Gippsreal Ltd v Estcourt

[2007] VSC 448

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 7902 of 2007

GIPPSREAL LTD & ANOR	Plaintiff
v
GREGORY MARK ESTCOURT	Defendant

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JUDGE:	KAYE J
WHERE HELD:	Melbourne
DATE OF HEARING:	12 October 2007
DATE OF JUDGMENT:	12 October 2007
CASE MAY BE CITED AS:	Gippsreal Ltd & Anor v Estcourt
MEDIUM NEUTRAL CITATION:	[2007] VSC 448

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PRACTICE COURT – Application for interlocutory injunction to restrain plaintiffs from taking possession of defendant’s property – Defendant in default of mortgage payments owed to plaintiffs – No serious issue to be tried – Application dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J.M. Barber	Oakleys
For the Defendant	Mr P.W. Lithgow	Hill Legal

HIS HONOUR:

1. This is an application on behalf of the defendant to restrain the plaintiffs from exercising rights which the plaintiffs claim to take possession of the defendant's property at 26 Wagstaff Street, Rye. 

1. It is not necessary for me to set out in any detail the background of this matter.  I shall refrain from doing so because of the late hour at which I am now delivering judgment and also because of the relative urgency of this application.

1. In April of this year, the defendant executed a mortgage over the property to the first plaintiff, Gippsreal Ltd, to secure a loan to him for $351,000.  He executed a second mortgage in favour of the second plaintiff, Trewilton Pty Ltd, to secure a loan to him of $81,000.  It is common ground that the defendant failed to pay interest payments which were owing under the mortgage documents for the months of June, July and September.  He made a payment in August which would have covered interest at what is described as the "lower rate" for June, July and August, but which it is accepted did not comply with his obligations which, by then, had been to pay interest at the higher rate for the two months in respect of which the account had been delinquent.

1. The plaintiffs have issued proceedings in this case claiming the whole of the debt and the plaintiffs also claim possession of the land.  The plaintiffs did enter default judgment for possession, but that was set aside by consent because it was erroneously entered.  The plaintiffs, however, notwithstanding the continuation of these proceedings, intend to endeavour to take possession of the premises without obtaining an order for them to do so.  Thus the defendant approaches this Court seeking an interlocutory injunction to restrain the plaintiffs from seeking to take possession of the premises until the resolution of this case.

1. In order to found a right for an interlocutory injunction, the defendant must, of course, demonstrate that there is what is described as a serious issue to be tried.  Essentially, in the context of what has been argued before me, the defendant must show that there is, at least, some viable argument that the plaintiffs, under the terms of the agreements and mortgages, do not at present have a right to possession of the premises.

1. As I remarked in the course of argument, in my view, given that the defendant resides at the property, it would be sufficient if the argument were weak, however, it must be an argument which, at least, has some validity in terms of establishing a legal right to stay the rights of the plaintiffs to possession.

1. In order to meet that requirement, Mr Lithgow, who appeared on behalf of the defendant, submitted that the defendant in fact was not in default in June.  He drew my attention to the performance fee which had been required to be paid and had been paid by the defendant to the plaintiffs as part of the lending.  Mr Lithgow submitted that it was at least arguable that that fee is not a pre-estimate of loss to be sustained in the event of default by the defendant, but rather was a penalty. 

MR BARBER:  Your Honour, I do apologise for interrupting, but there's something that I think I should have drawn to Your Honour's attention earlier, and I think I should draw to Your Honour's attention now.  I apologise for interrupting.

But, Your Honour, it's just struck me, I've just recalled that s.81 of the Transfer of Land Act gives a right only to the first plaintiff as a first mortgagee and not to a second mortgagee.

HIS HONOUR:  Yes.

MR BARBER:  I should have made that clear to Your Honour earlier.

HIS HONOUR:  So?

MR BARBER:  So that it is - I can't stand here and say to Your Honour that the second plaintiff has a right to immediate possession of the property, but the first plaintiff, in my submission, does.  I apologise for interrupting Your Honour's reasons.

HIS HONOUR:  Thank you for doing that.

MR BARBER:  I thought I should've done it earlier but - - -

HIS HONOUR:  Well, you accept then that - - -

MR BARBER:  I should say that the second plaintiff doesn't seek possession in the writ either.  Only the first plaintiff.

HIS HONOUR:  So is the second plaintiff going to take possession or only the first plaintiff?

MR BARBER:  Well, Your Honour, the second plaintiff, in my submission, can't do that.

HIS HONOUR:  So it won't be seeking to avail itself of self-help?

MR BARBER:  Well, that would be my advice to my clients, Your Honour.

HIS HONOUR:  Well, are you prepared to give that undertaking?

MR BARBER:  Would Your Honour pardon me a moment?  Your Honour, I'm instructed that the second plaintiff has never served notice saying it would take possession, and it doesn't intend to take possession.

HIS HONOUR:  Thank you.

MR BARBER:  If Your Honour pleases.  I apologise, Your Honour.

HIS HONOUR:  Thank you.  You are quite right in doing so. 

1. As that interchange between myself and counsel reveals, the second plaintiff will not be seeking to take possession so this injunction is only needed in relation to the first plaintiff.

1. In my view, Mr Lithgow is correct in submitting that there is, at least, a serious issue to be tried as to whether the performance fee is a penalty.  I should say no more about that, because that is a matter that needs to be more properly and fully argued at trial in relation to the debt claim. 

1. However, the question which then arises is whether that operates in any way to overcome the right of the first plaintiff to possession under the mortgage.  In my view, Mr Barber was correct in making two responses to that proposition.  Firstly, by clause 14(f) of the General Conditions it is, I think, clear beyond argument that the performance fee could not be characterised as any pre-payment of interest.  If, as argued by Mr Lithgow, it is a penalty then it is and was held by the first plaintiff as a debt owing to the defendant.

1. The second response is that even if there was under the terms of the agreement for an equity to be some off-setting, that would only have eliminated the June default and would not have accounted for the July and September defaults.  In respect of those faults, Mr Barber has drawn my attention to notices that were served on and received by the defendant dated 24 September.  Those notices give clear notice of the intention of the plaintiff to take possession of the property and comply with clause 15(3) of the Memorandum of Common Provisions which form part of the mortgage.

1. It would, therefore, seem that even if the notices served in respect to the June default could be adequately accounted for by Mr Lithgow's submission in relation to the performance fee, a similar argument would not have failed the defendant in relation to the arrears for July and September nor, indeed, for part of the arrears in August.

1. For those reasons, although I must say the arguments put by Mr Lithgow were put skilfully and Mr Lithgow did not spare any effort to try to find an arguable case, I cannot say on any view that he has succeeded in establishing there is a serious issue to be tried in relation to the plaintiff’s entitlement to possession.  I have reached that conclusion.  Notwithstanding, as I have stated, that I would accept there was a serious issue even if the argument were, in legal terms, quite weak. 

1. In the course of submissions, Mr Lithgow put to me that nonetheless I ought to restrain the plaintiff from seeking to exercise its rights of self-help because it has elected to seek the intervention of the Court and claim a judgment for possession.  That argument, without reference to authority, has some attraction because of the Court's general dislike of the concept of self-help.

1. However, there is clear authority for the proposition that notwithstanding that the first plaintiff has resorted to this Court to claim a right to possession against the defendant, nonetheless, it does not qualify or negate the plaintiff’s right to seek to avail itself of self-help.  I refer to the decision of the New South Wales Court of Appeal in MacIntosh v Lobel[1];  see also Aglionby v Cohen[2]. 

   [1][1993] 30 NSWLR 441, 461 and 465.

   [2][1995] 1 QB 558.

1. For those reasons, the fact that there is in existence a claim for possession made by writ in this Court does not, in my view, give the defendant any right to enjoin the first plaintiff from exercising its rights of self-help.  In the course of submissions I made it clear to the plaintiffs, and counsel has, no doubt, already drawn attention to his client, that the law does not generally regard it as particularly wise for landlords or mortgagees to exercise their rights of self-help, particularly where litigation is on foot.  Nonetheless, I cannot say that the issue of the writ in this case is a basis for enjoining it from doing so.

1. For those reasons, notwithstanding the conscientious efforts of Mr Lithgow to persuade me to the contrary, I cannot say that there has been made out any serious issue to be tried and, accordingly, the application for an interlocutory injunction by way of summons dated 4 October will be dismissed.