Global Broadhurst Pty Ltd v The Trust Company (Australia) Limited

[2024] VSC 624

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S ECI 2024 04543

GLOBAL BROADHURST PTY LTD (ACN 602 963 379)	Plaintiff
v
THE TRUST COMPANY (AUSTRALIA) LIMITED (ACN 000 000 993) AS CUSTODIAN FOR TRILOGY FUNDS MANAGEMENT LIMITED (ACN 080 383 679) AS RESPONSIBLE ENTITY FOR THE TRILOGY MONTHLY INCOME TRUST (ABN 12 921 343 543)	First Defendant
and
NEW STREET CHILDCARE PTY LTD ATF NEW STREET CHILD CARE TRUST (ACN 651 144 115)	Second Defendant

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JUDGE:	Croft J
WHERE HELD:	Melbourne
DATE OF HEARING:	17 & 18 September 2024
DATE OF JUDGMENT:	11 October 2024
CASE MAY BE CITED AS:	Global Broadhurst Pty Ltd v The Trust Company (Australia) Limited & Ors
MEDIUM NEUTRAL CITATION:	[2024] VSC 624

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EQUITY — Estoppel — Property sold by mortgagee to a bona fide third party purchaser for value without notice — Whether conduct of mortgagee amounted to representation that it would allow mortgagor to refinance and redeem Property — Whether conduct of mortgagee amounted to representation that it would give reasonable notice to mortgagor that it intended to execute contract of sale — No representation arose from conduct — Hatziminas v Hatziminas [2024] VSC 513 — Laird v Vallance [2023] VSCA 138 — Waltons Stores (interstate) Ltd v Maher (1988) 164 CLR 387.

PROPERTY — Exercise of mortgagee’s power of sale — Property sold by mortgagee to a bona fide third party purchaser for value without notice — Claim that Property sold at undervalue such that mortgagee had failed to act in good faith having regard to interests of mortgagor contrary to s 77 of the Transfer of Land Act 1958 — Property was not sold at an undervalue — Mortgagor precluded from permanently restraining sale — Restraint of sale would destroy equitable proprietary interest of purchaser or cause loss and damage due to purchaser — Saafin Constructions Pty Ltd (in liq) v MAG Financial and Investment Ventures Pty Ltd [2021] VSC 489 — Kravchenko v The Rock Building Society, (2009) 26 VR 400 — Vasiliou v Westpac Banking Corporation (2007) 19 VR 229 — Transfer of Land Act 1958.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr WHC Forrester	DSA Law – Lawyers & Consultants
For the First Defendant	Mr MW Guo	Nicholas O’Donohue & Co Lawyers
For the Second Defendant	Mr R  Greenberger	Indovino’s Lawyers

HIS HONOUR:

Introduction and background

1. Global Broadhurst Pty Ltd (ACN 602 963 379) (‘the plaintiff’) seeks orders that The Trust Company (Australia) Limited (ACN 000 000 993) as Custodian for Trilogy Funds Management Limited (ACN 080 383 679) as Responsible Entity for the Trilogy Monthly Income Trust (ABN 12 921 343 543) (‘the first defendant’) be permanently restrained from completing settlement of a Contract of Sale of the property situated at 37‑47 McFadzean Avenue, Reservoir in the State of Victoria, 3073 (Certificate of Title, Volume 10132 Folio 812) (‘the Property’) dated 4 June 2024 (‘the Contract of Sale’) which the first defendant entered into with New Street Childcare Pty Ltd atf New Street Child Care Trust (ACN 651 144 115) (‘the second defendant’).  The Property is subject to a first registered mortgage to the first defendant (Mortgage AU660473A, 05/08/2021) (‘the first defendant’s mortgage’ or ‘the mortgage’). 

1. This proceeding commenced by writ dated 29 August 2024 and was first brought before the Court by summons dated 29 August 2024 filed on behalf of the plaintiff.  The summons was heard by Ginnane J in the Practice Court on 30 August 2024.  The plaintiff by summons sought orders that the first defendant be restrained until further order of the Court from completing the Contract of Sale.  For reasons set out in the judgment of Ginnane J on the hearing of the plaintiff’s summons[1] various orders were made, including the following:[2]

1. Until further order, the First Defendant, whether by itself, its servants, agents or howsoever is restrained from completing the settlement due on 2 September 2024 of the Contract of Sale made with the Second Defendant on or about 12 June 2024, of the property situated at 37‑47 McFadzean Avenue, Reservoir in the State of Victoria 3073.

2. Until further order, the First Defendant, whether by itself, its servants, agents or howsoever, is restrained from terminating the Contract of Sale made with the Second Defendant on or about 12 June 2024 of the property situated at 37‑47 McFadzean Avenue, Reservoir in the State of Victoria 3073, whether pursuant to Clause 12.5(a) of said Contract of Sale, or pursuant to any other power or right.

[1]Transcript 48–51 (Revised). 

[2]Orders (30 August 2024). 

1. In anticipation of the hearing of the trial in this proceeding, I made orders on 6 September 2024 which required, inter alia, the service of an Amended Writ, for further affidavit material sought to be relied upon by the plaintiff, the first and second defendants and also for parties jointly to submit to the Court, a statement of issues.  This statement of issues is set out in the reasons which follow and each of the matters raised addressed by reference to the reasons for judgment. 

1. The relief sought as set out in the Indorsement of Claim now forming the Amended Writ dated 9 September 2024 seeks both interim and final relief, as follows:

1. INTERIM RELIEF

a. An interlocutory injunction order that the First Defendant be restrained from completing the Sale Agreement, due to settle on 2 September 2024, to a date to be fixed by the Court.

2. FINAL RELIEF SOUGHT

a. A declaration that the First Defendant contravened s 77 of the Act [i.e. the Transfer of Land Act 1958].

b. A declaration that the Contract of Sale is void or voidable and is to be set aside.

c. Further or alternatively, an order permanently restraining settlement of the Contract of Sale by the Defendants.

d. Alternatively, damages.

e. Costs.

f. Interest.

g. Such further or other order as the Court deems appropriate.

At its heart, this proceeding is a contest between the relative rights of the plaintiff as mortgagor of the Property, those of the first defendant as selling mortgagee and of the second defendant as purchaser from the first defendant as selling mortgagee.  It is common ground, and agreed between the parties, that the second defendant is a bona fide purchaser for value of the Property without notice.

Legal principles

1. The statutory context of this proceeding is s 77(1) of the Transfer of Land Act 1958 (‘the Act’). In this context, the plaintiff seeks to set aside the Contract of Sale on the basis of, first, the failure on the part of the first defendant to discharge its duties as selling mortgagee under the provisions of s 77(1) and also on the basis that it is estopped from exercising the statutory power of sale. The claimed estoppel is, in summary, on the basis that the first defendant would not sell the Property without first giving the plaintiff an opportunity to pay outstanding monies under the first defendant’s mortgage and thereby exercise its equitable right to redeem the mortgage. In terms of applicable principles, I turn to these issues in turn.

Statutory provisions

1. Section 77(1) of the Act provides as follows:

If within one month after the service of such notice or demand or such other period as is fixed in such mortgage or charge the mortgagor grantor or other persons do not comply with the notice or demand the mortgagee or annuitant may, in good faith and having regard to the interests of the mortgagor grantor or other persons, sell or concur with any other person in selling the mortgaged or charged land or any part thereof, together or in lots, by public auction or by private contract, at one or several times, and for a sum payable in one amount or by instalments, subject to such terms and conditions as the mortgagee or annuitant thinks fit, with power to vary any contract for sale and to buy in at any auction or to rescind any contract for sale and to resell without being answerable for any loss occasioned thereby and with power to make such roads streets and passages and grant and reserve such easements as the circumstances of the case require and the mortgagee or annuitant thinks fit, and may make and sign such transfers and do such acts and things as are necessary for effectuating any such sale.

[Emphasis added]

Exercise of the mortgagee’s power of sale

1. Relatively recently, in Saafin Constructions Pty Ltd (in liq) v MAG Financial and Investment Ventures Pty Ltd,[3] Riordan J considered the principles applicable to a mortgagee exercising its power of sale in the context of s 77(1) of the Act.

   [3][2021] VSC 489.

1. Historically, Riordan J observed that the only duty imposed on the mortgagee exercising its power of sale was to act in good faith.[4]  Continuing, his Honour said:[5]

   [4][2021] VSC 489, [428]; referring to Kennedy v De Trafford [1896] 1 Ch 762; MBF Investments Pty Ltd v Nolan (2011) 37 VR 116, 135–136 [65] (Neave, Redlich and Weinberg JJA).

   [5][2021] VSC 489, [430]–[431].

430.In MBF Investments Pty Ltd v Nolan, the Court of Appeal stated that the words of s 77(1) must be interpreted against the background of equitable principles, which they summarised as follows:

(a) a mortgagee is not a trustee of the power of sale, which is given to the mortgagee to enable the realisation of the security interest;

(b) a mortgagee must act in good faith, that is conscionably, and cannot sell for a purpose other than that for which the power of sale is conferred;

(c) a mortgagee is not required to place the interests of the mortgagor above the mortgagee’s interests in recovering the debt. For example, the mortgagee can sell the property at a time of the mortgagee’s choice, even though the property might realise a higher price if the sale were postponed;

(d) the mortgagee cannot disregard the interests of the mortgagor by simply selling for a price which will cover the amount of the loan. The mortgagee must take reasonable steps to obtain the best price consistently with its right to enforce its security interest. This requires the mortgagee to consider how the property should be advertised and to allow an appropriate time between the advertisement and the sale;

(e) the mortgagee must also have regard to the interests of subsequent security holders; and

(f) if there is no doubt that the sale of the lots preferred by the mortgagor would be sufficient to discharge the debt owed to the relevant mortgagee and of any other security holders whose interest the mortgagee is required to consider, a failure to sell the preferred lots may breach the mortgagee’s duty to sell in good faith.[6]

431.For the purpose of determining whether the mortgagee has breached its duty to act conscionably towards the mortgagor, ‘the duty is not to be considered in some mechanical way, but the whole of the mortgagee’s conduct with respect to the sale is to be considered’.[7]

[6](2011) 37 VR 116, 144–145 [100] (citations omitted).

[7]Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646, 652 [38] (Young CJ in Eq).

1. As to the principles with respect to the extinguishment of the mortgagor’s equitable right of redemption, Riordan J said:[8]

   [8][2021] VSC 489, [341]; the Court of Appeal in Mag Financial and Investment Ventures Pty Ltd v Hassan El‑Saafin [2022] VSCA 286, [164] (McLeish, Sifris and Walker JJA).

341.With respect to the contention that, by the time of the July Tender, the Company’s right to redeem the mortgages had been extinguished, I note the relevant principles as follows:

(a) On the mortgagee entering into a valid contract of sale with respect to the secured property, the mortgagor’s right to redeem the mortgage is extinguished.[9]

(b) If the mortgagee does not act bona fide in the exercise of the power of sale and the purchaser had knowledge of such impropriety at the date of the contract, the mortgagor does not lose its equity of redemption by the entry into the contract.[10]

(c) Further, if the purchaser was not aware that the mortgagee had acted in bad faith, the mortgagor would not necessarily lose its right of redemption but the matter would be ‘determined in accordance with the general principles by which disputes as to priority between competing claims are resolved, there is no principle which operates to postpone the right of the mortgagor to that of the purchaser’.[11]

In relation to the third point, point (c), Riordan J made reference to the following statement by Walsh J in Forsyth v Blundell:[12]

If a contract of sale had been made which was not affected by any impropriety, it would not have been open to the mortgagor to claim that until the contract had been completed his right to redeem the mortgage continued notwithstanding the contract and was superior to the right of the purchaser. Although he retained his title to the land this was subject to the power of sale as defined in the Ordinance and as incorporated into the mortgage instruments. In my opinion, a contract of sale properly made in the course of the exercise of that power is binding upon the mortgagor, not because the mortgagee contracts as agent for the mortgagor, but because by entering into a mortgage to which the Ordinance applies the mortgagor makes his own rights subject to its provisions, including those which confer and regulate the power of sale, and, therefore, subject to any action which is properly taken in good faith by the mortgagee. On this question, I regard as applicable and as correct the decision in Waring (Lord) v. London and Manchester Assurance Co. Ltd.,[13] approved in Property & Bloodstock Ltd. v. Emerton,[14] that a contract by the mortgagee to sell the property is binding, before completion, upon the mortgagor unless it be proved that the mortgagee exercised his power of sale in bad faith.

[9]R v Registrar of Titles; Ex parte Watson [1952] VLR 470, 476–477 (Herring CJ).

[10]Forsyth v Blundell (1973) 129 CLR 477, 499 (Walsh J), discussed in McKean v Maloney [1988] 1 Qd R 628, 635 (McPherson J); Rockett v Evans [2008] QSC 227, [12]–[14] (Martin J).

[11]Forsyth v Blundell (1973) 129 CLR 477, 499 (Walsh J), discussed in McKean v Maloney [1988] 1 Qd R 628, 635 (McPherson J); Rockett v Evans [2008] QSC 227, [12]–[14] (Martin J).

[12](1973) 129 CLR 477, 499.

[13](1935) 1 Ch 310.

[14](1968) 1 Ch 94.

1. In the present proceedings, the plaintiff contends that the first defendant did not properly exercise its power of sale in that it breached its duty under s 77(1) of the Act to obtain the best price which could reasonably have been obtained in the sale of the Property. In this respect, reference is made to two decisions of the Court of Appeal.

1. In Kravchenko v The Rock Building Society,[15] Buchanan JA said that:

Generally, the interests of the mortgagee and the mortgagor are best served by obtaining the best price that is available, and that should be the mortgagee’s aim. Nevertheless, as the mortgagee is entitled to prefer his own interests while taking reasonable care to protect the interests of others, in certain circumstances it may be that a mortgagor will be justified in accepting a price that is less than the best price that could be reasonably be obtained, but is a price that can be described as proper. In Vasiliou v Westpac Banking Corporation, Maxwell P, Neave and Kellam JJA said of a mortgagee to whom s 77 of the Act applied:

… The mortgagee is obliged to obtain the best price consistent with its entitlement to realise its security.

[15](2009) 26 VR 400, 404 [20].

1. In Vasiliou v Westpac Banking Corporation,[16] the Court of Appeal considered whether advertising is required in a mortgagee’s sale and in so doing considered these authorities, as follows:

   [16](2007) 19 VR 229, 241–242 [58]–[64].

58The Bank submits that the requirement stated by Lush J in Henry Roach[17] – that a mortgagee is not entitled to sell a property without advertising – is limited to the case where the sale is by public auction.  Lush J cited Pendlebury v Colonial Mutual Life Assurance Society Limited,[18] in which the sale of the mortgaged land was by auction.  The land there in question was in country Victoria, but the auction was held in Melbourne.  The auction was advertised in Melbourne newspapers only and the description of the land referred only to its title and acreage.  The High Court held that the advertisement was inadequate, both in content and in distribution.  By contrast, in Swerus v Central Mortgage Registry of Australia Pty Ltd,[19] Cohen J held that lack of advertising was not fatal to a private sale conducted by a mortgagee, in circumstances where the offer made was a “market price” offer and where acceptance avoided delay, advertising expenses and real estate agent’s commission. 

[17]Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309.

[18](1912) 13 CLR 676.

[19][1989] ANZ ConvR 169.

59The question of whether advertising was required was considered by Hansen J in A Legudi and Sons (Vic) Pty Ltd and ors v VL Finance Pty Ltd.[20]  There his Honour said:

[20](Unreported, Supreme Court of Victoria, Hansen J, 30 April 1997); [1997] VicSC 162.

There was no advertising of the property. Each agent had recommended advertising and the reason is obvious: to maximise the number of persons who might become aware of the property and who might become interested as potential purchasers …  I am prepared to assume that as a matter of principle the defendant did fail to take a step it should have taken.  However, that does not answer the case on liability for the following reasons: First, there is the question as to market value.  If the property was sold at or in the range of market value the failure to advertise does not lead the plaintiff anywhere.  Secondly, there is a point of fundamental significance, namely, that the estimates of value given to the defendant by the four agents were all based on an advertising program having been undertaken and the property being put up for auction.  Although there was no advertising and no auction, the property was sold for a figure that exceeded their estimates.  Thirdly, and most importantly, I am not satisfied on the basis of the evidence that advertising the property would have produced a better result.  For all these reasons, I am not satisfied that in the present context the defendants failed to act in good faith and having regard to the plaintiff’s interests.

60In the present case, the trial Judge adopted the same approach as did Hansen J in Legudi, stating:[21]

[21]Ibid [37].

If it were shown that the sale price was, nevertheless, not insufficient, then the want of advertisement ceases to be of significance.

61In Goldcel Nominees Pty Ltd v Network Finance Limited,[22] Murphy J gave consideration to the obligations of the mortgagee in such circumstances.  He said:

[22][1983] 2 VR 257.

In my opinion, for the purposes of the present case, s 77(1) requires that the mortgagee, on selling, must take reasonable steps to ensure that, at the time of sale, he is getting the best price then available for the mortgaged property, and reasonable steps to obtain the best price must be taken, irrespective of the amount of the mortgage debt. The ‘interests of the mortgagor’ must in my opinion include at least his interest to see that the mortgagee takes reasonable steps to get on sale the best possible price available for his property. The mortgagee must have regard to this interest.

… 

The Court is required in each case to make an assessment of the mortgagee’s actions, along with those of its servants and agents, and to determine whether or not the requisite subjective element of good faith is satisfied as well as the objective standard of reasonableness of conduct having regard to the mortgagor’s interest. 

62As Ashley J observed in Guss v Geelong Building Society (in liq),[23] there are differing approaches to s 77(1). Whereas Lush J held that the mortgagee’s obligation was to take reasonable care to obtain a proper price, Murphy J in Goldcel Nominees held that the duty was to take “reasonable steps to obtain the best price”.  In the present case, however, the distinction makes no difference, since the evidence before his Honour was that the sum of $400,000 was both the best price and a proper price. 

63Whether advertising is required in such a case depends on the circumstances. The mortgagee is obliged to obtain the best price consistent with its entitlement to realise its security. Whether advertising is a necessary step in the securing of that price will vary from case to case. By itself, the presence, or absence, of advertising will rarely be decisive. What matters is the price obtained. If the price is satisfactory, a failure to advertise will be immaterial. Conversely, if the price is unsatisfactory, as a result of the mortgagee’s acts or omissions, the fact that the property was advertised would be unlikely to be an answer to the allegation that the duty under s 77(1) had been breached.

64In the present case, the price was satisfactory.  The failure to advertise was immaterial. 

[23][2001] VSC 37.

1. Ultimately, as observed by the plaintiff, the obligation of a mortgagee to act in good faith is an obligation to act conscionably and so it follows that the duty must be considered with regard to the whole of the mortgagee’s conduct.[24] 

   [24]See, eg, MBF Investments (2011) 37 VR 116, [76], [100] (Neave, Redlich and Weinberg JJA); and El‑Saafin v Franek(No 4) [2020] VSC 389, [175].

Estoppel

1. In this respect, the plaintiff contends that a proprietary estoppel arose in the course of dealings between it and the first defendant which gave rise to a proprietary estoppel in its favour with respect to the mortgage property. Having regard to the position that a mortgage under the Act is, unlike a mortgage at general law, merely a statutory charge[25] thus leaving the ‘fee simple’ ownership in the mortgagor, it is not entirely clear to me how a proprietary estoppel claim is raised in the present proceedings. On one view, it might be said that the property to be ‘acquired’ by reason of a proprietary estoppel in these circumstances is the ‘fee simple’ in the property unencumbered by any mortgage, whether or not such mortgage operates only as a statutory charge. On the other hand, one might have thought that a claim based on promissory estoppel better fits the nature and circumstances of a Torrens title mortgage, as a statutory charge under the Act. Were that the case it would be expected that the principles of promissory estoppel enunciated in Waltons Stores (interstate) Ltd v Maher[26] and subsequent authorities would be more apposite.  In any event, in the present circumstances and having regard to the reasons which follow, the same result would, in my view, apply if either approach were taken.  Moreover, as the issue is not raised in submissions by the parties I will proceed on the basis of the plaintiff’s characterisation of the estoppel claim as one proprietary estoppel. 

   [25]Transfer of Land Act 1958 s 74; and see C Croft and R Hay, The Mortgagee’s Power of Sale (LexisNexis, 4^th ed, 2019), 6–8, [1.7].

   [26](1988) 164 CLR 387.

1. Turning to the authorities, in Laird v Vallance,[27] the Court of Appeal summarised the elements of proprietary estoppel in the following terms:

a. A representation was made by the defendant that the defendant would confer on the plaintiff an interest in property.

b. The plaintiff acted in reliance on that promise.

c. The plaintiff acted reasonably in relying on the promise made by the defendant.

d. The defendant knew or intended the plaintiff would rely on the promise.

e. The plaintiff has suffered detriment as a consequence of the failure by the defendant to adhere to the promise.

[27][2023] VSCA 138, [51].

1. Even more recently, in Hatziminas v Hatziminas,[28] Quigley J summarised the principles:[29]

   [28][2024] VSC 513.

   [29][2024] VSC 513, [72]–[ 79] (footnotes omitted).

72 The representation may be inferred by conduct, and whilst the representation must be clear in its terms, the test is less strict than required for a representation in contract law. The question of uncertainty or ambiguity of a promise is relevant to the issues relating to reliance, the reasonableness of the reliance, the nature and expectations of the promise, the awareness of the promisor on the reliance of the promisee, and the nature of the detriment sustained by the promisee if the promise is not adhered to. The terms in which the promise was expressed may bear on the question that, in all the circumstances, it would be unconscionable for the defendant not to adhere to the promise found by the court.

73 The inducement may arise from positive representations, express or implied by words or conduct, or a combination of both; it may arise by omission where the defendant, knowing the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation under which the plaintiff is conducting their affairs.

74 The plaintiff must show that there was reliance on the assumed state of affairs. Reliance is a fact to be found and not imputed on the basis of evidence which falls short of the proof of fact. The question is whether the promisee was so influenced by the promise that it would be unconscionable for the promisor to resile from the promise, and the promise being a ‘significant factor’ which the promisee took into account when deciding to act as they did. The question was framed by Gageler J in Sidhu at [93] as:

Despite any other contributing factors, would the party seeking to establish the estoppel have adopted a different course (of either action or refraining from action) to that which [the party] did had the relevant assumption not been induced?

75 The assumption must be a reasonable one. That is, the plaintiff must have acted reasonably in adopting the assumption. The question of whether reliance was reasonable encompasses both the reasonableness of adopting the representation in the circumstances and that of taking the relevant actions. The claim will fail if the plaintiff knows that the representation was not true or that the representor lacked authority to make it.

76 Detriment is not confined to financial loss and may consist of the loss of opportunity to protect or advance one’s position. Detriment is not to be approached in a narrow, technical sense and need not consist of expenditure of money or other quantifiable financial disadvantage so long as it is something substantial. It must be such that it binds the conscience of the party being estopped. It is approached as part of the broad enquiry as to whether departure from the promise would be unconscionable in all the circumstances.

77 The promisee is prima facie entitled to have the promisor held to the promise or expectation. However, the court will then consider all the circumstances to determine whether it is necessary to modify the relief to avoid going beyond what is required for conscientious conduct or to avoid injustice to others. The equity may be satisfied in another more limited way where the plaintiff’s expectation or assumption is uncertain, or extravagant, or out of all proportion to the detriment suffered. Proportionality is a relevant consideration but not a necessary constitutive element to be proved by the party seeking relief.

78 Whilst the character of the detriment is a relevant consideration, the exercise is not one of weighing detriment too minutely in order that it be converted into some equivalent of cash or kind. Nor does it require substantial correspondence between the expectation and the monetary value of the detriment. The detriment should also not be treated as consideration for the proprietary interest.

79 Estoppel in equity may not entitle the plaintiff to the full benefit of the assumption upon which he relied. As put by Brennan J in Waltons Stores at 423:

[t]he object of the equity is not to compel the party bound to fulfil the assumption or expectation; it is to avoid detriment which, if the assumption or expectation goes unfulfilled will be suffered by the party who has been induced to act or abstain from acting thereon.

Factual matters

1. The factual matters in this proceeding, both leading up to the sale of the Property and the conduct of the sale itself, are largely uncontroversial particularly so in relation to events leading to the sale as the evidence is almost exclusively documentary.  And with respect to the sale process the evidence, though also oral, is very much based on documents or the omission of documents.  The controversy between the parties flows from the fact of various documents, or omissions, and inferences and findings to be drawn from this evidence. 

1. The plaintiff has helpfully provided a summary of relevant facts which are set out in the Tender Bundle and the Palta Affidavit.[30]  This summary is as follows:[31]

   [30]Affidavit of Rakesh Palta affirmed 9 September 2024 (‘Palta Affidavit’).

   [31]Plaintiff’s Closing Submissions (16 September 2024), [31]; some of the documents referred to in this summary purport to reference tender bundle documents – but those referenced in paragraphs ‘g’, ‘s’, ‘w’ and ‘t’ are not contained in the tender bundle and so these paragraphs are omitted. 

a. Global owns the Property and has been developing it over 10 years;[32]

[32]Palta Affidavit, [24]–[27].

b. Global borrowed $1,553,833 from Trilogy in July 2021;[33]

[33]Tender Bundle, 5–38.

c. Between February 2022 and December 2023, various extensions were provided to repay the loan;[34]

[34]Tender Bundle, 39–52.

d. Global defaulted on its loan with Trilogy in or around November 2023 and were issued with a notice of default under s 76 of the Act (Notice);[35]

[35]Tender Bundle, 126–129.

e. On 22 December 2023, Trilogy agreed to extend the date by which Global was to repay the loan to 15 March 2024, conditional on the payment of $65,150 by 19 January 2024;[36]

[36]Tender Bundle, 130–132.

f. Global did not pay the $65,150 by 19 January 2024;

…

h. On 10 May 2024, solicitors for Global contacted the solicitors for Trilogy by email notifying Trilogy of the intention to repay the loan through refinance in 21 days;[37]

[37]Tender Bundle, 186.

i. On 13 May 2024, solicitors for Trilogy responded noting that “no Auction Date has been set yet” and “if your client is able to refinance its loan before the auction date, then our client will be happy to facilitate same”;[38]

[38]Tender Bundle, 187.

j. On 15 May 2024, solicitors for Global sent an email to the solicitors for Trilogy asking for a payout figure and asking that no sale of the Property be undertaken pending the re‑finance;[39]

[39]Tender Bundle, 188..

k. On 15 May 2024, solicitors for Trilogy responded and noted that they would seek instructions and respond;[40]

[40]Tender Bundle, 188.

l. On 16 May 2024, solicitors for Trilogy responded with a payout figure of $1,708,770.29;[41]

[41]Tender Bundle, 189.

m. On 22 May 2024 at 11.30am, Mr Palta sent Mr Jamieson an “Accelerated Formal Loan Approval” document;[42]

[42]Palta Affidavit, [12] and Tender Bundle, 191.

n. On 22 May 2024 at 11.31am, Mr Palta sent a text message to Mr Jamieson stating “just sent you an e‑mail for settlement next week. Please call.”[43]

[43]Palta Affidavit, [13].

o. On 22 May 2024 between 11.31am and 11.57am, Mr Palta had a critical conversation with Mr Jamieson where during the conversation:

“Craig said words to the effect that Trilogy had received our formal loan approval letter, that Trilogy was satisfied with this loan approval and he assured me that Trilogy would not take any action regarding the sale of the property, provided that they received a copy of the loan documents for the refinance. I recall Craig making a point that Trilogy had wanted to be satisfied that the refinance was actually going ahead, but I had now sent him the letter confirming the approval. I recall making a comment to the effect that Trilogy did not need to sell the Property anymore and that it should stop any sale process that had been underway, as I was concerned about this. Craig said to me, words to the effect that in any event, Trilogy would provide us with several days’ notice before taking any steps to sell the property.”

p. On 22 May 2024 at 11.57am, Mr Palta sent Mr Jamieson a follow‑up email “as per my phone call and email this email is formally [to] inform you that we have already secured unconditional formal loan approval and incoming lender will settle by next Friday. Please inform your estate agent that this property is no more available for sale in market”.[44]

[44]Tender Bundle, 190.

q. On 22 May 2024, solicitors for Global sent solicitors for Trilogy an email attaching a loan approval letter and requested confirmation of documents required by Trilogy to discharge the loan;[45]

[45]Tender Bundle, 191–196.

r. On 23 May 2024 in response to the email from Global’s solicitors of 17 May 2024, solicitors for Trilogy responded and stated that “Please be aware that our client has extensively marketed the property over the last 5 weeks by way of an “expression of interest” campaign. The offers have come in and our client now needs to sign the best offer to enforce its security. Our client will delay signing a sales contract until 4pm, 27 May 2024 to accommodate your client’s proposed refinance. If your client does not refinance its loan by the said time, our client will have no choice but to continue with the sales process”. Mr Palta’s evidence is that neither he nor anyone at Global received this email and his solicitors did not send it to him;[46]

[46]T44.5–48.26; Tender Bundle, 197.

…

…

u. On 6 June 2024, solicitors for Global responded to Trilogy’s 23 May 2024 email noting:

1. there would be unconditional loan approval sent on 7 June 2024;

2. Settlement of the loan would take place on 16 June 2024; and

3. In light of those matters, Global asked that no action be taken with respect to the Property;[47]

[47]Tender Bundle, 198.

v. On 7 June 2024, Mr Jamieson sent an email to Mr Palta further to his 31 May 2024 email noting that loan documents had yet to be received … ;[48]

[48]Tender Bundle, 199.

…

x. On 12 June 2024, unbeknownst to Global, Trilogy entered into a contract of sale with a purchaser for $1,750,000;

y. On 12 June 2024, in reliance on the representations of Mr Jamieson and with no knowledge that the contact of sale was being executed, Global signed the loan documents;[49]

[49]Palta Affidavit, [10].

z. On 2 July 2024, solicitors for Global invited solicitors for Trilogy to a workplace PEXA to allow the refinance of the loan;[50]

[50]Tender Bundle, 200.

aa. On 3 July 2024, solicitors for Trilogy responded stating the payout figure and noted that “there is an unconditional sale contract on foot. However our client does have the right to pull out if your client can refinance” and sent a further email providing payout figure, trust account receipt and other relevant settlement documents;[51]

[51]Tender Bundle, 201.

ab. On 3 July 2024 at 10:58am, solicitors for Global sent an e‑mail to solicitors for Trilogy stating that the agent fees were actually $54,670 as per the invoice from Hudson Bond provided by Trilogy previously, and asking for a copy of the contract of sale and trust receipt for the deposit.[52]

[52]Tender Bundle, 202.

ac. On 3 July 2024, at 11:32am, solicitors for Trilogy sent an e‑mail to solicitors for Global, stating a corrected payout figure of $1,813,013.88 and attaching copies of the trust account receipt, sale authority and sales contract;[53]

[53]Tender Bundle, 203–247.

ad. On 4 July 2024, solicitors for Global sent an email to solicitors for Trilogy noting that settlement was scheduled for 2pm;[54]

[54]Tender Bundle, 248.

ae. On 4 July 2024, solicitors for Trilogy responded by attaching the proposed PPSR deed of release, to be discharged once the settlement had been completed;[55]

[55]Tender Bundle, 249–250.

af. On 9 July 2024, solicitors for Global sent an email to solicitors for Trilogy noting that settlement did not occur due to a caveat being placed on the Property by the purchaser;[56]

[56]Tender Bundle, 251.

ag. On 10 July 2024, solicitors for Trilogy sent solicitors for Global and email stating

“As you are aware, our client gave your client a deadline of 27 May 2024 to refinance the property and we attach our email correspondence in this respect. Your client failed to refinance its loan by the said date. Our client subsequently entered into a sales contract on 12 June 2024 to sell the property as mortgagee in possession. Your client’s right of redemption lapsed at the time our client’s power of sale was exercised.”[57]

[57]Tender Bundle, 252.

ah. On 10 July 2024, in response to the email from Trilogy’s solicitor’s, the solicitors for Global said:

“We note that our client proceeded on the basis that the loan was going to paid on out last week and we note that you agreed to the settlement date and time.

I also note that you advised that you had a provision whereby you would be able to cancel the sale.

Accordingly, our client proceeded on the basis of the representations and in pursuant of their right of redemption.

Further we note that the property appears to have been sold for only $1,750,000 when the sworn valuation just received indicates that the true value is in fact $2,550,000.00 as determined by Egan National Valuers

Accordingly if the refinance does not proceed we will be seeking that the difference be paid to our client by the mortgagee.

In light of the above we ask that you promptly arrange for the removal of the caveat so as to allow settlement to proceed.”

ai. On 15 July 2024, solicitors for Trilogy sent a letter to Global’s solicitors, stating amongst other things:

a. Trilogy was entitled to terminate the contract if conditions under Clause 12.5 of the contract were met;

b. If Global wished to refinance its loan, it encouraged Global to seek an injunction to prevent the sale, which may allow Trilogy to terminate the sale contract.[58]

This summary does not appear to be controversial.  The controversy between the parties arises, rather, in relation to what is to be drawn from these factual matters. The only matter considered in this summary which is controversial is the assertion of reliance in paragraph ‘y’. This assertion is not a factual matter and, for the reasons which will follow, is not, in my view, established. Additionally, the document in paragraph ‘v’ omits critical context of the email to which reference is made and is ‘redacted’ accordingly.

[58]Tender Bundle, 255–257.

1. The plaintiff also highlights what are described as further significant facts relevant to the sale of the Property, as follows:[59]

   [59]Plaintiff’s Closing Submissions (16 September 2024), [32]. 

a. The value of the Property at the time of the marketing and Contract of Sale and now is approximately $2.25m;

b. The Property was not sold at auction or even given consideration as to whether to sell at auction;

c. The Property was first advertised on 6 April 2024 by signpost, then online on 9 April 2024;

d. By 15 April 2024, there was no information memorandum, contract of sale or section 32 forming part of the advertising campaign;[60]

e. The Property was not marketed to include a significant aspect of its value, being the current planning permit issued on 25 September 2018, permit number D551/2016. The permit allowed three years to commence construction and five years to complete. The permit also allowed for the mixed‑use development comprising the construction of a three‑storey and a two‑storey building, consisting of four ground floor shops, food and drink premises (takeaway) and eight dwellings and car park reduction, in accordance with the endorsed plans;

f. By 13 May 2024, the selling agent knew of potential buyer concerns regarding potential contamination;[61]

g. Whilst an email confirming “SITE REMEDIATED” had been sent to 27 people on or around 16 May 2024, it was not part of any other advertising;[62]

h. The fact of the relevant permits was a “revelation” which apparently came about and was communicated to a small number of potential buyers (3 based on pages 30‑35 of the exhibit to the Gilbert Affidavit) on 14 May 2024. This “revelation” made the Property an “unbelievable buy”.[63]

[60]Affidavit of Thomas Gilbert affirmed 12 September 2024 (‘Gilbert Affidavit’), exhibit page 14.

[61]Gilbert Affidavit, [13].

[62]Gilbert Affidavit, [13].

[63]Gilbert Affidavit, exhibit pages 30–35.

1. In terms of the evidentiary material, the plaintiff contends that there is a dearth of evidence regarding the sale of the Property between 16 May 2024 and 12 June 2024.[64]  More particularly, it is contended that there is no evidence of the communications, recommendations or otherwise surrounding the actual sale price; why the Property was sold for what is said to be such a low figure compared to the advertised price; from the first defendant with respect to its decision making process in signing the Contract of Sale; and to explain why the first defendant did not undertake an auction of the Property as it initially ‘represented’ that it would.  These observations are, rather, submissions on the part of the plaintiff particularly given that they are observations as to the absence of evidence rather than actual evidence of particular matters.  Nevertheless, it is helpful to make reference to these matters at this point.  The implications or inferences to be drawn from these “omissions” are the subject of the reasons which follow. 

   [64]Plaintiff’s Closing Submissions (16 September 2024), [33]. 

Submissions and findings

1. At the outset it must be observed that the process of realising the first defendant’s mortgage over the Property has been somewhat drawn out. The plaintiff’s default under the mortgage occurred in or around November 2023 and a notice under s 76 of the Act was given to the plaintiff at about that time. From 22 December 2023 it appears that discussions took place between the plaintiff and the first defendant, the former indicating an intention to repay the mortgage loan contingent upon its refinancing with another lender. Communications between the parties were at times direct but during the critical period in May 2024 solicitors for the plaintiff and the first defendant were actively involved; though with some further communications between Mr Palta and Mr Jamieson on behalf of the plaintiff and the first defendant, respectively. In the course of these communications a critical email was sent on 23 May 2024 by the first defendant’s solicitors to the plaintiff’s solicitors stating, inter alia, that the first defendant would delay signing a sales contract for the sale of the Property until 4:00pm on 27 May 2024.  Mr Palta’s evidence is that neither he nor anyone on behalf of the plaintiff received the email and its solicitors did not send that email to him or, apparently, otherwise inform him of this ‘deadline’.  It is against this background that I now turn to consider submissions by the parties in relation to the significance of the factual matters, particularly the various communications between them that have been set out.  For convenience the estoppel claim is considered first, followed by matters with respect to the sale of the Property. 

Estoppel

1. The plaintiff contends that the first defendant’s conduct amounted to a representation to the plaintiff that it could acquire back its interest in the Property before it was sold if it could obtain finance and that the first defendant would not sell the Property without providing the plaintiff with an opportunity to refinance.  In essence, the plaintiff contends, the evidence establishes that Mr Palta, on behalf of the plaintiff, spoke to Mr Craig Jamieson, on behalf of the first defendant, on 22 May 2024 and that he said words to the effect that the first defendant would not take any action regarding the sale of the Property provided he received a copy of the loan documents for the proposed refinancing and that the first defendant would provide notice before taking steps to sell the Property.  In effect, Mr Palta says that he believed he had an agreement with Mr Jamieson.[65]  In due course, Mr Palta provided the relevant documents[66] and therefore believed that the first defendant would refinance the loan and would acquire back its legal and equitable interest in the Property through its equitable right of redemption. At this point I note previous observations in these reasons as to the nature of a Torrens system mortgage in Victoria under the provisions of the Act and also that, on the evidence, Mr Palta apparently took no steps to verify with Mr Jamieson that he had such an arrangement. In my view, this indicates that this was simply an assumption in the course of a relatively long period of backwards and forwards communications which were generally by email.

   [65]See Palta Affidavit, [14]–[15].

   [66]See Palta Affidavit, [16]–[20].

1. As to the 23 May 2024 email from the solicitors from the first defendant to the solicitors for the plaintiff, the plaintiff contends that this was, in effect, the mortgagee’s solicitors listing ‘an arbitrary deadline of 27 May 2024 for Global [the plaintiff] to obtain refinance otherwise Trilogy [the first defendant] would continue with the sale process’.[67]  The plaintiff also adds that such communication ‘does not mean that there was a buyer to whom Trilogy [the first defendant] was about to sell the Property’.[68]  The plaintiff submits that although Mr Palta says he did not receive the email it cannot be disputed that the plaintiff’s solicitors did see the email and were acting as its agent.  Nevertheless it is submitted that notwithstanding this agency ‘any imputation of knowledge to Global [the plaintiff], Mr Jamieson did not communicate this position to Mr Palta’.[69]  In my view, it is difficult to attach much if any significance to this observation or submission as the nature of communications between the plaintiff and the first defendant was, as indicated previously, a mixture of direct communications between Mr Palta and Mr Jamieson but, at critical times, communications were between the solicitors for these parties. 

   [67]Plaintiff’s Closing Submissions (16 September 2024), [39]. 

   [68]Plaintiff’s Closing Submissions (16 September 2024), [39]. 

   [69]Plaintiff’s Closing Submissions (16 September 2024), [39]. 

1. Following the 23 May 2024 communications between the solicitors, Mr Palta and Mr Jamieson continued to communicate with each other.  The plaintiff contends that this course of communications was on the basis of the 22 May 2024 representation said to be contained in the communications on that day as set out previously.[70]  Then it is said that the emails from Mr Jamieson on 31 May 2024 and 7 June 2024 support Mr Palta’s reasonable belief that all he was required to do was to send the relevant loan documents to Mr Jamieson, which he did.  They were, however, unsigned and there were provisions in the loan documents, as observed by the first defendant, which the first defendant contends made the position highly conditional in any event. 

   [70]See above, [18] (as substitution paras m. to q. of the Plaintiff’s submissions as therein set out)

1. On the basis of these communications, the plaintiff contends that the first defendant knew that the plaintiff held a belief or expectation that it had been agreed that it would refinance the mortgage loan with a third party, the Property would not be sold and that the plaintiff would rely upon that belief or expectation.  In terms of reliance the plaintiff cites, by way of example, obtaining a refinancing of the loan and not seeking an injunctive relief to prevent a sale of the Property. 

1. The plaintiff contends that it did reasonably act to its detriment and, or alternatively, changed its position in reliance upon the expectation or belief induced by the alleged representation because it did not seek to restrain the first defendant from selling the Property on 12 June 2024.  The plaintiff says that had it been aware of the first defendant’s intention to sell the Property on 12 June 2024 to New Street Childcare, the second defendant, it would either have ensured that settlement of the refinancing took place prior to 12 June 2024 or would have sought an injunction to prevent the sale[71], particularly as it contends that the sale was at a significant undervalue.  Moreover, it says that in circumstances where the refinancing of the mortgage loan was approved by the incoming lender and booked and ready for settlement on 5 July 2024, it could have accelerated the administrative process to achieve a refinancing of the settlement prior to 12 June 2024.  Thus it says that the detriment incurred by the plaintiff is such that it would be unconscionable for the first defendant to assert its legal rights against the plaintiff by not fulfilling the plaintiff’s expectation and selling the Property in circumstances where the plaintiff was able to exercise its equitable right of redemption.  Hence it is said that the plaintiff has satisfied the requisite elements to establish an estoppel.  The first defendant, on the other hand, contends that there is no such estoppel and it is to its submissions in this respect that I now turn. 

   [71]Palta Affidavit, [22].

1. The first and general point made by the first defendant goes to the evidence upon which the plaintiff relies, particularly that of Mr Palta.  The effect of the plaintiff’s forensic decision, it is said, was to dispense with the evidence of Ms Supriya Sood, a director of the plaintiff company, and to rely on Mr Palta’s evidence on the basis that he was the one responsible for its dealings with the first defendant.[72]  It follows, the first defendant submits, that the relevant state of mind with respect to the estoppel claim by the plaintiff, judged objectively, is Mr Palta’s.  However, the first defendant submits that Mr Palta was an unsatisfactory witness.  It is said that he was vague and evasive, and unwilling to accept obvious propositions.  More particularly, it is said that the high point of his evidence was his readiness to blame his lawyers for not having been provided with the critical email from the first defendant’s lawyers of 23 May 2024 in which a specific deadline was set for refinancing to occur.[73]  In this context, it is said by the first defendant that the attempt to blame Mr Palta’s own lawyers was self‑serving. 

   [72]T12.2–9.

   [73]Tender Bundle, 197.

1. In any event, the first defendant says that even if Mr Palta was not provided a copy of that critical email by his lawyers as he claimed, his own narrative in chief painted a false picture which did not stand testing.  More particularly, the first defendant highlights that when Mr Palta said[74] that he had sent certain loan documents to Mr Jamieson, on 31 May 2024, as apparent evidence that refinancing had finally been obtained by the plaintiff, he told the Court, in his affidavit, that he ‘assumed Craig had received these and did not have any concern, as I did not hear anything back until 7 June 2024’.  Under cross‑examination, Mr Palta was shown a response from Mr Jamieson saying that the email did not actually have any attachments.  Mr Palta’s response was to claim that Mr Jamieson’s email went to his — Mr Palta’s — spam folder.[75]  Mr Palta also accepted under cross‑examination that his original email of 31 May 2024 which purported to attach documents did not in fact have any attachments.  Again, he blamed IT issues.[76]  As observed by the first defendant, none of these excuses were in Mr Palta’s affidavit.  Indeed, despite Mr Palta having read Mr Jamieson’s response of 31 May 2024 prior to him affirming his affidavit,[77] his affidavit was silent about that email. 

   [74]Palta Affidavit, [19].

   [75]T51.2–15.

   [76]T53.17–25.

   [77]T30.30–31.

1. Continuing with respect to the documents in relation to refinancing, Mr Palta was shown in cross‑examination Mr Jamieson’s response of 7 June 2024 by email, where Mr Jamieson said:

Still haven’t received any documents confirming a refinance of the current loan facility is scheduled to take place.

Taking this into consideration in additional [sic] to the Loan being in default … we are looking to finalise sale of the property as previously communicated over the last few weeks and months.

Later that afternoon, in response to Mr Jamieson’s email, Mr Palta sent an email in reply attaching the various refinancing documents. 

1. Having regard to these matters, with respect to Mr Palta’s evidence as highlighted by the first defendant in its submissions to which reference has been made, I accept, on the basis of these matters and as submitted by the first defendant, that Mr Palta was an unsatisfactory witness.  There are further, more specific aspects of his evidence to which I will now turn which, in my view, only serve to reinforce this assessment.  Moreover, and significantly, such an assessment is highly relevant with respect to the veracity of the plaintiff’s estoppel case. 

1. The first defendant submits that taking Mr Palta’s IT excuses at their highest, they only serve to highlight that he was operating on an assumption he had formed and which, importantly, he failed to confirm.  Despite the claimed IT issues, after emailing Mr Jamieson back on 7 June 2024, Mr Palta failed to take the simple step of telephoning Mr Jamieson to let him know that unconditional finance had apparently and eventually been obtained and that it was just a matter of having documents signed.[78]  Indeed, that was my reaction in hearing closing submissions and I raised the very same point with the plaintiff’s counsel.  In any event, and critically, based on a bare assumption that Mr Jamieson had received the documents and nothing more, Mr Palta had ‘thought it’s all good’.[79]  There was an attempt by Mr Palta to suggest that the plaintiff had been incurring interest from some time in May 2024 but, even assuming that to be true, it does not amount to evidence of the first defendant having made any representations.  As the first defendant observes, Mr Palta conceded that he never told Mr Jamieson of the plaintiff allegedly incurring interest with the incoming financier since May.[80] 

   [78]T54.29–55.2.

   [79]T54.31.

   [80]T61.11–16.

1. It should also be observed, as does the first defendant, that the email of 7 June 2024 on which Mr Palta relies, attached documents to Mr Jamieson that were entirely unsigned.[81]  Moreover, Mr Palta did not tell Mr Jamieson when the documents, which he belatedly provided to him on 7 June 2024, were going to be signed, having previously given Mr Jamieson several ‘false starts’; as is indicated by the documents as previously listed and summarised.  It was also pointed out to Mr Palta, in Mr Jamieson’s email, that the first defendant had not received ‘confirm[ation] [that] a refinance of the current loan facility is scheduled to take place’, yet Mr Palta’s response was entirely silent in response to that ‘squarely‑raised’ and, in my view, critical point.  So, as the first defendant observes, it is Mr Palta having made an assumption that by the mere provision of unsigned documents and nothing more on his part, that that was enough for the first defendant not to follow through on its expressly‑stated intention as set out in the critical 23 May 2024 email to sign a contract of sale. 

   [81]T55.6–9.

1. As contended by the first defendant, I am of the opinion that Mr Palta’s assumption that in spite of the contents of the critical 23 May 2024 email the first defendant was representing that it would not sell the Property pending the plaintiff’s refinancing of the loan was entirely unreasonable.  In this respect I think that the first defendant’s submissions on the point are accurate and entirely justified where they summarised the position as follows:[82]

This artefact of many ‘false starts’ deserves emphasis. It highlights how unreasonable it was for the assumption to have been made. The assumption was apparently made by Mr Palta in the context of Global being in persistent default, Global having been “given many opportunities” by Trilogy to refinance,[83] and, as Mr Palta accepted, Global adopting a strategy of “running down the clock, trying to push out repayments for as long as it could”.[84] Trilogy was entitled to take the position of ‘enough is enough’ and look after its own interests.

[82]First Defendant’s Outline of Closing Submissions (18 September 2024), [11]. 

[83]T58.14–16.

[84]T59.15–16.

1. In terms of the estoppel case, the first defendant submits that the evidence therefore confirms that this case is one where not only must the plaintiff establish that the contended positive representations — per the agreed list of issues — arose from silence, and must also establish that these alleged representations were made in the face of the express statement in the critical 23 May 2024 email to the contrary.  In this respect, as submitted, the first defendant contends that the plaintiff has failed to do so.  On the basis of the matters to which reference has been made in the first defendant’s submissions and for the reasons there advanced, together with the findings and assessments which I have made as set out in the preceding reasons, I accept that this is the position.

1. Moving now to questions of reliance, the first defendant submits that even assuming that the representations Mr Palta thought that the first defendant had made had in fact been made, reliance upon them was unreasonable.  This is said to be because Mr Palta should have known better as an experienced businessman and as a director of at least 13 companies which he agreed were involved with property development, all of which took out loans to finance their activities.[85]  Some of these 13 companies, plus others with which he is or was involved but which are not property businesses, are or have been placed into receivership because of loan defaults.[86]  As the first defendant says, Mr Palta can hardly call on equity by relying on naivety as, to the contrary, Mr Palta agreed that he has ‘quite a lot of experience dealing with mortgages and loans’.[87] 

   [85]T67.18–69.25.

   [86]T68.5–18, 69.8–14.

   [87]T69.26–27.

1. Picking up on the evidence of Mr Palta’s experience, he, himself, accepted that the mortgage document which the plaintiff had signed, and its associated memorandum of common provisions (‘MCP’), contained either ‘standard’ provisions,[88] or provisions which if not standard he relied on his lawyers to point out to him.[89]  As to the latter, his evidence was that his lawyers did not point anything to him specifically[90] so the clear inference is that there was nothing exceptional in the mortgage documentation.  Reinforcing the position that Mr Palta clearly understood ‘standard’ mortgage provisions was evidence he had a previous career as a mortgage broker.[91]  As the first defendant observes ‘he is therefore not new to this game’.[92]  Having regard to the evidence of Mr Palta’s understanding of mortgage documentation it is relevant, in my view, to have regard to a number of provisions of the mortgage and loan agreement with respect to the Property which include:

(a)   ‘no waiver’ provisions: see e.g. cl 4.2(a), 4.3(c)–(d) of the MCP, and cl 12.1 of the loan agreement;[93] and

(b)  provisions expressly empowering the first defendant to exercise rights as mortgagee without giving prior notice: see e.g. cls 8.4(b) and 12.4(a) of the MCP. 

[88]T15.11–12.

[89]T17.21–27.

[90]T18.6–16.

[91]T70.30–71.1.

[92]First Defendant’s Outline of Closing Submissions (18 September 2024), [15]. 

[93]Tender Bundle, 19, cl 12.1.

1. Additionally, Ms Sood acknowledged in writing that she had read the MCP,[94] although Mr Palta denied that.[95]  In my view, it matters little in the circumstances as Mr Palta either understood the terms to be ‘standard’ because of his business acumen but nonetheless acted in the way he did or, if he had no subjective appreciation of these provisions, his lawyers ought to have.  As the first defendant contends, neither scenario bodes well for the plaintiff’s case. 

   [94]First Defendant’s cross‑examination bundle (‘XB’), 1.

   [95]T14.21–22.

1. Finally, the first defendant submits that there is a further matter which could be understood through either the prism of detriment or futility with respect to the granting of relief.  Mr Palta’s own evidence was that the plaintiff and its directors and associates are $7,400 ‘short’ in being able to meet the mortgage debt.[96]  I accept that the evidence about the ability to fund this shortfall was vague, which is, to say the least, surprising given the plaintiff’s onus in this proceeding.  Having regard to this position, the first defendant says that the Court should hesitate to maintain the injunction for this reason alone. 

   [96]T82.1.

1. For the preceding reasons, I find that the plaintiff has failed to establish its estoppel case, whether analysed in terms of proprietary estoppel or promissory estoppel.  The evidence does not establish that the claimed representations were made or that, if they were, reliance on the plaintiff’s part was reasonable.  It is, in my view, quite astonishing that Mr Palta, who was no stranger to commercial matters, including property development, financing and mortgages, could rely upon vague assumptions which he himself had made in the course of dealings with the first defendant in the course of the commercial dealings with which this proceeding is concerned.  The first defendant’s position was made quite clear in the critical email of 23 May 2024.  Any subsequent communications between the parties would, in my opinion, only be viewed as something in the nature of a gratuitous indulgence on the part of the first defendant which was by that time clearly requiring payment whereas the plaintiff was, as it has been said, trying to push out payments for as long as it could.  Then, rather astonishingly, the plaintiff is now providing evidence that it would, even with its claimed refinancing, be $7,400 ‘short’. 

Equitable defences to the estoppel claim

Delay/Laches

1. The first defendant submits that in the event that it is found that an estoppel can be established in favour of the plaintiff then the first defendant raises the defence of laches.  In this respect, the first defendant refers to the maxim of equity: ‘Equity assists the diligent, not the tardy’.[97]  More specifically, and in support of this defence, the first defendant submits that regard should be had to the position that Mr Palta’s evidence was that if he knew that the first defendant had ‘given notice as previously foreshadowed that they wanted to proceed with a sale, we would have acted immediately’.[98]  In response, the first defendant’s contention is that the plaintiff was given notice of its intention to proceed with a sale — in fact twice, both on 23 May 2024 and again on 7 June 2024.  Moreover, the evidence is that the first defendant did not countersign the Contract of Sale of the Property until 12 June 2024.[99]  So, the first defendant submits, there was ample opportunity from 23 May 2024, or even from 7 June 2024, for Mr Palta to expedite finance — a matter which he agreed was a simple matter of ‘just picking up the phone to David Tokarev’.[100]  In any event, as the first defendant observes, even if finance could not be expedited, there was ample opportunity to seek this Court’s urgent intervention on the basis that finance was otherwise imminent.  The plaintiff, it is contended, inexplicably failed to do so. 

   [97]Romanous v Saleh [2008] NSWSC 656, [20] (White J); and see PW Young, CE Croft and ML Smith, On Equity (LBC, 2009), 184–186, [3.380]–[3.400].

   [98]Palta Affidavit, [22].

   [99]Tender Bundle, 209.

   [100]T64.20–65.22.

1. The plaintiff, in response, in effect reinforces and maintains its position with respect to the representations which it says grounds its estoppel claim and that, in any event, on the basis of the representations, or the common understanding, between the parties it says was that the first defendant would give the plaintiff sufficient notice before entering into a contract to sell the Property to enable finance to be finalised and the mortgage paid out.  For the preceding reasons, I do not accept this position and, in any event, the evidence is that the plaintiff was going to be ‘short’ on available funds to meet the mortgage payout figure.  Also, the evidence as to the plaintiff’s ability to fund this shortfall was vague to say the least. 

Unclean hands

1. This defence immediately raises another equitable maxim, as described in On Equity as follows:[101]

The rather picturesquely expressed maxim, ‘they who come to equity must come with clean hands’, reflects the origins and discretionary nature of equity, as does the maxim ‘they who seek equity must do equity’. The two maxims complement each other, each looking to the conduct of the plaintiff, and it would appear that the ‘clean hands’ maxim is derived from the other maxim.[102]

[101]P Young, C Croft and M Smith, On Equity, (LBC, 2009), 180–181 [3.20]. 

[102]G Spence, The Equitable Jurisdiction of the Coast of Chancery (Stevens & Norton, London, 1846), 423, cited in FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15 NSWLR 552, 559.

1. The facts relied upon by the first defendant in support of its unclean hands defence fall into three categories, as set out in its submissions:[103]

a. statements by Global to Trilogy about its ability to refinance, which were untrue or proved to be untrue. Some of these are described above as part of the ‘false starts’: see [11]. Others will be developed orally. As Mr Palta said under cross‑examination, the strategy of Global telling Trilogy “dates that you would be able to settle, which didn’t actually come to fruition … [did] bring delay a little bit”;[104]

b. a failure by Global to adhere to its contractual obligation to inform Trilogy of an event of default (cf MCP cl 4.1),[105] namely, that ASIC had begun to take steps to strike off Global’s registration.[106] There was a late attempt by Mr Palta to pay overdue ASIC return fees, literally mid‑court.[107] He initially suggested he knew that the overdue fees was the reason for the strike‑off action,[108] but he later sought to recant this evidence,[109] when it appeared to him that by adhering to his initial answer he was conceding knowledge of the default.[110] He then, unconvincingly, tried to blame his accountants.[111] In any event, this belated payment is not action which constitutes ‘washing’ of unclean hands. ‘Washing’ consists of showing that the “misconduct has ceased, or that the misconduct occurred by accident and will not recur”.[112] It is not possible to cease the default of failing to notify Trilogy of the event of default when it happened (cf MCP cl 12.8), because the time for compliance has long passed. The Court should also reject any suggestion that the default occurred by accident—Mr Palta’s evidence in cross‑examination was unsatisfactory for the reasons stated above, and even in re‑examination Mr Palta did not claim that the failure to notify Trilogy was an oversight;[113]

c. a misstatement to the court,[114] in the form of Mr Palta’s affidavit at paragraph 28, which suggests that he personally could contribute “resources to meet any shortfall” to pay out Trilogy, when the true position is that Mr Palta is the subject of bankruptcy proceedings.[115] Even though Mr Palta’s evidence is that he is contesting the bankruptcy notice, it was not accurate for Mr Palta to suggest at paragraph 28 of his affidavit that he, together with others, had “resources to meet any shortfall”. Mr Palta himself said that the bankruptcy notice was “done on the basis of a judgment”.[116] Notwithstanding that Mr Palta asserts, without more, that the judgment debt was a “scam”[117] (the issue left untouched in re‑examination), “failure to comply with a bankruptcy notice [is] prima facie evidence of insolvency”,[118] and “[n]on‑payment of a judgment debt is … prima facie evidence of insolvency”.[119]

In relation to categories (a) and (b), as set out above, the first defendant says that they were directly about the mortgage and went to its right to exercise its power of sale, and therefore have an ‘immediate and necessary relation to the equity sued for’.[120]  As to the matter set out in category (c), the first defendant says that the fact or facts are a type of ‘depravity’ which is in a category of its own, not requiring any connection with the mortgage and exercise of the first defendant’s power of sale because it is about misleading the Court from which the plaintiff seeks equity in the present proceedings.[121] 

[103]First Defendant’s Outline of Closing Submissions (18 September 2024), [21].

[104]T59.29–30.

[105]XB 11.

[106]XB 75–76.

[107]T93.1–2.

[108]T74.27–30.

[109]T76.21–77.8.

[110]T75.29–76.9.

[111]T76.12–24, 77.15–22.

[112]Klein v Mochkin [2024] VSCA 174, [64] (Kennedy, Walker and Macaulay JJA).

[113]T92.20–25.

[114]See Palta Affidavit, [28].

[115]XB 77.

[116]T83.17–18.

[117]T83.18.

[118]Ozdil v Vrsecky (Trustee) [2016] FCA 881, [15] (Jessup J).

[119]Sayer‑Jones v Juju Bean Investments Pty Ltd [2020] FCA 177, [38] (Bromwich J).

[120][2024] VSCA 174, [67] (Kennedy, Walker and Macaulay JJA).

[121]See IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440, [246].

1. The plaintiff resists the unclean hands defence raised by the first defendant relying, in substance, on the matters and inferences referred to in support of its estoppel claim.[122]  More specifically, in this context, it contends that none of its conduct has prejudiced either the first or the second defendant.[123]  Additionally, the plaintiff says that there was no actual or attempted “trickery” on its part[124] and that all it was doing was seeking to redeem the mortgaged Property, not seeking to taking any advantage from any “wrong” on its part.  However, as indicated in the preceding reasons, the plaintiff failed to act in time or at all to achieve redemption of the mortgage in circumstances where the first defendant gave it every reasonable opportunity to do so.

   [122]See Plaintiff’s Closing Submissions (16 September 2024), [54]–[62].

   [123]See Plaintiff’s Closing Submissions (16 September 2024), [54]–[62].

   [124]Making reference in this respect to Fiona Trust & Holding Corporation v Yuri Privalov [2008] 1748 (Comm) at [19].

1. Having regard to the matters set out in the preceding reasons, it is not necessary to express any final views with respect to this defence because, as I have indicated, the plaintiff’s claim in estoppel is simply not made out.  Rather, I am of the opinion that the matters which the first defendant raises in terms of this defence go to the credibility of the plaintiff’s evidence, and particularly to the credit of Mr Palta.  In my view, these matters tend to confirm views previously expressed with respect to the plaintiff’s, in particular Mr Palta’s, evidence in support of the estoppel claim.  I should, however, stress that the position I have reached in relation to the plaintiff’s evidence and position with respect to the estoppel claim is not based on credit or credibility of its evidence but rather, as I have indicated previously, the content of the evidence in the context of the objective facts and circumstances. 

Sale of the Property

Exercise of the mortgagee’s power of sale

1. The plaintiff contends that the first defendant acted in bad faith and contrary to the requirements of s 77(1) of the Act in exercising its power of sale as mortgagee in selling the Property. In addition to this aspect of the claimed breach of these provisions, the plaintiff claims that it sold the Property at a significant undervalue.

1. In relation to the more general claim that the first defendant breached its duty to act in good faith in exercising its power of sale, the plaintiff relies upon the elements which it says give rise to an estoppel as the basis for such a finding.  I have, however, found, as set out in the preceding reasons, that the plaintiff has not established an estoppel as claimed.  Having regard to this position and my assessment of the evidence relied upon by the plaintiff, and as set out in the preceding reasons, it follows that I do not accept that the first defendant breached its duty of good faith in exercising the power of sale on these bases.  I turn then to the claim that the Property was sold at a significant undervalue. 

1. Fundamentally, the plaintiff relies upon the report of Mr Antonio Falvo[125] as the basis for its claim in this respect.  More particularly, it is submitted that the sales process itself appears to have been a significant cause of the sale at an undervalue.  In this respect, it says that the sale was not made at auction, the marketing process appears to have been unreasonably restricted in its reach and shortness in time,[126] and, of greatest significance it is said, a key feature of the property impacting its value was that it was not properly advertised.[127] 

   [125] Report of Antonio Falvo dated 12 September, 2024; Tender Bundle 575-604.

   [126]Once the ‘revelation’ as to remediating the site was discovered on or around 14 May 2024 only 34 potential buyers were informed and the advertisements were not changed. 

   [127]See Falvo Report, 5 and Gilbert Affidavit, 37.

1. The sales campaign began with physical and online advertising for the sale of the Property, which was a former Caltex petrol station site.  The online advertisement, the plaintiff says, was never altered during the campaign.  Additionally, it is submitted that notwithstanding the availability of plans and an environmental report, neither were advertised or provided to anyone until well over four weeks into the ‘marketing campaign’.  Mr Falvo says the existing permits applying to the Property and the environmental report would add significant value to the Property and should have been advertised.  He said in his evidence that an Information Memorandum would have been appropriate as part of the sales campaign and would include these matters. 

1. Mr Thomas Gilbert principally handled the marketing campaign and sale of the Property.  Mr Gilbert describes himself as a Commercial Sales & Leasing Consultant and is employed by Hudson Bond Real Estate, the selling agents engaged by the first defendant.  The plaintiff describes Mr Gilbert’s evidence about his instructions regarding the sale of the Property as unhelpful.  It is said that he claimed to have provided a document to the first defendant outlining the sale process and relevant matters such as price, but no document has been provided.  He could not say when he knew about the environmental report or the permits and it was not clear that he had either document.  It seems that by at least 13 May 2024, Mr Gilbert had received specific communication of concerns regarding contamination from an individual who was apparently not interested in purchasing the Property.[128]  As the plaintiff observes, it appears that this prompted him to contact the first defendant and to obtain the relevant environmental report.  This was a ‘revelation’ according to Mr Gilbert, which the plaintiff says can only mean that the first defendant had provided relevant details to him.[129] Moreover, the plaintiff says that notwithstanding this ‘revelation’ it did not cause him to consider changing the advertisement of the Property, online or otherwise. It did not cause him to send updated information to his 25,000 strong database. Rather, he merely sent the updated ‘site remediated’ email with attached environmental report to 27 potential buyers. For these reasons, the plaintiff contends that the first defendant, through its agent, failed to maximise the exposure of the Property with all of its salient information. It also says that the Property was not sufficiently advertised to include relevant particulars and special details. On these bases, the plaintiff submits that the Contract of Sale should be set aside, being the fruit of a mortgagee’s sale process in breach of the provisions of the Act.

   [128]Gilbert Affidavit, [12(c)].

   [129]Gilbert Affidavit, [12(d)].

1. The first defendant, on the other hand, rejects the position put by the plaintiff and denies that the Property was sold for an undervalue or otherwise that it exercised its power of sale in breach of the provisions of the Act.

1. Turning to the sale process and the valuation evidence more particularly, the first defendant submits that, like Mr Palta, Mr Falvo was also an unsatisfactory witness.  His answers were, it is said, both argumentative and non‑responsive.  He was unwilling to shift his views when confronted with new facts.  Moreover, and in any event, ‘objectively’, Mr Falvo’s valuation of the Property was done using comparables that are relatively aged, the most recent of them was February 2024 with all others either from 2022 or 2023. In making this point, the first defendant sought to contrast Mr Falvo’s approach to that of Savills Valuations Pty Ltd in the valuation report dated 1 July 2024 prepared for the second defendant, as purchaser of the Property, for mortgage security purposes (‘Savills Report’); a report which produced a valuation for the Property at $1,750,000, which was the price at which the Property was sold under the Contract of Sale. The plaintiff, however, objected to any reliance on the Savills Report on the basis that it was not in evidence; noting that its author had not been called as a witness and hence there had been no opportunity for cross‑examination and the report was a draft in any event.[130]  In response the first defendant confirmed that no reliance was placed on anything in the Savills Report for proof of the truth of the facts asserted.[131]  Continuing, the first defendant says that taking Mr Falvo’s evidence at its highest, and even disregarding the Savills Report’s more recent data points entirely, if, on Mr Falvo’s own evidence, there are no comparables after February 2024,[132] this would highlight that the market has shifted, and likely so in a fundamental way.  Mr Falvo himself accepted that the ‘real estate market can move quickly’.[133] 

   [130]T126.12-127.

   [131]T127.29–130.

   [132]T134.23–135.4.

   [133]T135.29–30.

1. Additionally, attention was drawn to the position that interest rates have increased materially from 2023 to 2024,[134] and as Mr Falvo accepted,[135] have affected the market as a result.  Additionally, Mr Gilbert also gave evidence that the cost of building has substantially increased, also affecting the market.[136]  These two trends are of course well known and I accept that they provide reasons alone to doubt Mr Falvo’s valuation relying as it does, on no comparables after February this year. 

   [134]Something about which it is said that the Court is entitled to take judicial notice; and see also < type="1">

2. An additional issue and matter upon which Mr Falvo and Mr Gilbert initially disagreed is how much value a permit for use and development of a property would add to its value.  Nevertheless, Mr Falvo ultimately did concede that there ‘are some permits which don’t stack up, so they add no value’,[137] though he did cavil with the obvious proposition that the value of such a permit is in the eye of the beholder.[138]  But even on this issue, as the first defendant emphasises, Mr Falvo did ultimately conceded that ‘individual choice’ of a prospective buyer would inform whether, for that buyer, the permit ‘stacks up’, and so ‘a particular buyer might not place much value on a given permit at all’.[139]  In contrast to these views, Mr Gilbert, who is actually in the business of selling commercial real estate, gave clearer evidence that ‘a buyer will have their own plans and permits and disregard any other plans and permits on the property. Often, they think the property price is inflated if you include plans and permits’.[140]  I accept, on the basis of Mr Falvo’s evidence, that he does have some knowledge and experience in relation to the marketing techniques when selling commercial property. However, he is not in the same position as Mr Gilbert who is actually in the business of selling commercial real estate and in the commercial environment in recent years, particularly more recently in relation to the sale of the Property.  Mr Falvo is not in the position, or at least certainly in relevant recent times, of actually being engaged in the business of selling commercial real estate and dealing with current economic conditions and potential buyers directly.  In relation to the question of permits, the evidence of both Mr Falvo and Mr Gilbert is that permits do not necessarily add value, if at all, to a property.  I accept, as submitted by the first defendant, that the cross-examination of Mr Gilbert as to whether the timing of the advertising of the permits had any effect on the overall sales price is therefore futile since both Mr Gilbert and Mr Falvo gave largely consistent evidence in this respect. In any event, Mr Gilbert did specifically draw to the attention of those who had actually expressed interest in purchasing the Property, the existence of permits.[141] 

   [137]T95.21–22.

   [138]T95.23–25.

   [139]T96.5–13.

   [140]T145.17–20.

   [141]Gilbert Affidavit, exhibit TG‑1 pp 12, 17, 22, 23, 26, 30–35.

1. In relation to the possibility of potential residual contamination, Mr Falvo, after what can only be described as long‑winded answers, eventually conceded that the ‘spectre of contamination creates a bit of a stigma to a site that some people might accept and others may not’.[142]  Mr Falvo’s valuation did not account for this.  In any event, in terms of the selling process, it appears from Mr Gilbert’s evidence that raising the ‘spectre of contamination’ initially in advertising material may well have a negative effect on the sale process and the number of potential purchasers who may be attracted.  Nonetheless, as I understand his evidence, the environmental report showing decontamination would be provided to those who had expressed an interest as potential purchasers; but this information ‘up front’ would be likely to have the effect of discouraging potential purchases from expressing interest in the Property at the outset.

   [142]T109.14–16

1. Further, there arose the question whether the Property ought to have been sold by an expression of interest (‘EOI’) process or through the ‘usual’ auction process.  This is a question which Mr Falvo was asked to address in his letter of instructions.  In response, he said that it ‘is no different … In most cases, they probably don’t produce a different price’.[143]  A point was made by the plaintiff in relation to the selling process in the context of its estoppel claims which, in the present context, would go to claims of lack of good faith on the part of the first defendant in exercising its power of sale.  However, in light of this evidence, clearly nothing turns on the sale process adopted in this context; EOI or auction. 

   [143]T137.12–21.

1. In relation to the sale issues, the first defendant in its closings submissions summarises the position as follows:[144]

   [144]First Defendant’s Outline of Closing Submissions (18 September 2024), [31], [32], [34], [35].

31. In the real world, the property was the subject of a diligent sales campaign. As summarised in Trilogy’s written opening, the bar is high for proving an undervalue claim. The duty to act in good faith:

a. contains “no positive obligation on the mortgagee to do everything in its power to obtain the best possible price for the property. Any departure from reasonable standards must be so serious as to be properly characterised as unconscionable”.[145] Thus, “mere negligence or carelessness in carrying out the sale” is insufficient to prove a lack of good faith;[146]

[145]Fuge, [249] (Lee J), referring to Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation [1995] ANZ Conv R 361, 363 (McLelland CJ in Eq).

[146]Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676, 700 (Isaacs J).

b. will only be breached if the mortgagee has engaged in conduct that is fraudulent or would amount to a wilful or reckless sacrificing of those interests”.[147]

[147]Upton v Tasmanian Perpetual Trustees Ltd [2007] FCAFC 57; 158 FCR 118, [22] (Kiefel and Besanko JJ).

32. Even if it is assumed that some things could have been done differently, or even ought to have been done differently,[148] there was no evidence that they would have actually made a difference. The points about permits and contamination are already addressed above. Global’s cross‑examination of Mr Gilbert in relation to contamination was also incoherent: it seemed to simultaneously accept that the property should not have been misrepresented to the public but also suggest that contamination should not have been advertised lest it depress offers. In any event, with the inevitable due diligence, the contamination issue would have eventually been apparent to a buyer through the section 32 statement anyway.

…

34. The evidence does not come close to meeting the relevant thresholds. This was a sale of a tough property in, as Mr Falva himself said, “not a great market”.[149]

35. Trilogy’s agent told Trilogy that the market estimate of selling price was $1.95m‑2.145m.[150] Trilogy had actually attempted to obtain offers at $2.2m,[151] i.e. higher, and around the price Global suggests after the event, being a price which would have fully discharged Global’s debt and left Global with a tidy surplus. No offers at this price point were received. If Trilogy was not to lower the price, what was it supposed to do? By June 2024, Global had been in default for some seven months, and Trilogy was entitled to look after its own interests. A failure to achieve that price hardly bespeaks negligence, let alone a failure to act in good faith. The market is what it was.[152]

Finally, the first defendant observes that as its selling agent was to be remunerated on a basis calculated as a percentage of the sale price[153] the agent was, it is said, financially incentivised, to sell for as high as it could obtain.  True this is, but on the basis of the evidence before the Court, I am, nevertheless, satisfied that the selling agent was diligently taking all reasonable steps to sell the Property for the best price that could then reasonable be obtained.  In this respect, it should also be borne in mind that a selling mortgagee is entitled to sell at a time it chooses in order to realise its security and is not obliged to delay this process on the basis that this may result in a better selling price.[154] 

[148]Cf Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676, 700 (Isaacs J).

[149]T135.11.

[150]Tender Bundle 246.

[151]Gilbert Affidavit, [7]–[11].

[152]Spencer v Commonwealth (1907) 5 CLR 418.

[153]Tender Bundle 246.

[154]See the authorities referred to in C Croft and R Hay, The Mortgagee’s Power of Sale, 4^th ed, LexisNexis Butterworths, 2019, 137–138 [7.6].

1. For the reasons I have indicated in the course of considering the submissions of the parties in relation to the sale of the Property and particularly having regard to the matters relied upon by the first defendant and its submissions in support of its position and the authorities to which reference has been made, I find that there is no basis for the plaintiff’s claim that the first defendant breached its duty in the exercise of its power of sale, as mortgagee, under the provisions of s 77(1) of the Act.

Position of the purchaser

1. At the outset I note that, as previously indicated, the position of the parties is that the second defendant is a bona fide purchaser of the Property for value and without notice.  It is against this agreed position that the position of the second defendant as purchaser of the Property is considered. 

Overview of second defendant’s position

1. The second defendant contends that it is too late for the plaintiff to obtain a declaration that the Contract of Sale is void, or that it is voidable and ought be set aside, or an order permanently restraining settlement of the Contract of Sale.  This is because the uncompleted Contract of Sale is binding and enforceable as between the second defendant and the first defendant, and accordingly, the second defendant has acquired equitable rights in relation to the land, in addition to, or including, the right to an order for specific performance of the Contract of Sale.

1. It is essential to note, the second defendant submits, that in this case the plaintiff has not pleaded any cause of action against the second defendant.  The second defendant assumes that it has been joined as a necessary party, on the basis that the remedies sought against the first defendant would adversely affect the second defendant.  In any event, it is submitted that the plaintiff has failed to establish that it has any entitlement to any remedy against the second defendant.

1. Moreover, it is submitted that the plaintiff has failed to establish that it has any entitlement to any remedy against the first defendant which would deprive the second defendant of the benefit of its Contract of Sale of the Property.  Further to this, the second defendant says that the plaintiff does not dispute that at the time of the sale:

(a)   the plaintiff was in default under the mortgage with the first defendant;

(b)  the first defendant had called up the mortgage by way of a Notice of Default dated 3 November 2023, which was served on about that date and which gave notice that if the amount due of $1,631,181.95 was not paid within 30 days after the Notice was served, the first defendant proposed to exercise its power of sale in respect of the Property;

(c)   the plaintiff was liable to discharge its loan debt to the first defendant, in full;

(d)  the first defendant had taken possession of the Property, which was vacant land; and

(e)   as regards everyone other than the plaintiff, the first defendant was ostensibly entitled to exercise, and was ostensibly exercising, its power of sale.

1. Furthermore, there is no dispute that upon the signing of the Contract of Sale, the second defendant had no knowledge of any alleged estoppel in favour of the plaintiff, preventing the first defendant from exercising its power of sale as mortgagee.

1. Crucially, as the second defendant submits, upon the signing of the Contract of Sale:

(a)   the second defendant became, and remains, a bona fide purchaser for value, of the Property, without notice of any estoppel claim by the plaintiff;

(b)  the first defendant became, in equity, a trustee of the Property for the second defendant; and

(c)   the beneficial ownership of the Property passed to the second defendant, subject to payment of the balance of the purchase price.

Most crucially, upon the beneficial ownership of the Property passing to the second defendant, the plaintiff lost any right it may have had to redeem the Property by paying out the mortgage to the first defendant.[155]

[155]See Saafin Constructions Pty Ltd (in liq) v MAG Financial and Investment Ventures Pty Ltd [2021] VSC 489, [341] (Riordan J); and, above [9].

1. Moreover, as observed by the second defendant, the plaintiff has not pleaded any cause of action against the second defendant.  Accordingly, it is said that there is no legal basis for the plaintiff to obtain any remedy or relief which would deprive the second defendant of the benefit of the Contract of Sale.  In particular, such remedies would include the remedies sought in the Amended Writ, namely a declaration that the Contract of Sale is void or voidable, or ought to be set aside, or an order restraining settlement of the Contract of Sale by the defendants.  In my view this is, for the preceding reasons, the position and so it follows that the plaintiff’s claim for those remedies, whether against the first defendant and/or the second defendant and/or both defendants, should be dismissed.

1. Additionally, the second defendant contends that it will suffer substantial loss and damage in the event that the plaintiff is granted any of the remedies referred to above, as it has already outlaid actual amounts totalling $1,965,000 towards the purchase price, in respect of which it is suffering a loss of use, and has incurred expenses in excess of $130,000 in connection with its purchase, and proposed redevelopment of the Property into a childcare centre.  Were the question of conscience in equity necessary to be considered, then the second defendant relies on those matters.  However, having regard to my findings with respect to the plaintiff’s claim, this issue does not arise with respect to the second defendant; and particularly as it is common ground that it is a bona fide purchaser of the Property for value and without notice of any claims or interests claimed by the plaintiff.

Second defendant’s evidence

1. The evidence on behalf of the second defendant is contained in the affidavit of Mr Jonathon Tavella.  I accept that, as contended, there is no clash or inconsistency between that evidence, and the evidence of any of the witnesses on behalf of the other parties.  Thus, the evidence is uncontradicted, and is reasonable and probable, and in my view is to be accepted.

1. Mr Tavella’s company purchased the Property in good faith, in a genuine purchase transaction, in reliance on the first defendant being a mortgagee in possession.  He intended to purchase the Property to erect a childcare centre, which would be leased out to a childcare centre operator.[156]

   [156]Affidavit of Jonathon Tavella sworn 12 September 2024 (‘Tavella Affidavit’), [5].

1. The narrative as to the events leading up to the purchase, and the current hold‑up, are set out in Mr Tavella’s affidavit.[157]  Essentially, on 20 May 2024 Mr Tavella and his brother found this Property listed online, made an enquiry with the selling agent, and received a copy of the Contract of Sale and vendor statement.  The agent was seeking EOIs.

   [157]Tavella Affidavit, [9]–[15].

1. From 21 May 2024 to 5 June 2024 Mr Tavella and his brother considered the feasibility of the project, and sought advice from external advisers and consultants, and made enquiries of the local planning department.  On 4 June 2024, the second defendant made an offer to purchase at $1.7 million, which was rejected.  On 10 or 11 June 2024 the second defendant transferred $175,000 and made a higher offer of $1,750,000, and on 12 June 2024 the selling agent confirmed that the vendor accepted the second defendant’s offer of $1,750,000.  On 12 June 2024 the Contract of Sale was entered into.  The settlement date under the contract was 2 September 2024.  The evidence is that the second defendant was ready, willing and able to settle the purchase of the Property on 2 September 2024, but was prevented from doing so by an interlocutory injunction made on 30 August 2024.[158]

   [158]See above, [2].

1. In Mr Tavella’s affidavit, he sets out the funds which the second defendant has outlaid in respect of the purchase price, amounting to $1,965,000 (comprising the deposit of $175,000 and funds transferred into the PEXA workspace of $1,790,000).[159]  According to the Statement of Adjustments prepared in anticipation of settlement to take place on 2 September 2024, after adjustments, the balance due to the vendor was $1,682,347.87[160] (which was less than the funds being held in the PEXA workspace).  In Mr Tavella’s affidavit, he also sets out the steps taken by the second defendant subsequent to the entry into the Contract of Sale, to proceed with the development project in relation to constructing a childcare centre, which was to be leased to a childcare centre operator, in respect of which the second defendant has incurred expenses amounting to $130,091.84 as set out.[161]

   [159]Tavella Affidavit, [5]–[7]; and bundle exhibit ‘JT‑1’, 253–254.

   [160]Tavella Affidavit, [5]–[7]; and bundle exhibit ‘JT‑1’, 255.

   [161]Tavella Affidavit, [16]–[23].

1. Further, in Mr Tavella’s affidavit, he says that the purchase of the Property by the second defendant represents a unique investment and profit‑making opportunity, and if a restraint is imposed on the first defendant, the second defendant would lose that opportunity.[162]  He also says that the second defendant would lose the opportunity to receive future revenue and capital profit which it expected to derive from constructing a childcare centre on the Property, and leasing it to a childcare centre operator.[163]

Second defendant has acquired an equitable interest in the Property

[162]Tavella Affidavit, [8].

[163]Tavella Affidavit, [24].

1. The traditional position as set out in Voumard is as follows:[164]

Upon the signing of a valid and specifically enforceable contract for the sale of land the vendor becomes in equity (and so long as the contract is specifically enforceable he continues to be) a trustee of the land for the purchaser, and the beneficial ownership passes to the latter subject to his paying the purchase money.

[164]PN Wikramanayake and James Barber, ‘Voumard: The Sale of Land’ (Thomson Reuters, 6^th ed, 1995), 4-53 [4050] (citations omitted); referring to writing of Mr Louis Voumard QC in the First Edition, 1939.

1. More recently, cases, and commentators, have criticised or rejected the existence of a complete trustee/beneficiary relationship, but have nevertheless recognised the existence of an equitable interest in the land sold, in favour of the purchaser under a Contract of Sale, where equity would grant specific performance.[165]

   [165]P Young, C Croft and M Smith, On Equity, (LBC, 2009) 513–514, at [8.170] and the cases there cited.

1. In The Mortgagee’s Power of Sale[166] the authors say:

However, once a contract has been entered into the mortgagor may only obtain the court’s assistance to restrain completion when the mortgagee did not act in good faith in relation to the sale. In Waring (Lord) v London and Manchester Assurance Co Ltd (at 317) Crossman J said:

After the contract has been entered into, however, it is, in my judgment, perfectly clear that the mortgagee … can be restrained from completing only on the ground that he has not acted in good faith and that the sale is therefore liable to be set aside.

[166]C Croft and R Hay, The Mortgagee’s Power of Sale, (LexisNexis, 4^th ed, 2019), 206; and see Saafin Constructions Pty Ltd (in liq) v MAG Financial and Investment Ventures Pty Ltd [2021] VSC 489, [341].

1. Dealing with the situation where the power of sale has been improperly exercised, the same authors state:[167]

As the mortgagor’s right to set the sale aside is a mere equity it will be defeated by a bona fide purchaser for value of any legal or equitable interest in the mortgaged property who purchases without notice of the irregularity …

That is not, however, the situation in the present case, for the reasons I have indicated.

Remedy sought by the plaintiff

[167]C Croft and R Hay, The Mortgagee’s Power of Sale, (LexisNexis, 4^th ed, 2019), 215, citing Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265, 274–5.

1. The second defendant submits that, on the basis of its evidence, and the legal analysis set out above, the Court should find that in regard to the Contract of Sale, the second defendant is a bona fide purchaser for value, and that either there was no impropriety on the part of the first defendant, or alternatively, if there was, the second defendant had no notice or knowledge of such impropriety.  As indicated previously, it is common ground that the second defendant is a bona fide purchaser for value without notice.  In any event, the evidence in this proceeding supports such a finding.

1. Furthermore, insofar as the plaintiff seeks any equitable remedies, it is submitted by the second defendant that equity would not provide those remedies in circumstances where financial loss and damage would be inflicted on an innocent third party, namely the second defendant. In those circumstances, it is submitted that the Court should dismiss the plaintiff’s claims for orders that the Contract of Sale be set aside, or that settlement of the Contract of Sale be permanently restrained. For the preceding reasons I accept that this is the appropriate course; noting that, in any event, the plaintiff’s claims for equitable relief have failed.

Conclusions and orders

1. As indicated previously, the parties provided a List of Issues which are agreed as matters raised by these proceedings, as follows:[168]

   [168]Where ‘Global’ is in reference to the plaintiff, ‘Trilogy’ to the first defendant; and ‘New Start’ to the second defendant.

List of Issues	Court Findings
1. Did Trilogy’s conduct between 10 May 2024 and 12 June 2024 amount to a representation that:	No, see above [22]–[39].
a. Trilogy would allow Global to refinance and redeem the Property prior to any sale; alternatively
b. Trilogy would give reasonable notice to Global that it intended to execute a contract of sale for the Property.
2. Did Trilogy’s conduct between 10 May 2024 and 12 June 2024 cause Global to reasonably believe that:	Not applicable as Trilogy is found not to have made any representation in the manner set out in Issue 1 above. See above [22]‑[29].
a. Trilogy would allow Global to refinance and redeem the Property prior to any sale; alternatively
b. Trilogy would give reasonable notice to Global that it intended to execute a contract of sale for the Property.
3. Did Trilogy know that Global had relied upon Trilogy’s conduct such that it held the reasonable expectation and assumption that:	Not applicable as Trilogy is found not to have made any representation in the manner set out in Issue 1 above. See above [22]‑[29].
a. Trilogy would allow Global to refinance and redeem the Property prior to any sale; alternatively
b. Trilogy would give reasonable notice to Global that it intended to execute a contract of sale for the Property.
4. Has Trilogy acted contrary to Global’s reasonable expectation and assumption referred to in 3 above?	Not applicable as Trilogy is found not to have made any representation in the manner set out in Issue 1 above. See above [22]‑[29].
5. Has Global suffered detriment as a consequence of the failure by Trilogy to adhere to the representation that:	Not applicable as Trilogy is found not to have made any representation in the manner set out in Issue 1 above. See above [22]‑[29].
a. Trilogy would allow Global to refinance and redeem the Property prior to any sale; alternatively
b. Trilogy would give reasonable notice to Global that it intended to execute a contract of sale for the Property?
6. Is Global entitled to fulfillment of its reasonable expectation or assumption such that the Contract of Sale should be set aside?	Not applicable as Trilogy is found not to have made any representation in the manner set out in Issue 1 above. See above [22]‑[29].
6A. Should relief be refused because of:	Not applicable as Trilogy is found not to have made any representation in the manner set out in Issue 1 above. See above [22]‑[29].
a. the defence of laches;
b. the defence of unclean hands arising from Global’s conduct; or
c. prejudice to New Street?
7. Do the matters in paragraphs 1–5 above amount to a contravention by Trilogy of s 77 of the Transfer of Land Act 1958 (Vic) because Trilogy has failed to act in good faith having regard to the interest of Global?	Not applicable as Trilogy is found not to have made any representation in the manner set out in Issue 1 above. See above [22]‑[29].
8. Was the Property sold at an undervalue such that Trilogy has failed to act in good faith having regard to the interest of Global in contravention of s 77 of the Transfer of Land Act 1958 (Vic)?	No, see above [46]‑[58].
9. If the answer to 8 above is yes, should relief be refused because of:	Not applicable as answer to Issue 8, above, is ‘No’.
a. the defence of laches;
b. the defence of unclean hands arising from Global’s conduct; or
c. prejudice to New Street;
and if not, what is the appropriate remedy for Global?
9A. If Global establishes its alleged estoppel or a contravention by Trilogy of s 77 of the Transfer of Land Act 1958, which of Global and New Street has the better equity?	Not applicable as alleged estoppel not made out, see response to Issue 1, above.
10. Is the second defendant a bona fide purchaser for value without notice of any claim by the plaintiff based on estoppel?	Yes, see above [59]‑[66].
11. Is the plaintiff precluded from permanently restraining the first defendant from completing settlement of the sale to the second defendant by reason that such a restraint would:	Yes, see above, [77]‑[78].
a. destroy the equitable proprietary interest of the second defendant under the contract of sale, and or
b. cause loss and damage to the second defendant?

1. As follows from the findings of the Court with respect to the agreed issues, on the basis of the preceding reasons, the plaintiff’s claims will be dismissed and the orders by way of interlocutory injunction made by Ginnane J on 29 August 2024 will be dissolved.

1. The parties are to bring in orders to give effect to these reasons.

1. I reserve the question of costs and will hear the parties on this issue as required.

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