in rental accommodation since May 1992.
Whilst it is correct to say that there was a period of about 4 months between becoming aware of the exchange of contracts and filing a notice of motion to restrain the sale, the first notice of motion, in respect of the King Street and Cremorne Road properties, was brought as a matter of urgency because of the pending date of completion of the contract for sale of King Street and the auction date of the Cremorne Road properties. It was clear at the time the applicants made that application that they were limiting the relief then sought to those properties, because of the urgency. Further, Castle Constructions complained about the sales immediately it became aware of them and also raised at an early time the validity of the s.57(2)(b) notices. Very shortly after judgment was delivered in the first application, the solicitor for the applicants wrote to Esanda's solicitors, drawing their attention to the findings in relation to the validity of the s.57(2)(b) notices and called upon Esanda to give undertakings in relation to the balance of the properties secured by mortgages, including the land. Esanda's solicitors wrote back and sought a short period of time to enable them to consider the judgment. On 15 March 1993, the applicants' solicitor wrote to Esanda's solicitors advising that if Esanda did not give undertakings in respect of the land, the applicants would approach the Court for interlocutory relief. On 22 March 1993, Esanda's solicitors advised the applicants' solicitor that Esanda was prepared to give the following undertaking:
"2. ...
(i) Esanda Finance Corporation Limited will not take steps towards the completion of the sale of 43 and 45 Bennett Street, Neutral Bay and 22A Bertha Road, Neutral Bay to Biremal Pty. Limited before the 24 April 1993. Unless otherwise restrained our client intends to settle the purchase of the site to Biremal Pty. Limited on the 24 April, 1993."
However, on 25 March 1993, Esanda's solicitors wrote and advised that completion of the contracts for the sale of the land was set down for 19 April 1993, not 24 April 1993 as previously advised. Subsequently, the solicitors for the applicants ascertained that the land was not due for settlement until 3 May 1993.
In addition, during the course of various directions hearings, I encouraged the applicants and Esanda to reach agreement in respect of any further interlocutory application in circumstances where I had made an order for expedition and the matter was in the callover list awaiting the allocation of a hearing date. A further apparent complication arose when the applicants discovered that at the date of entry into the contracts, Biremal did not exist, and was de-registered on 27 February 1992. It subsequently appeared that this de-registration arose through administrative error. There were several further requests by the applicants' solicitor that the matter be dealt with by way of undertakings pending final hearing.
I do not consider that in the circumstances Castle Constructions has "sat on its hands". At all times it has been actively pursuing, and seeking to protect its rights, although it has been doing so on a number of different fronts and has reacted to the exigencies of the moment. In all of the circumstances, I do not consider that the ground of laches has been made out. Should Esanda elect to rely upon the new s.57(2)(b) notice, then for the reasons which I have already given, there would be no substance at all in a submission that the applicants have been guilty of laches.
Damages an adequate remedy
33. Counsel for Biremal next submitted that as the land had only been purchased by the first applicant for development and resale at a profit, damages are an adequate remedy. This was an argument which was also made by counsel for Esanda on the last occasion. However, in circumstances where the applicants seeks relief under s.87, and the first applicant seeks to impugn Esanda's title, should circumstances otherwise exist for the grant of an injunction, I do not think that an injunction should be refused simply because, on one view of it, the first applicant's damage can be quantified.
Hardship:
34. Biremal is an innocent purchaser of the land under contracts for sale which, as at the date of hearing of this notice of motion, have not been completed. However, the rights of a mortgagor prevail over those of such an innocent purchaser: (Blundell and Anor. v. Associated Securities Ltd. and Ors. (1971) 19 FLR 17 (Fox J at 39; Forsyth and Anor. v. Blundell and Anor. (1973) 129 CLR 477; George v. Commercial Union Assurance Co-op Australia Ltd. (1977) 1 BPR (97072) (Powell J at p 9652.5)).
If the original notice is to be relied upon, I do not consider that the matters raised in support of this ground are sufficient to cause the balance of convenience to shift from the applicants. There are a number of reasons for this. A portion of the time was spent and expenditure was incurred prior to the exchange of contracts and at least some of this time would have been spent and expenditure incurred even if Biremal had not entered into the contracts for sale. As I have already said, some at least of the post contractual expenditure has been incurred notwithstanding that Biremal was aware that Castle Constructions was challenging Esanda's conduct. In addition, Biremal has had the benefit of interest on the proceeds of the Lyons' family home, which would have had some offsetting effect on the rent which they have been paying, or the interest payable on the purchase of the land.
If the new notice is to be relied upon, I consider that the arguments as to hardship suffer from the same difficulties to which I have referred above.
Undertaking as to damages
37. The applicants proffer an undertaking as to damages. However, Esanda and Biremal dispute the worth of this undertaking and submit that this is a matter which affects the balance of convenience.
Esanda alleges that as at 21 April 1993 the amount owing by Castle Constructions was $5,652,461.18. Interest is accruing at the rate of $1,658.10 per day. Esanda is receiving rent in an amount of $128,960 per annum from the King Street and Cremorne Road properties.
In the first application, certain information was put to me from the Bar table by both sides as to the value of the security properties, which effectively comprises the entirety of the applicants' assets. The effect of that information was that the asset position appeared to be at least equivalent to the debt. That is not the case on the evidence in this application. The valuation evidence reveals that the total value of the security held by Esanda is between $4,355,000 and $4,530,000. This is a significant matter affecting the balance of convenience in favour of the respondents.
I consider that overall the balance of convenience lies in favour of the applicants. There is a serious issue to be tried as to the validity of the original s.57(2)(b) notice. More significantly, I am not aware which s.57(2)(b) notice Esanda proposes to rely upon. If it relies upon the second notice, that notice did not expire until approximately 5 June 1993. After that there would have to be a novation of the contracts entered into with Biremal on 21 December 1992. In such circumstances, completion of the contracts would not have occurred till early to mid June. As I have already said, Esanda and Biremal would have novated the contracts, with full knowledge of the applicants' claim.
Biremal's development application was not likely to be approved until mid June at the earliest, that is, 5 or 6 weeks before the commencement of the final hearing in this matter. The building approval was not likely to issue until at least another 2 to 4 weeks after that. Those estimates are made on the basis that the relevant approvals are given within the minimum of the usual time that it takes for such applications to be approved by North Sydney Council. At best, all approvals might have been granted somewhere between 4 and 2 weeks before the commencement of the hearing. On the other hand, it was possible, and on the evidence one would have to say equally as possible, that the development application would not have been approved at least till the end of July and quite possibly even later. Another minimum 2 to 4 weeks after that would have to be allowed for the approval of the development application. If an assessment is made that in the ordinary course of things, judgment, after a fully contested hearing in the matter, would not be delivered until the end of August or early September, Biremal will have lost at most a period of 6 to 7 weeks in the progress of the development, on the assumption that the applicants are not successful in obtaining the specific relief it seeks in respect of the land. This will mean that Biremal will be delayed by at least that time in the receipt of its anticipated profit. At the same time, that will be a period during which it will not be incurring costs in respect of the development.
In all the circumstances, I consider it appropriate that the injunction be granted. I make the following orders:
1. The first and third respondents be restrained from completing the Agreements for Sale dated 21 December 1992 between the first respondent and the third respondent of the land contained in Folio Identifiers 1, 2 and 3/826366.
2. The costs of the motion be costs in the cause.
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