Hall v Moutidis

IN THE SUPREME COURT OF VICTORIA	Unrestricted
AT MELBOURNE PRACTICE COURT
No. 7954 of 2009
JOHN MALCOLM HALL	Plaintiff
v
ELIAS MOUTIDIS & ORS	Defendant

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JUDGE:	OSBORN J
WHERE HELD:	Melbourne
DATE OF HEARING:	30 July 2009
DATE OF JUDGMENT:	30 July 2009
CASE MAY BE CITED AS:	Hall v Moutidis & Ors
MEDIUM NEUTRAL CITATION:	[2009] VSC 598

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PROPERTY LAW – Interim injunction preventing sale of property sought to be lifted – material matters not disclosed when interim injunction sought – Sale of property not a sham – No basis for mortgagee to improperly exercise power of sale – Balance of convenience favours discharge of interim injunction.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	No appearance
For the First Defendant	Mr T Maclean	John Curtain & Associates Pty
HIS HONOUR:

On Friday last the plaintiff appeared in person on an ex parte application before me and obtained an interim order restraining the sale by the first named defendant of a residential property in Richmond. That order was expressed to run until 4 pm on 31 July 2009. The application for further injunctive relief was adjourned over until 31 July 2009, but liberty to apply was expressly reserved.
The first defendant now comes before me seeking to have the interim injunction discharged and the liberty I reserved was, of course, intended to facilitate such an application if it were desired to be made.
Notice of the first defendant's application has been given by the defendants' solicitors both to the plaintiff himself and to the solicitor who has acted for him in related proceedings and it is apparent, for reasons I shall come to, has some involvement in this proceeding.
That solicitor, a J Kotsifis, forwarded to the court yesterday, a facsimile letter referring to this proceeding number 7954 of 2009, and requesting that the matter be adjourned for a period of one month to enable it to be finalised. The letter further stated:
There are proceedings in the Supreme Court for an injunction of Friday, 31 July 2009 and pending the outcome of those proceedings, the liquidator will
determine whether he will consent to the matter being withdrawn.
The import of this letter is somewhat difficult to understand, although the context in which it is to be understood will be clarified by the balance of these reasons. Nevertheless, for present purposes it is sufficient to say that I am satisfied both by the affidavit which has been sworn and filed by the first defendant's solicitor, and by the letter to this court of Mr Kotsifis, that the plaintiff is aware of today's application. The plaintiff has not however appeared before me today.
That failure to appear has occurred after service of the material upon which the first defendant relies in his application before me. That documentation can be described as setting out significant detail of background matters to the situation with which I am confronted.
The first defendant's solicitor also deposes that contrary to the express provision of my order last Friday, he was not given immediate notice of such order by the plaintiff. He was first notified of such order by Mr Kotsifis by way of facsimile transmission at 12:22 pm on Monday of this week, that is Monday 27 July, 2009 (I note that the First Defendants solicitor’s offices are close in proximity to this Court).
It follows from this that not only was the order breached, but the first defendant has come before the court expeditiously, and having regard to the complexity of the material he has placed before me, it might be said on the face of it, as expeditiously as reasonably practicable.
Mr Kotsifis is the solicitor on the record for the plaintiff in a 2004 proceeding, number 7706 of 2004, in which the plaintiff in the present proceeding claims moneys due from the parents of the first defendant in this proceeding. The moneys are claimed in part pursuant to a loan agreement and an associated allegation is made that such moneys are secured by a charge granted by the first defendant's mother over the Richmond property. I should add that the first defendant's mother is the registered proprietor of that property.
The first defendant seeks to sell the property as the holder of a mortgage in priority to any such interest as may be asserted by the plaintiff in this proceeding. The sale proposed is to his brother, Chris, and was due for settlement on 24 June 2009. It did not settle because their mother’s trustee in bankruptcy, lodged a caveat asserting an interest in the property under s 58(3) of the Bankruptcy Act 1966.
The first defendant then instituted proceeding 7850 of 2009 seeking removal of that caveat. That proceeding was resolved by consent on the morning of 24 July 2009, and orders were obtained from Associate Justice Daly.
The proceeding had resolved before the application to me was made in the course of the afternoon of that day and the trustee has since executed has withdrawn all of the caveat in any registrable form.
The present application is made on a series of interrelated bases, but it is sufficient for the present purposes to say that the first defendant contends that:
(a)        the plaintiff has not fully and properly disclosed relevant matters to the court in obtaining the interim order;
(b)        the first defendant is entitled to effect the proposed sale in priority to the plaintiff's interest, that the evidence available demonstrates that the proposed sale is not a sham, and that the sale should proceed on the basis to which the trustee in bankruptcy of the registered proprietor has agreed;
(c)         that the balance of convenience favours the sale proceeding.
I accept these contentions.
The facts in issue are complex but it is, I think, sufficient to record the following matters. In the affidavit on the basis on which the plaintiff obtained interim relief, he referred to his 2004 claim. The plaintiff did not, however, indicate the defences raised to that claim, including contentions that the amount he claims is not secured by the loan document on which he relies, that in truth his claim is one for damages, and the further contention that the registered proprietor is entitled to avoid the alleged charge on the property for equitable reasons relating to the circumstances in which the loan document was executed by her.
Documents filed in that proceeding demonstrate to my mind that the first contention I have referred to is, on its face, seriously arguable.
Next, the plaintiff's affidavit in this proceeding asserts by para 12, that the 2004 action has been stayed by virtue of s 58(3) of the Bankruptcy Act. Counsel for the first defendant has referred me to a report by the trustee to the bankruptcy creditors dated 4 June 2009. Under the heading, "Legal proceedings", this states;
Mr Malcolm Hall (a secured creditor) has initiated proceedings against Mr Elias Moutidis (the bankrupt spouse) and Sophie Moutidis (Supreme Court Proceedings No. 7706 of 2004). Mr Hall's claim relates to moneys advanced to rectify building works and subsequent costs and liquidated damages not exceeding $1,200,000. The bankrupt has allegedly provided the 2 Bellevue Street, Richmond property as security for this debt. Mr Hall is seeking court orders which would allow the sale of the Bellevue Street property enabling him to realise his security interest in this property.
An “in principle” agreement has been reached with Mr Hall for my consent in allowing for the continuation of the proceeding.
The terms of this agreement are summarised as:
1. Mr Hall is to pay $5000 to the bankrupt's estate on execution of the agreement.
2. Any funds recovered from the proceeding or in realisation of the Bellevue Street property, after firstly paying the debts of any higher rank of interests will be applied as:

a.

legal costs and the trustee's fees and expenses arising from the proceedings; then

b.

an amount limited to $80,000 to be divided equally between the estate and Mr Hall; then
c. Mr Hall to the limit of his claim.

The directions hearing in relation to this matter has been adjourned to 17 June
2009.

It can be seen that contrary to the plaintiff's affidavit in this proceeding, the trustee had agreed to the continuation of the proceeding on terms. Reference to the court file indicates that the 2004 proceeding last came before the court for directions on 29 July 2009 and no directions were made because no parties appeared before the Associate Justice.
I come then to point 3 in respect of the basis of my conclusions.
The basis of the resolution of the proceeding before Associate Justice Daly on 24 July 2009 reflects acceptance by the trustee that the first defendant will pay into court any net surplus available after sale by him of the property and it does not appear to me to be inconsistent with the 'in principle' agreement to which the trustee refers in his report but to which Mr Hall did not refer when he came before me and relied on an affidavit to the effect that the proceeding he had instituted had been stayed by the trustee.
The plaintiff further referred me to the first defendant's affidavit of 20 July 2009 sworn in the caveat proceeding which adverts to a number of relevant matters;
(a)        that affidavit demonstrates the first defendant took a valid assignment of mortgage for value and holds a prior equity to any the plaintiff may assert;
(b)        that affidavit refers to two independent valuations of the property and not simply to a single valuation to which the plaintiff refers in his affidavit. It exhibits those valuations which upon perusal fully describe the property and on their face comprise independent property valuations made by valuers having appropriate qualifications and expertise (see Exhibits 9 and 10 to the affidavit in issue);
(c)         the first defendant's affidavit sets out the basis of sale as follows:
I arranged for two valuations to be obtained over the property, one from On Line Valuations dated 11 December 2008 and one from John D Sier and Associates dated 29 January 2009. The On Line Valuation valued the property in the sum of $575,000 and the John D Sier valuation valued the property in the sum of $590,000. Both valuations emphasized that the value of the property is essentially land value with the building being of such poor condition that it added little value to the property.
…
In March 2009 I signed a contract of sale to sell the property to Bellview for the sum of $590,000. I did so because Bellview was already the owner of such equity as existed in respect of the property pursuant to the unregistered transfer obtained from the sheriff. I also had regard to the interests of the mortgagor who is my mother and is in poor mental health. My mother requires constant medication for her psychiatric condition. I've been informed by my brother, Kris Moutidis, that he intends to allow the mortgagor and my father to remain on the premises after the sale of the property to him is completed, now produced and shown to me and marked with letters KM11 is a true copy of the contract of sale.
In my view the plaintiff's affidavit in this proceeding did not fully and fairly set out the circumstances of sale as the first defendant had deposed to them in other proceedings in this court in circumstances where the plaintiff himself relied on the affidavit in issue for other purposes;
(d)        the first defendant's affidavit further particularises the basis of the balance of the claim made under the mortgage including sums of $24,600 due in council rates. That calculation explains a figure presented in the plaintiff's affidavit as suspiciously inflated. It is true that the plaintiff's affidavit refers to the City of Yarra as being owed rates exceeding $23,000 but in my opinion, once again the plaintiff has failed to disclose the detailed evidence of the first defendant in relation to this question which it is plain was available to him;
(e)        the first named defendant's affidavit of 20 July 2009 shows these calculations were supplied to the trustee in bankruptcy and were so supplied before he consented to the withdrawal of the caveat.
I turn then for completeness to the question of the balance of convenience. I am satisfied that the first defendant will suffer significant consequential losses if the injunction is continued. The extent of that loss is now fully evidenced before me.
Putting these matters together, I am satisfied first that the material which the plaintiff placed before me in order to obtain inter alia relief, did not disclose facts relevant to a proper assessment of the situation.
Secondly, I am satisfied that the first defendant has given a credible answer to the plaintiff's allegation that the proposed sale is a sham.
Thirdly, I am satisfied that there is no basis on the material before me to conclude that the first defendant will exercise his mortgagee's power of sale improperly.
Fourthly, I am satisfied that the balance of convenience favours discharge of the injunction having regard to the weakness of the plaintiff's case on the one hand, and the significant loss which will flow to the first defendant on the other if the injunction is continued.
I am prepared to order:

1 The ex parte injunction granted by me on 24 July 2009 is discharged.
2 There is no order as to the costs reserved on 24 July 2009.
3 The plaintiff pay the costs of incidental to the first defendant's summons and of today.
4 The issue of whether the first defendant has suffered any loss and damage which is to be paid in accordance with the undertaking as to damages given by him to the court on 24 July 2009 is referred to the Listing Master for directions.
5 I direct that this order be prepared by the first defendant's solicitors and be signed by the judge in accordance with rule 60.04 of the rules of court.

I am also prepared to make an order for indemnity costs. I have held that it is plain the plaintiff failed to disclose matters to me which he should have disclosed and he has failed to come before the court today when he has been advised of the basis of the application that has been made by the first defendant.

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[2009] VSC 598

30 July 2009