Hurburgh, Andrew David v Trust Bank

[1998] TASSC 71

71/1998

PARTIES:  HURBURGH, Andrew David
  v
  TRUST BANK

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  844/1998
DELIVERED:  18 June 1998
HEARING DATE/S:  16 June 1998
JUDGMENT OF:  Cox CJ

CATCHWORDS:

Mortgages - Mortgages and charges generally - Remedies of the mortgagee - Sale under power - Mode of exercise of power - Remedies of mortgagor - Injunction to restrain sale - Effect on application for interim injunction of delay, of failure to pay amount owing into court and of evidence of intention to sell to third party considered.

Inglis v Commonwealth Trading Bank of Australia (1971) 126 CLR 161, referred to.
Forsyth v Blundell (1973) 129 CLR 477, applied.
Aust Dig Mortgages [60]

REPRESENTATION:

Counsel:
             Applicant:  In person
             Respondent:  D R Wallace
Solicitors:
             Applicant:  In person
             Respondent:  Wallace Wilkinson & Webster

Judgment category classification:
Court Computer Code:  
Judgment ID Number:  71/1998
Number of pages:  4

Serial No 71/1998
File No 844/1998

ANDREW DAVID HURBURGH and TRUST BANK

REASONS FOR JUDGMENT  COX CJ

18 June 1998

By a writ issued out of the Registry of this Court on 16 June 1998, the applicant commenced an action against the respondent seeking a declaration that the respondent has not acted in good faith and/or has not had any regard to the interests of the applicant in exercising its power of sale as mortgagee by contracting to sell the plaintiff's land known as "Linden" at East Shelly Beach Drive, Orford in Tasmania to Maxwell Robert Rex and Elizabeth Mary Rex and/or a further declaration that the contract of sale of "Linden" to the Rexes does not constitute a sale of "Linden" at the best price and an order that the respondent be restrained from selling and/or transferring "Linden" to the Rexes pursuant to that contract, and further an order that the said sale and/or contract of sale of "Linden" to the Rexes be set aside and an order for damages, costs and other relief as the Court considers appropriate.  At the same time, an interlocutory summons was filed seeking an order that the respondent be restrained from selling, transferring, further encumbering, disposing of or dealing with the property mentioned in the writ (hereinafter called "the land").  An order against the Recorder of Titles restraining him from registering any dealings on the title to the land was sought but not persisted with.  An appointment for the hearing of the interim application was given for 4pm on the afternoon of that day.

In his affidavit in support, the applicant deposes that he is the registered proprietor of the land, that it is subject to a mortgage to the respondent, that the respondent exercised a power of sale due to the applicant's failure to meet monthly payments due under the mortgage, that the respondent obtained an order for possession of the land in November 1997 and that the land was sold to Mr and Mrs Rex by public auction on 16 April 1998.  The affidavit claims the purchase price was $301,000, but on cross-examination the applicant conceded that it was probably $310,000.

Other matters advanced in the affidavit are claims that the property was sold materially at under value, it having been valued by a Mr Timms in May 1996 at $380,000, such valuation being confirmed when the loan was taken up some months later.  There is, therefore, evidence of a difference of $70,000 in the price obtained some eighteen months later.  It is also claimed that the property was inadequately advertised, it being said to be a large beach front property in a popular subdivision at Orford, capable of further subdivision and likely to appeal to interstate buyers.  It is also claimed that too short a time was allowed for advertising (the affidavit does not reveal when it was first advertised) and that it was mis-described, an announcement being allegedly made by the auctioneer to those attending the auction that the land was subject to a public right of way when this is not the case.  There are other allegations to the effect that the auctioneer publicly indicated that the reserve had been reached when bidding passed $285,000 and said, just before the close of bidding, "we are selling ¾ the property is going for a lot, lot less than valuation price".

The applicant also states in par15 of his affidavit:

"I am concerned that the purchaser was told the reserve price before the Auction commenced.  I know Mr Rex and he did not attend the Auction.  Bidding was carried out on his behalf by a lady.  I do not know her name.  I noticed this lady talking to both the Auctioneer and the Real Estate Agent, Mr Paul Yard just before the Auction and I assume that the reserve price had been indicated to both the Auctioneer and to Mr Yard before this time."

In my opinion, the material in this paragraph is incapable of constituting any evidence of collusion on the part of the purchasers who have not been joined in the action.

On 16 April 1998, that is the day of the auction, the applicant entered into a contract for the sale of the whole of the land to a professional colleague, Mr Michael Saltmarsh, for $430,000.  The contract required the purchaser to pay a deposit of $1,000 to the applicant on the signing of the contract and a further $42,000 on confirmation of a condition precedent, namely that the purchaser procure finance in the sum of $340,000 within thirty days of confirmation of a further condition precedent, namely that the purchaser obtain unconditional approval from the local council to subdivide the property into a minimum of three allotments within ninety days of the signing of the contract.  In fact, no deposit was paid.  On the strength of this conditional contract, the purchaser, with the assistance of the applicant, filed a Priority Notice on the title preventing the registration of any other dealing for a period of sixty days, expiring on the day the writ was issued.  A Priority Notice was lodged by the Rexes on 29 April, reserving priority for sixty days for a transfer from the respondent to them.

I have said that the sale to Mr Saltmarsh was for the whole of the land.  The contract was put in evidence and I received confirmation from the applicant that the land described in it was the whole of the land.  However, in his affidavit the applicant claims that "the sale also provided that I could keep part of the subdivided Orford property for myself".  No such provision is in the written agreement and the applicant claimed that this was subject to a private arrangement between him and Mr Saltmarsh.

It has been held that a mortgagor who can show an arguable case that the power of sale has not been properly exercised as, for example, because the price is an under value or in some other way that the sale is improper, may obtain an injunction to restrain the sale, even where there is a binding contract but the sale has not yet been completed (Forsyth v Blundell (1973) 129 CLR 477).

At best, on the evidence so far adduced, the case is borderline in respect of many of the complaints.  It is a notorious fact that the real property market in recent months has been sluggish.  The applicant has produced no evidence of an expert nature as to what the market value of the property was as at April 1998, and all he can show indicative of a sale at under value are the alleged statements of the auctioneer and the difference in the price received from that estimated by Mr Timms in May 1996 and confirmed a few months later by him.  No evidence has been adduced as to the length of public notice given for the auction.  If the claims of mis-description in respect of the right of way are made out, that would make the case stronger; but even assuming that the applicant can be said to have an arguable case, injunctive relief is discretionary and there are powerful reasons why the discretion should not be exercised in the applicant's favour in this case.

_    First, there is the matter of delay.  He has known of the sale to the Rexes since 16 April 1998, having attended the auction.  Equally, he has known of the Saltmarsh Priority Notice lodged that same day which prevented registration of the sale to the Rexes until 16 June 1998.  It was only on that day, when Mr Saltmarsh's Priority Notice ceased to have effect and the Rexes' Priority Notice, which will give them priority until 29 June next can operate, that he commenced the action. 

_    Second, the Rexes are not joined.  They have a clear interest in the outcome and yet have not been given the opportunity to be heard.  While that is not irremediable, giving them such an opportunity will cause further delay. 

_    Third, although the applicant claims to have some private arrangement with Mr Saltmarsh for the ultimate retention by the applicant of portion of the land (the terms of which he has not disclosed), his action in signing the Saltmarsh contract demonstrates an attempt to transfer the whole of the land to Mr Saltmarsh.  In these circumstances, if he does establish his claims to sale at under value or other impropriety, he will have a clear remedy in damages against the respondent which will put him (subject to the undisclosed private arrangement) in no worse position than if the sale to Mr Saltmarsh had been completed. 

_    Last, the applicant's evidence makes it quite clear that he is not in a position to pay into court or to otherwise secure the large amount owing on the mortgage.  His evidence in this respect was as follows:

"QDo you have any money right now with which you could make a substantial payment?

A        I could probably access money in the next 48 hours … yes.

Q        Where would you get that from?
A        Well, people owe me money.

Q        How much could you pay?
A        It would be a few thousand.

Q        Are you able to pay into court the amount owing?
A        Of course not.  No.

Q        How much do you owe the Trust Bank?
A        I believe it to be about $350,000."

In Inglis v Commonwealth Trading Bank of Australia (1971) 126 CLR 161, Walsh J said at 164:

"A general rule has long been established, in relation to applications to restrain the exercise by a mortgagee of powers given by a mortgage and in particular the exercise of a power of sale, that such an injunction will not be granted unless the amount of the mortgage debt, if this be not in dispute, be paid or unless, if the amount be disputed, the amount claimed by the mortgagee be paid into court."

At 165 he added:

"The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed."

He reaffirmed this general or "ordinary" rule in Forsyth v Blundell (supra) at 504 - 505. In that case, Gibbs J, when a member of the Supreme Court of the Australian Capital Territory, gave an interlocutory injunction to restrain the completion of the sale by a mortgagee on condition that the mortgagor bring into court within five days the amount sworn to be due under the mortgage or deposit securities therefor to the satisfaction of the Registrar. The scope and purpose of the rule was examined by Fox J, as judge at first instance, in Forsyth v Blundell (see (1971) 19 FLR 17 at 45, et seq).  As the applicant clearly cannot comply with that rule and there is no reason why it should not be applied, the grant of an interim injunction on such a condition would be an exercise in futility.  It would be unreasonable, in my view, to specify a time within which payment into court should be made which was greater than a few days in the present circumstances.  As in the case of Inglis v Commonwealth Trading Bank (supra) at 164, the applicant here has made no payment to the respondent (since before the order in November 1997 that it have possession of the land) or to pay any sum into court.  There is no suggestion that the mortgage document itself is in any way defective or that the applicant does not owe the respondent a sum in the order of $350,000.  In all the circumstances, I decline to make an order as sought.  The interlocutory application is dismissed.