Harriette & Co Pty Ltd v Platine Property Development Pty Ltd (No 2)

[2022] NSWSC 1611

Supreme Court

New South Wales

Medium Neutral Citation:

Harriette & Co Pty Ltd v Platine Property Development Pty Ltd (No 2) [2022] NSWSC 1611

Hearing dates:

17 and 24 November 2022

Date of orders:

24 November 2022

Decision date:

24 November 2022

Jurisdiction:

Common Law

Before:

Walton J

Decision:

Orders and notations at [49]

Catchwords:

PRACTICE AND PROCEDURE – Interlocutory injunction – interim relief – application to extend interlocutory injunction – prima facie case – balance of convenience – change in circumstances – where earlier proceedings found finance for $6 million likely to be approved imminently – where finance was not approved since the earlier proceedings – where reconsideration of the balance of convenience required

PRACTICE AND PROCEDURE – Interlocutory injunction – interim relief – balance of convenience – change in circumstances – where loan documents provided for $4.9 million – where undertakings for payment into Court made – where assurances made as to friendly caveats

PRACTICE AND PROCEDURE – Interlocutory injunction – principle in Inglis v Commonwealth – exception in Harvey v McWatters – power of judicial sale – whether as of right or discretionary – conflicting authority – not appropriate to decide conflicting lines of authority in expedited hearing for interlocutory relief in Duty List

Legislation Cited:

Conveyancing Act 1919 (NSW), ss 109, 111

Real Property Act 1900 (NSW), ss 57, 58

Uniform Civil Procedure Rules 2005 (NSW), r 41.11

Cases Cited:

Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208

Australia and New Zealand Banking Group Pty Ltd v Donnelly [2012] NSWSC 1615

Bellevarde Constructions Pty Ltd v Cosmas Pty Ltd [2016] NSWSC 406

E & P Developers P/L v D J Capital Solutions Limited [2005] NSWSC 1110

Harriette & Co Pty Ltd v Platine Property Development Pty Ltd [2022] NSWSC 1536

Harvey v McWatters (1948) 49 SR(NSW) 173

Hillston Grove Vineyards Ltd v Lushvale P/L [2000] QSC 1

Inglis v Commonwealth Bank of Australia (1971) 126 CLR 161

Ippin Textiles Pty Ltd v Winau Aust Pty Ltd (2021) 386 ALR 268; [2021] NSWCA 9

Liristis v Bank of Western Australia [2002] NSWSC 1119

Parist Holdings Pty Ltd v Perpetual Nominees Ltd (2006) NSW ConvR 56-161; [2006] NSWSC 599

Solomon-Innes v Carter-Lannstrom [2017] QSC 49

Sood v Christianos [2008] NSWSC 1087

Wenkart v Pantzer (2013) 215 FCR 470; [2013] FCAFC 81

Wilby v St George Bank (2001) 80 SASR 404; [2001] SASC 388

Texts Cited:

Sykes and Walker, The Law of Securities (5th ed, Law Book Co)

Practice Note SC CL 5

Category:

Principal judgment

Parties:

Harriette & Co Pty Ltd (Plaintiff / Cross-Defendant / Respondent)
Platine Property Development Pty Ltd (First Defendant / First Cross-Plaintiff / First Applicant)
Yubo Chen (Second Defendant / Second Cross-Plaintiff / Second Applicant)
Michelle Chen (Third Defendant / Third Cross-Plaintiff / Third Applicant)

Representation:

Counsel:
J Jaffray with N Condylis (Applicants)
M Condon with N Kabilafkas and D Southwood (Respondent)

Solicitors:
McLachlan Thorpe Partners (Applicants)
Juris Cor Legal (Respondent)

File Number(s):

2021/00363506

Judgment

INTRODUCTION

1. By a Notice of Motion filed on 15 November 2022, the defendants and cross-plaintiffs, Platine Property Development Pty Ltd, Yubo Chen and Michelle Chen (“the applicants”), have sought an extension of an interlocutory injunction made by Chen J on 1 November 2022 (“the interlocutory injunction”). In essence, his Honour ordered that the plaintiff and cross-defendant, Harriette & Co Pty Ltd (“the respondent”), be restrained from enforcing or exercising certain rights under a Deed of Settlement dated 5 August 2022 (“the Settlement Deed”) or exercising any power to sell or possess Unit 2, 53 Suttie Road, Bellevue Hill NSW 2023 (“the Bellevue Hill unit”). The interlocutory injunction made by Chen J operated until 5:00pm on 18 November 2022.

2. The Notice of Motion came before me in the Duty List on 17 November 2022. On that day, I made orders listing the applicants’ motion for hearing on 24 November 2022. On 18 November 2022, I made an order extending the interlocutory injunction to 5:00pm on 24 November 2024.

BACKGROUND

3. I respectfully adopt the background to these proceedings as set out by Chen J at [4]-[16] of his Honour’s revised judgment in Harriette & Co Pty Ltd v Platine Property Development Pty Ltd [2022] NSWSC 1536. I am grateful to his Honour because his summary allows me deal with the background to these proceedings in a more succinct way.

4. There was a loan agreement between the respondent and the first applicant on 22 October 2019. It provided that the respondent will loan the first applicant $5 million which was to be repaid on 6 March 2020. The loan was secured by two mortgages. One mortgage was the Bellevue Hill unit (which is referred to as “parcel A” in the Settlement Deed and in Chen J’s judgment). The other was an equitable mortgage over four lots in a strata plan. In addition, the loan was to be secured by a personal guarantee given by the second applicant.

5. The mortgage over the Bellevue Hill unit was executed on 15 November 2019. There was an annexure to that mortgage – known as “ANNEXURE A”. Upon the registration of the mortgage, only the mortgage was registered. Relevantly, ANNEXURE A was not registered.

6. On the repayment date of 6 March 2020, the loan had not been repaid. As Chen J stated, “[i]t seems clear that there was an act of default”.

7. On 22 December 2021, the respondent commenced proceedings in this Court by way of a Statement of Claim. The respondent sought to recover $7,161,654.33, which includes the alleged outstanding principal from the loan agreement as well as interest and court costs. The first applicant was joined for failure to perform the terms of the loan agreement, and the second and third defendants were sued on the guarantees that they had given.

8. On 26 July 2022, an in-principle settlement was reached by the parties. On 5 August 2022, the respondent and the second and third applicants executed the Settlement Deed. The deed relevantly provided that the second and third applicants were to pay the respondent $100,000 by 30 August 2022 and $6,450,000 by 30 September 2022. If they failed to meet these requirements, there would be an act of default and the respondent was entitled to “file the Consent Judgment” without further notice to the applicants. The Consent Judgment was contained in Schedule 2, which entitled the respondent to judgment for the principal sum of $5 million with interest from the repayment date of 6 March 2020 at an interest rate if 24% per annum; leave to issue a writ for possession of the Bellevue Hill unit; an order permitting the sale of the that unit pursuant to ss 57 and 58 of the Real Property Act 1900 (NSW) (“RPA”); and for the payment of the respondent’s costs.

9. On 30 September 2022, the Settlement Deed was varied by agreement of the parties (“Deed of Variation”). The requirement to pay $6,450,000 by 30 September 2022 was changed so that there must be payment of $450,000 by 11 October 2022 and then $6 million by 18 October 2022. In consideration for this variation, the second and third applicants were required to pay $30,000, $10,000 and $60,000 by 30 September 2022, 11 October 2022 and 18 October 2022, respectively. The failure to make these three payments by the stipulated time gave the respondent a right to file the Consent Judgment.

10. As Chen J identifies at [13] and [14] of his Honour’s judgment, it appears that some funds have been paid. It was agreed by the parties before his Honour that $6.06 million was required to be paid by 18 October 2022 but was not.

11. The respondent has considered that this is an act of default. They have sought to enforce rights conferred upon it under the Settlement Deed. The second and third applicants did not contest that there had been an act of default when they were before Chen J. Instead, they argued in a Cross-Summons filed on 24 October 2022 that cl 4.1 of the Settlement Deed, cl 3 of the Deed of Variation and the Consent Judgment are void and otherwise unenforceable because they constitute a penalty. They sought relief against forfeiture and they contend that the respondent is not entitled to exercise the power of sale under ss 57 and 58 of the RPA.

12. The applicants sought interlocutory relief, which was heard by Chen J in the Duty List on 28 October and 1 November 2022.

13. In relation to the submission by the applicants that ANNEXURE A did not form part of the mortgage that was registered, his Honour noted that there was a contention between the parties as to the state of the law about whether regard could be had to an unregistered document such as ANNEXURE A when construing the terms of the mortgage. Reference was made to Ippin Textiles Pty Ltd v Winau Aust Pty Ltd (2021) 386 ALR 268; [2021] NSWCA 9 and a contrary line of authorities. I respectfully agree with his Honour that the issue raises a “contested question of law” and is one that requires “full consideration”.

14. In relation to the submission by the respondent that there was an entitlement to exercise the power of sale under the Conveyancing Act 1919 (NSW) or by judicial sale of property, his Honour noted that notice requirements under the Conveyancing Act had not yet been taken. His Honour also held that there is “a serious question about whether, and if so upon what terms, the plaintiff might be entitled to judicial sale of [the Bellevue Hill unit]” for reasons stated at [34]-[38].

15. In relation to the submission by the applicants about the Cross-Summons, his Honour found that there was a prima facie case and stated at [42]:

I am inclined to accept that there is an arguable case on the issue argued, albeit one that is not without difficulty. In this respect, the issue will turn on what is a contested issue of fact – being whether there was an acknowledgement in the sense discussed. In that situation, the proper approach is to assume the contest will be resolved favourably to the plaintiff: Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729, 733-734; 1st Fleet Pty Ltd v Australian Cooperative Foods Ltd [2006] NSWSC 881 at [5]. That would not be a complete defence, even if it were made out, to the plaintiff’s claim: it would simply operate to reduce it to a degree – said to be in the order of around $1.3 million.

16. In relation to the balance of convenience, his Honour stated that “the balance of convenience clearly and distinctly favours the relief sought by the [applicants]”. In his Honour’s view, granting interlocutory relief “is best calculated to achieve justice”. In summary, his Honour stated that:

1. Any harm or injustice suffered by the respondent “would be modest if the injunction were granted”. But it would “cause serious hardship and injustice” to the second and third applicants to permit the respondent to take possession of the Bellevue Hill unit;

2. Damages would be an adequate remedy for the respondent. The respondent did not submit otherwise;

3. The applicants have offered the usual undertaking as to damages, which favours the grant of relief. Contrary to the respondent’s submissions, this would not be inutile. There was evidence that the applicants were finalising an application for finance in the amount of $6 million;

4. There is a “realistic prospect of the [applicants] obtaining refinance that would enable them, but for a contextually small sum, to discharge their liability to the [respondent] in the amount that was agreed on 18 October 2022 – that is, the amount of $6.06 million”. The evidence of the applicants was that they have been seeking finance from Westpac since 10 August 2022. It was noted that the Bellevue Hill unit has been valued between $6 million to $10 million. His Honour stated:

To be clear, I accept the evidence that finance is likely to be approved, imminently, and in the amount of $6 million.

5. The applicants had only sought interim relief until 18 November 2022, which was 17 days away. Given that “the outcome of the application for finance with Westpac will all but certainly be known before that time, it seems to me that it is in the interests of no party that steps be taken to exercise any power of sale under s 58 of the [RPA]”. It was emphasised that “the order is for a confined period” of 17 days and “[t]he shortness of the period of the order negates…any possible hardship that the [respondent] may suffer”;

6. It was noted that “[t]he availability of finance to discharge a mortgage – or that there is credible evidence that finance will be available – reflects a common circumstances in which a stay (or injunction) to restrain the mortgagee’s power of sale will be ordered”, citing GE Personal Finance Pty Limited v Smith [2006] NSWSC 889 at [9]-[10] (Johnson J) and Practice Note SC CL 6 at [29]; and

7. His Honour was not satisfied that there is any conduct of the applicants that is disentitling.

17. His Honour made the following orders:

(1)    Upon the defendants/cross-plaintiffs’ giving to the Court the usual undertaking as to damages, order that the plaintiff/cross-defendant, by itself, its servants or its agents, is restrained, until 5:00pm 18 November 2022, from:

(a)    enforcing or otherwise exercising any right under clause 4.1 of the Settlement Deed dated 5 August 2022 (Settlement Deed);

(b)    enforcing or otherwise exercising any right under clause 3 of the “Deed of Variation”;

(c)    filing or otherwise taking steps to file the “Consent Judgment” in Schedule 2 of the Settlement Deed (Consent Judgment);

(d)    otherwise seeking or requesting to have the Court make or enter the orders in the Consent Judgment;

(e)    for the avoidance of any doubt, exercising any power of sale with respect to, or taking possession of, the property located at Unit 2, 53 Suttie Road, Bellevue Hill NSW 2023 (folio ID 2/SP93524).

(2)    The Second Defendant through his counsel undertakes to the Court to pay $100,000 into Court by 5:00pm, Friday 4 November 2022.

(3)    All questions of costs are reserved.

(4)    The Court’s orders be entered forthwith.

(5)    The proceedings are listed before the General Registrar in the Common Law Division at 9:00am 3 November 2022 in order to obtain a hearing date and further orders in relation to evidence and related matters.

18. Since the decision of Chen J was delivered, a few developments have occurred.

19. First, pursuant to order (5) of his Honour’s orders, the matter was listed before the Common Law Registrar on 3 November 2022. On that occasion, Registrar Jones stood the matter over to Chambers to enquire as to availability for a 2 day hearing urgently this year. On 8 November 2022, Registrar Jones listed a 2 day hearing of the final relief in the Cross-Summons on 12 December 2022 before Chen J.

20. Secondly, as noted above, the applicants filed a Notice of Motion on 15 November 2022 seeking relevantly that “Order 1 made on 1 November 2022 by Chen J be extended to 5:00pm on 13 December 2022 or such other time as the Court considers appropriate”. On 18 November 2022, I made orders extending order 1 as follows:

1.    Order 1 of the Orders made by Chen J on 1 November 2022 be extended until 5.00pm on Thursday 24 November 2022 upon the giving of the usual undertaking as to damages by the defendants.

2.    The Court orders that these orders be entered forthwith.

21. Thirdly, the Westpac loan has not been forthcoming. Westpac has refused to provide finance. The applicants, however, have sought to obtain a loan from a new financier which I consider below.

RELEVANT PRINCIPLES

22. I respectfully and gratefully adopt the principles for the grant of an interlocutory injunction stated by Chen J at [17]-[20], which was not contested by the parties, as follows:

[17] The power to grant an interlocutory injunction is contained in s 66(4) of the Supreme Court Act 1970 (NSW). That section provides:

The Court may, at any stage of proceedings, on terms, grant an interlocutory injunction in any case in which it appears to the Court to be just or convenient so to do.

[18] Notwithstanding the breadth of the discretion conferred, the courts have developed “organising principles … having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed”: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46 at [19] (‘O’Neill’). These principles are well-established, and there was no debate about them before me.

[19] The granting of interim relief is discretionary, and the Court thus has to exercise its discretion in a manner best calculated to achieve justice between the parties: Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208, 216. That exercise involves consideration of two matters: (i) the nature of the plaintiff’s case (including the apparent strength of that case); and, (ii) the balance of convenience: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618, 622-623; O’Neill at [19]; [65]-]72].

[20] Although it is usual to deal with each question separately, and for the purposes of this judgment I will do so, each bears on the assessment of the other: O’Neill at [71]-[72]; GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser Healthcare (UK) Ltd (2013) 305 ALR 363; [2013] FCAFC 102 at [81(j)] (Bennett, Jagot and Griffiths JJ).

PRIMA FACIE CASE

23. The respondent has, appropriately in my view, indicated that they do not wish to reagitate the issues relating to the existence of a prima facie case that were before Chen J. That concession results in the Court not having to consider, for the purposes of the present application, whether the applicants has established a prima facie case.

BALANCE OF CONVENIENCE

24. The respondent does, however, contest whether the balance of probabilities favours extending the interlocutory injunction. I agree with the respondent that the evidence relating to this question is substantially different than that before Chen J. As I noted above, his Honour had noted that there was an expectation that an application for finance with Westpac would be approved imminently. That has not occurred.

25. Counsel for the respondent submits that “this fact alone is sufficient to dismiss the application for a further extension of time”. I do not agree. The fact that the circumstances or basis of the Court’s earlier consideration on the balance of convenience has changed is not, by itself, a reason to now refuse an extension. Instead, what is required is that the Court re-evaluate the balance of convenience analysis, which I will now undertake. In this respect, it must be remembered that the party seeking the relief has the onus of proving that the balance of convenience, taking into account the requirement to do equity, favours granting the relief. Ultimately, the Court is concerned to do justice

26. I begin with issues of hardship It is clear that the second and third applicants would suffer serious hardship if the respondent was able to take possession of the Bellevue Hill unit, which is their family home. This fact was not contested by the respondent. The fact that the property is a family home, as opposed to some other kind of property, is an appropriate matter to be considered because possession and sale of that property has the potential to cause serious injustice: Liristis v Bank of Western Australia [2002] NSWSC 1119 at [25] (Campbell J) (“Liristis”); Solomon-Innes v Carter-Lannstrom [2017] QSC 49 at [44] (Ann Lyons J). A person’s home is like their castle or fortress. It is unique. As the property in this case involves a family home, damages are not an adequate remedy in lieu of an injunction.

27. Counsel for the respondent did not contest that damages may be an adequate remedy for the respondent. But he raised a concern that the amounts paid into Court and the proposed path of financing in the evidence is either insufficient, unclear or is only in Court (and not in the respondent’s hands).

28. There was previously an indicative loan offer made by Baccus Investments Ltd (“Baccus”) (although referred to as Bleier Mortgage Corporation Pty Ltd in earlier affidavits) of $7 million or 70% of the valuation of the Bellevue Hill unit. The applicant did not accept the offer. The evidence is that the parties have reopened discussions with Baccus with a view to reopening the indicative offer previously made.

24. On 16 November 2022, Mr Jack Rajwan, a financial broker who works at Baccus, sent an indicative loan offer of $4.9 million, which is 70% of the $7 million valuation of the Bellevue Hill unit. On 23 November, Baccus has sent a letter to the legal representatives of the applicants concerning a loan between Baccus and the first applicant. Those loan documents, which were extensive, were annexed in Exhibit YH-3 of the Affidavit of Yue Huang dated 24 November 2022.

25. Although the loan documents were unsigned, I consider that there is a real prospect that funds from the loan of $4.9 million would be forthcoming. The loan would be able to cover a substantial amount of the sum that the respondent argues is due.

26. Counsel for the applicants noted that there are presently “friendly” caveats on the Bellevue Hill unit. Apart from the caveat lodged by Feilong Pty Ltd (“Feilong”) (dealing number AQ578327), I have not been taken to evidence about other caveats although I see in the Affidavit of Yue Huang dated 31 October 2022 that there is a caveat lodged by Shenghua Gu (dealing number AQ10557). Counsel for the applicants has indicated that the friendly caveat by Feilong has been withdrawn. And assured the Court that two other friendly caveats would be withdrawn if judgment is entered for the cross-plaintiff in the Cross-Summons.

27. I also note that the applicants have, as of today, paid approximately $380,000 into Court. They have given an undertaking to pay $800,000 into Court by 5:00pm on 7 December 2022 in the Affidavit of Yue Huang dated 18 November 2022 at [10]. And in Court today, the applicants’ counsel, Ms Jaffray, made a second undertaking to pay $250,000 into Court by 10:00am on 12 December 2022. In total, the amount that would be paid into Court by the commencement of the hearing of the Cross-Claim would be approximately $1.43 million.

28. Counsel for the respondent submitted that the respondent’s rights cannot be protected by money being paid into Court. Mr Condon submitted:

The short point is, when money is paid into Court, it comes into the Court's control. There is no automatic right for someone in my client's position to receive that money. It depends upon why it was paid into Court and it's subject to disputation.

34. I reject this argument. It can simply be answered by reference to r 41.11 of the Uniform Civil Procedure Rules 2005 (NSW), which provide that, subject to the rules, funds in Court may not be paid out of Court except to the party entitled or, with their consent, their solicitor. If the respondent believes they are entitled to the funds, they can follow the requisite procedure under the rules to obtain an order for those funds. The fact that it may be subject to disputation does not deprive any person of their lawful entitlement to the funds under the rules. The fact that funds have been paid into Court demonstrates the willingness of the applicants to place amounts of money into the hands of the Court, rather than retain it themselves. This act is not to be treated as trivial or insignificant gesture. It goes hand-in-hand with the recognition and respect for this Court’s authority to decide the dispute.

35. In the Affidavit of Yue Huang dated 17 November 2022, he states that he believes the second applicant is able to obtain $1 million from “his social network” by 30 November 2022. In the Affidavit of Yue Huang dated 17 November 2022, he states that he believes the second applicant is able to obtain a “further” $500,000, also from “his social network”. There is no evidence as to what this social network is, how he would be able to obtain $1.5 million (assuming the accumulation of the two amounts proferred) from such a network and how he believes that those funds would be raised by the stipulated dates. Counsel for the respondent was right to point out that this evidence should be given little, if any, weight at all. There is difficulty having confidence that these sums can be raised.

36. Notwithstanding my scepticism of the ability of the applicants to raise funds from his social network, I am satisfied that there is a fair prospect of the applicants obtaining funds that would substantially discharge their liability to the respondent for $6.06 million in the amount that was agreed on 18 October 2022.

37. Other considerations that are relevant include the fact that the applicants have undertaken to pay damages, the period of time to the hearing days are not long and the applicants have agreed to “guillotine orders” should it fail to make the undertaken payments to the Court. It is also relevant that if an injunction is not extended, the respondent may be free to take steps to possess and sell the Bellevue Hill unit. This may circumvent the final relief if the applicants/cross-plaintiffs prevailed in the Cross-Summons.

POWER OF SALE

38. I recognise that there is a long-standing principle stated by the High Court in Inglis v Commonwealth Bank of Australia (1971) 126 CLR 161 (“Inglis”) that a mortgagor in default seeking the assistance of a Court of Equity to restrain a mortgagee from exercising a power of sale, over a security must tender or pay into Court the funds owed. The principle is based on the maxim that those who seek equity must do equity. In the case of a transaction involving the loan of moneys it has invariably been held to be incumbent on a borrower seeking relief in equity to tender the amount due together with interest: Wilby v St George Bank (2001) 80 SASR 404; [2001] SASC 388 at 412 [77] (Perry J with whom Doyle CJ and Bleby J agreed). This rule has had long acceptance in Courts of Equity “although it may in some ways be regarded as harsh”: Parist Holdings Pty Ltd v Perpetual Nominees Ltd (2006) NSW ConvR 56-161; [2006] NSWSC 599 at [21] (Hamilton J).

39. However, this rule holds in the “ordinary type of case” described by Sugerman J in Harvey v McWatters (1948) 49 SR(NSW) 173. His Honour stated at 178:

There is a distinction between what I have called the ordinary case and the case in which the existence of the power of sale or the question whether it is exercisable at all is in question. The present case is of the second class. What is called the ordinary rule applies to cases of the first class, and to those cases only. This flows from the principles and reasoning on which that rule depends. Cases of the second class are, as regards interlocutory applications, governed by a rule of a similar type. But it is a rule resting on different principles and reasoning. These permit of a greater flexibility. They do not require that in every case the whole amount claimed or sworn to by the mortgagee or seen from the terms of the instrument to be the greatest amount that could be due should be paid in. The terms may be moulded so as to require payment in of so much only as suffices to give adequate protection to the mortgagee.

40. In Hillston Grove Vineyards Ltd v Lushvale P/L [2000] QSC 1, Chesterman J refused a demand for payment into Court stating at [25]:

If the plaintiff is right it should not yet have to pay the money. If the defendant is right it will be entitled to enforce the security after the trial. In the meantime its position is protected by the payment of interest. To require the plaintiff to pay the money would be to defeat its claim at the outset. It would deprive the proceedings of any utility.

41. In E & P Developers P/L v D J Capital Solutions Limited [2005] NSWSC 1110, Brereton J (as his Honour then was) summarised the exception as follows at [22]:

Sugerman J recognised that different principles apply when the issue is whether the power of sale has arisen at all. The same exception to the general rule was recognised by Powell J in Allfox Building Pty Ltd v Bank of Melbourne Limited (1992) NSW Conv R 55-734, in which his Honour said that if the challenge to the mortgagee sale were based upon the non existence or lack of present availability of the power of sale, either because the alleged breach of covenant relied on by the mortgagee was challenged, or because the occurrence of some other pre-condition, whether statutory or otherwise (which I take to include non service of a s 57(2)(b) notice) to the arising of the power of sale was in issue, then what was invoked was the auxiliary jurisdiction in equity to grant an injunction to prevent interference with one's legal rights, in which case the plaintiff was not to be required, as a condition of obtaining relief, to do equity by bringing into court the mortgage money, or offering to redeem. I accept that this is a case which falls within that exception, but as will be seen, that does not mean that no terms are imposed.

42. Counsel for the respondent submitted that, whilst the respondent’s power of sale as a registered mortgagee under ss 57 and 58 of the RPA are challenged, they have a power of sale as equitable mortgagee that can be enforced pursuant to ss 109 and 111 of the Conveyancing Act 1919 (NSW). Counsel relied on Wenkart v Pantzer (2013) 215 FCR 470; [2013] FCAFC 81 in which Dowsett, McKerracher and Foster JJ stated at 525 [225] that “[t]he making of an order for sale is of right and is not regarded as a matter of discretion (Sykes at p 198)”. The reference was to the work of Professor Sykes and Ms Walker in The Law of Securities (5th ed, Law Book Co).

43. I note that the issue as to whether an equitable mortgagee is entitled, as of right, to an order for judicial sale is by no means clear on the authorities. In this respect, I refer to the canvassing of authorities by Stevenson J in Bellevarde Constructions Pty Ltd v Cosmas Pty Ltd [2016] NSWSC 406 and Garling J in Australia and New Zealand Banking Group Pty Ltd v Donnelly [2012] NSWSC 1615. With respect, the reasoning of Garling J is rather compelling. His Honour stated (with reference to Brereton J’s judgment in Sood v Christianos [2008] NSWSC 1087) at [29]-[30]:

[29]    So, it seems to me that in order to obtain an order for judicial sale, an equitable chargee does not have to demonstrate what, if any, other steps have been taken to enforce the charge. Nor does an equitable chargee have to prove any special or exceptional entitlement to the order. It is sufficient that the equitable chargee can show that the charge exists and is enforceable and that default has occurred. That said, it seems to me that before a Court makes an order for judicial sale, it is and must be entitled to have regard to the position of those who will be affected adversely by the making of the order.

[30]    I find it difficult to accept that a Court would grant an equitable remedy where the remedy itself would become an instrument of injustice. Although an equitable chargee may have an entitlement upon default to seek an order for judicial sale, the Court retains a discretion to determine whether, in all the circumstances, such an order ought to be made. To the extent that ANZ contended that Brereton J's judgment expressed some other principle which had the effect of removing all discretion from the Court as to whether it would make such an order, and that the order would in effect automatically be made in every case, I reject that submission. That is not how I understand the principle to which his Honour refers.

44. In my view, it is not appropriate for the Court, on an expedited hearing for interlocutory relief, to seek to resolve these lines of authority. I repeat the observation of Stevenson J that “it is by no means clear to me that [an equitable chargee] is entitled, as of right, to an order for sale”.

45. It seems to me in these proceedings that the respondent’s power with respect to judicial sale should not be assumed to be automatic. Assuming that there is discretion, there would appear to be discretionary arguments available to the applicants. Overall, I do not believe that the principle in Inglis precludes an extension of the interlocutory relief today.

CONCLUSION

46. It must be remembered that the function of the Court, when asked to grant interlocutory relief, is to take the course that is best calculated to achieve justice between the parties pending resolution of the dispute: Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208. The function of the Court is not to conduct a mini-hearing as to the substantive merits of the claim. In this respect, the consequences to each party that arise from granting or rejecting the relief are important considerations.

47. In the earlier proceedings, Chen J noted that “the balance of convenience clearly and distinctly favours the relief sought by the [applicants]”. Since that time, the changes in events have meant that the balance of convenience, which for now still favours the applicants, are no longer as clear and distinct. The Court expects the parties in this matter to resolve the underlying issues in the Cross-Summons expeditiously.

48. I will make orders extending the interlocutory injunction made by Chen J to the end of the last day of the scheduled hearing. However, that extension will be subject to “guillotine orders” based on two undertakings made by the applicants. A failure to comply with those undertakings will mean that the interlocutory injunction will terminate at the time that the payment is due.

49. For these reasons, the Court makes the following orders and notations:

1. Upon the defendants/cross-plaintiffs’ giving to the Court the usual undertaking as to damages and subject to order (3) below, the Court orders that order (1) made on 1 November 2022 by Chen J (“the interlocutory injunction”) be extended to 5:00pm on 13 December 2022.

2. The Court notes the undertaking of the defendants/cross-plaintiffs to:

1. Pay $800,000 into Court by 5:00pm on 7 December 2022; and

2. Pay $250,000 into Court by 10:00am on 12 December 2022.

3. The Court orders that the interlocutory injunction shall terminate at the stipulated times and dates in order (2) if the defendants/cross-plaintiffs fail to comply with the undertakings as to payments into Court set out in order (2).

4. The Court directs that the defendants/cross-plaintiffs are to file and serve an affidavit by each of the stipulated times and dates in order (2) as to their compliance with the undertakings set out in order (2).

5. Costs of the Notice of Motion filed on 15 November 2022 shall be costs in the cause of the Cross-Summons.

6. Liberty to apply on three days’ notice.

7. Exhibits to remain on the Court file.

8. Orders are to be entered forthwith.

50. A further note should be made about these proceedings. As I have noted above, this matter was listed before me in a very busy Duty List. The matter has involved a total of ten affidavits in evidence. Paragraph [17] of Practice Note SC CL 5 provides that matters will not usually be in the Duty List if they will take more than two hours. It was clear at the start of the listing in the Duty List – and confirmed by the proceedings that followed – that the matter would exceed two hours although some oral argument was able to be truncated because orders were made for written submissions to be provided to the Court.

51. As Campbell J noted in Liristis at [3], “[t]he Court depends, when it is making decisions on how interlocutory hearings will be run, on the estimates of counsel being responsible so that the Court can organise its business properly”. I would consider it appropriate in future proceedings (whether in this matter or not) where urgent injunctive relief requires a hearing longer than two hours and the parties are able to agree on an interim injunctive regime until the hearing that the parties should communicate and inform the Registrar of an accurate estimate of the hearing, available dates of their respective counsel and the terms of the interim injunctive regime so that it can be appropriately programmed: see Practice Note SC CL 5 at [20] and [21].

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Decision last updated: 25 November 2022