Equity One Mortgage Fund Ltd v Thompson
[2009] VSC 408
•11 September 2009 (revised reasons published 17 September 2009)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 8807 of 2009
| EQUITY ONE MORTGAGE FUND LTD | Plaintiff |
| v | |
| NORMAN THOMPSON | Defendant |
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JUDGE: | FORREST J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 September 2009 | |
DATE OF JUDGMENT: | 11 September 2009 (revised reasons published 17 September 2009) | |
CASE MAY BE CITED AS: | Equity One Mortgage Fund Ltd v Thompson | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 408 | |
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PRACTICE and PROCEDURE – Applications by mortgagor and mortgagee – Injunction to restrain the sale of property – Injunction to remove mortgagor from the premises – Discretionary considerations.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A.T. Kincaid | Mills Oakley |
| For the Defendant | Mr L. Watts | Mr Darrel Nelson |
HIS HONOUR:
The proceedings
There are two applications in the Practice Court today both relating to a mortgagee’s proposed sale of a property at Burgess Road, Kilmore (“the property”) tomorrow. The applications are brought by:
(a) the mortgagee, Equity One Mortgage Fund Ltd (“Equity One”) to restrain Mr Norman Thompson from entering or remaining on the premises; and
(b) a company controlled by Mr Norman Thompson and Mrs Faye Thompson ACN 126526930 Pty Ltd (“the Thompson company”) the mortgagor to restrain Equity One from selling the property by auction tomorrow.
Equity One’s application came on urgently in the Practice Court yesterday.
This morning, in the course of the hearing of that application, the Thompson company, through its counsel, Mr Watts, made application by summons for, in effect, a stay of the auction for 28 days.
On both applications, the following evidentiary material was adduced: on behalf of Equity One, (a) an affidavit of Mr Dean Dimos Koutsoumidis, (b) an affidavit of Andrew Phillip Brown, the solicitor for Equity One. On behalf of the Thompsons’ interests: (a) Mr Norman Thompson gave viva voce evidence and was cross-examined, (b) an affidavit of Mr Thompson’s wife, Mrs Faye Thompson, filed this morning.
It is convenient now to turn to the factual matters relevant to this application.
The background facts
In July and August 2008, Equity One, Red Rock Mortgagees (a mortgagee broker) and the Thompsons were engaged in negotiations for provision of a loan which was to be secured by mortgage over the property. A number of documents were executed and a facility agreement was signed on 8 September 2008. On that day, the Thompson company executed a mortgage over the property to Equity One and Mrs Thompson executed a guarantee in favour of Equity One. The mortgage was registered on 9 September 2008.
Within a short time, the Thompson company fell behind in its repayments to Equity One.
On 11 February 2009, a writ and statement of claim was issued by Equity One against the Thompson company and against Mrs Thompson as guarantor of the obligations of the Thompson company.
On 20 March 2009, default judgment was entered against the Thompson company for debt and recovery of land in the sum of $257,616, together with interest of $4,052 and $2,500.
On 16 April 2009, a warrant of possession was issued by this Court.
On 17 June 2009, the solicitors for Equity One informed the solicitors for the Thompson interests that the sheriff had advised that it intended to execute the warrant of possession on 26 June 2009.
On that day, that is 26 June 2009, the warrant of possession was executed and the locks changed.
Notwithstanding the changing of the locks, Mr Thompson was able to gain access to the premises through unlocked doors and has, in effect, remained in possession of the premises. At the present time, he lives on the premises by himself and the premises are furnished.
Equity One has, on several occasions over the past two months, endeavoured to lock the Thompsons out of the property, but the Thompsons have resisted such efforts.
Eviction of Mr Thompson
Ultimately, Mr Watts, who appeared for each of the Thompson interests, did not contend that Mr Thompson had a lawful basis to remain on the property. Initially, he had submitted that the lease entered into in September 2008 gave Mr Thompson a right to remain in possession. In closing submissions, Mr Watts correctly, in my view, did not persist with this submission. Accordingly, it is unnecessary for me to determine the validity of the lease between the Thompson company and Mr Thompson, which was the subject of some debate at the commencement of the hearing, as was the exercise of any option contained in the lease (if it was held to be valid).
Subject to what I have to say about the application to restrain the sale of the property, I propose to order that Mr Thompson be restrained from residing at or entering the premises. I will discuss the formal terms of that order with counsel.
Restraint on Equity One of sale of the property
I turn now to the question of the restraint of the sale of the property. Mr Watts relied upon three matters in urging me to restrain Equity One from selling the property tomorrow.
First, the realistic prospect of the Thompsons obtaining finance if given a four week stay. In this regard, he relied upon a letter, dated yesterday, forwarded from Oasis Finance (“Oasis”) (on its letterhead) to Mr Darrel Nelson, the solicitor for the Thompson interests, which reads as follows:
“Further to the application for finance lodged for Faye Thompson, director, for the property owned by [the Thompson company], 9-15 Burgess Road, Kilmore, Victoria. I can confirm that our funder, First Mortgage Managed Investments issued a letter of offer for the above security. The property valuation has since been done. I am advised that the funder has experienced difficulties in proceeding with the loan facility as the borrower [Thompson company] is no longer under the control of Ms Faye Thompson. If you require any additional information please call the undersigned.”
Secondly, it is likely the sale will realise a price greater than the current indebtedness of the Thompson company and any additional costs that may be incurred by Equity One if the sale is postponed. In this regard he relied upon three valuations provided over the past four years, each in the sum of $430,000. It was not in issue that the pay-out figure, as at 7 September, was roughly $334,000 plus any additional costs incurred since that date (legal and agent’s costs).
Thirdly, in addition to the fact that the property sale would meet the costs of any deferred sale, Mr Watts proffered an undertaking as to damages on the part of Mr and Mrs Thompson personally and the Thompson company in relation to any order restraining Equity One from proceeding with the sale tomorrow.
Mr Kincaid, for Equity One, relied upon two propositions in opposing the application. The first is that as a general rule, an injunction will not be granted restraining a mortgagee from exercising powers conferred by a mortgage, and in particular a power of sale, unless the amount of the mortgage debt, if not in dispute, is paid or unless, if the amount is disputed, the amount claimed by the mortgage is paid into Court. In Inglis v Commonwealth Trading Bank of Australia,[1] Walsh J said:
“The case falls fairly, in my opinion, within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument. Failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed by order upon the exercise of the respondent mortgagee’s rights under the mortgage.”
[1][1972] 126 CLR 161, 169.
Secondly, Mr Kincaid noted the imprecise nature of the offer for finance made by Oasis and the lack of any detail relating to the letter of offer referred to in the Oasis letter and the valuation. He contrasted the situation in this case, factually, to that faced recently by Hoeben J in Australian Barter Currency Exchange v Uniting Church Trust Association[2] in which the mortgagee was restrained from conducting a sale where there was clear and cogent evidence of a loan facility becoming available to the mortgagor within a short time of the application for the injunction.
[2][2009] NSWSC 607.
Conclusion
Ultimately, I am persuaded that in the interests of justice, the application by the Thompsons should be granted. In essence, I accept the submissions of Mr Watts and add the following observations.
The decision in Inglis is not a rigid or inflexible principle and at times must yield to the interests of justice. In Parist Holdings Pty Ltd v Perpetual Nominees Limited,[3] Hamilton J said as follows:
“Over the last 15 years, there have been various expressions of judicial opinion which are to the effect that the requirement in Inglis should be widened. For this to be done, it will need to be found either that there should be an additional exception to the general rule or that the time has come when the general rule should itself be revised and restated.
Those proposed modifications include a relaxation of the rule to permit injunctive relief: (1) where the plaintiff claims that he can redeem the mortgage within a fairly short time by carrying out an on its face reasonable refinancing proposal; (2) where the plaintiff has a demonstrable capacity to secure or at least refinance the mortgage debt.”
[3][2006] NSWSC 599, [16] and [17].
In Grose v St George Commercial Credit Union,[4] a decision of Bryson J, his Honour observed that the rule, if literally applied, would necessarily wreak hardship and that it should not be taken to be intended to prevent injunctive relief where there was a realistic prospect of refinance.
[4](1991) NSWConvR 55-586 at 59-300 – 59,301.
Then, in National Australia Bank v Convy,[5] Harrison J said:
“The issue is, having regard to the history of this matter, whether or not in the light of the principles to which I referred and the possible exceptions to the harsh general rule that constrain the exercise of my discretion, it would be just in the circumstances to grant the stay which the defendant seeks. Again, although the evidence was not particularly satisfactory, it seems likely for the foreseeable future, and by that I mean the period from 15 October this year of the campaign for the sale of the property availed to the plaintiff were commenced on that day, that the plaintiff will be adequately protected by the margin between the value of the property, and the debt it secures.”
[5][2007] NSWSC 1039 [25].
Cases such as these often require decisions where there may be a fine line between the interests of the mortgagor and mortgagee. I am not persuaded that the offer by or on behalf of Oasis is so vague as to be unreliable or discounted. It does seem to me, to use the words of Bryson J, to be realistic. True, it is not a definite offer of finance and a number of the supporting documents were not provided. However, it has been demonstrated to me that there is a reasonable prospect that there will be refinance available within a relatively short time. Moreover, the undertakings and the valuations seem to provide adequate security for the maintenance of Equity One’s position.
There is one other matter which I think is worth mentioning in this balancing exercise. I have the feeling that the marketing and presale activity in relation to the sale has been less than ideal. It is an impression that is based upon the evidence of Mr Thompson and, whilst it is correct that Mr Thompson himself has not encouraged the process, it is, nevertheless, my impression. A one month delay, unfettered by Mr Thompson’s presence on the premises, would ensure that further efforts to attract interest in the property will stifle any suggestion Equity One has breached its obligations to the Thompson company.
In the circumstances, I have formed the view that I should make an order restraining the exercise of the power of sale under the mortgage by Equity One for a period of 28 days or until further order.
In the event that either party wishes to vary or, in the case of the Thompson company, extend the order, I think it appropriate that such application be brought before me. Of course I would not want to prejudge the result of such an application to extend time, but it does seem to me that a period of one month in terms of permitting further advertising of the premises and consequential deferral of the date of sale is at the outer limit of the Court’s discretion.
I will hear from counsel in relation to the forms of orders in regard to both applications.
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