Latrobe Capital and Mortgage Corporation Ltd v Mt Eliza Mews Pty Ltd
[2001] VSC 464
•6 December 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 7940 of 2001
| LATROBE CAPITAL AND MORTGAGE CORPORATION LTD. AND ANOTHER | Plaintiffs |
| v. | |
| MT. ELIZA MEWS PTY. LTD. AND ANOTHER | Defendants |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 21 NOVEMBER 2001 | |
DATE OF JUDGMENT: | 6 DECEMBER 2001 | |
CASE MAY BE CITED AS: | LATROBE CAPITAL & MORTGAGE CORPORATION LTD. & ANOR. v. MT. ELIZA MEWS PTY. LTD. & ANOR. | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 464 | |
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CATCHWORDS: Mortgagor – Mortgagee – Power of sale of mortgagee – Claim by mortgagor to have set-off for damages – Default of mortgagor not caused by fault of mortgagee – Mortgagee should not be restrained from exercising power of sale.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr. R. Moore | Phillip Bing & Associates |
| For the Defendants | Mr. A. Schlict | Robert Daniels & Associates |
HIS HONOUR:
The second defendant Geoffrey David Harrison is the proprietor of the first defendant Mt. Eliza Mews Pty. Ltd. As I understand it, Harrison is a builder by occupation.
Mt. Eliza Mews is now the registered proprietor of land at 109 Canadian Bay Road, Mt. Eliza being the land in Certificate of Title Volume 8820 Folio 275. It is also now the registered proprietor of land at 468 Main Creek Road, Main Ridge being the land in Certificate of Title Volume 10474 Folio 313.
In November 1998 Anderson on behalf of Mt. Eliza Mews sought finance from Universal Mortgage Investments Pty. Ltd. to purchase the Canadian Bay Road land and to build a 16 unit development on it.
By letter of offer dated 20 November 1998 the first plaintiff LaTrobe Capital and Mortgage Corporation (LaTrobe) on behalf of Universal offered the defendants a loan of $1,300,000 for a year to enable the first defendant to purchase the Canadian Bay land and to construct the first five units on the land.
On 3 December 1998 the defendants accepted the offer (the initial loan).
The term of the initial loan expired on 9 February 2000. However, on or about 8 May 2000 LaTrobe "rolled over" the loan.
At some stage the Canadian Bay Road land was sub-divided into 16 lots. LaTrobe holds registered mortgage W769522R over lots 1 to 6 inclusive and lot 14 to secure repayment of the loan. The initial loan is recorded by LaTrobe as Loan No. 271/028.
By a further registered mortgage dated 12 September 2000 and numbered X087071Y, Mount Eliza Mews mortgaged lots 7, 10, 11 and 12 on the Canadian Bay Road to secure repayment of a further advance of $945,000 made to it by LaTrobe (the second loan).
The second loan is recorded by LaTrobe as Loan No. 210/147.
On or about 18 December 2000 Mount Eliza Mews mortgaged the whole of the Canadian Bay Road land to secure a further advance of $200,000 from LaTrobe (the third loan). That mortgage has not been registered.
The third loan is recorded by LaTrobe as No. 210/147.
On 11 May 2001 LaTrobe advanced a further sum of $450,000 to Mount Eliza Mews (the fourth loan).
The fourth loan is secured by registered mortgage No. X511701Q over the Main Ridge land to LaTrobe (recorded by LaTrobe as Loan No. 194/375) and registered second mortgage No. X511702M over the Main Ridge land to the second plaintiff Bendigo Bank Ltd. (Bendigo) (recorded by Bendigo as Loan No. 210/15300).
Since May 2001 Mount Eliza Mews has been and continues to be in arrears under the three loans made to it which are secured by mortgages to LaTrobe over the Canadian Bay Road land.
Since June 2001 Mount Eliza Mews has been and continues to be in arrears under the fourth loan made to it secured by mortgages over the Main Ridge land to LaTrobe and Bendigo.
Notices to Pay in respect of each mortgage as required by s.76 of the Transfer of Land Act 1958 were served on Mt. Eliza Mews on or about 14 August 2001. Mt. Eliza Mews has not complied with any of such notices.
Thereafter there were fruitless discussions between the solicitors for the parties with a view to resolving the matter without the plaintiffs exercising their rights under the mortgages, taking possession of the properties and in due course effecting sales of such as them as would be necessary to pay out the various loans.
On 17 September 2001 the plaintiffs' agent attended at the Canadian Bay Road land with a view to erecting "For Sale" signs on the allotments mortgaged to LaTrobe. Following an altercation with the second named defendant Harrison the agent left.
I do not propose to detail in my reasons for judgment the steps taken on behalf of the plaintiffs thereafter to take possession of the properties and effect a sale of them, or the steps taken by the second named defendant to thwart the plaintiffs in that regard.
Suffice it to say that by 12 October 2001 the situation had become such as to cause the plaintiffs to file an originating motion and summons in the Court whereby they seek (inter alia) the following relief:
"3.A declaration that the First Plaintiff has possession of the land situated and known as Lots 1, 2, 3, 4, 5, 6, 7, 10, 11, 12 and 14, 109 Canadian Bay Road, Mt. Eliza more particularly described in Certificates of Title Volume 10537 Folios 448, 449, 450, 451, 452, 453, 454, 457, 458, 459, 461 ('the Canadian Bay Road land').
4.A declaration that the First and Second Plaintiffs are in possession of the land situated and known as 468 Main Creek Road, Main Ridge more particularly described in Certificate of Title Volume 10474 Folio 313 ('the Main Ridge land').
5.An injunction, both interlocutory and permanent, restraining the Defendants, their servants, agents and employees from howsoever trespassing on the Canadian Bay Road land and the Main Ridge land.
6.An injunction, both interlocutory and permanent, restraining the Defendants, their servants, agents and employees from interfering and/or hindering in whatsoever manner with the Plaintiffs powers of sale of the Canadian Bay Road land and the Main Ridge land."
Before saying something of the arguments advanced on behalf of the defendants in opposition to the plaintiffs' application, I propose to deal first with the contention of the defendants' counsel that in bringing their proceeding by way of originating motion the plaintiffs have adopted the incorrect procedure and should not be permitted to pursue the originating motion.
Rather, so it is said, the plaintiffs should be required to deliver a statement of claim, the proceeding continue as if brought by writ, and the plaintiffs be required to take the usual interlocutory steps in the matter, ultimately concluding with a hearing in the Causes List.
Whilst from my personal point of view as the Judge sitting in the Practice Court, the argument advanced had a certain attraction about it, for the reasons which follow I declined to adopt it.
1. The action has a degree of urgency about it. Mt. Eliza Mews has made no re-payments in respect of the first three loans since May 2001 and none in respect of the fourth loan since June 2001.
Not only is it clear from the evidence that it will probably be unable to make any repayments in respect of the loans in the foreseeable future, it is equally clear that it is in no financial position now to complete the construction of the 16 units on the Canadian Bay Road land.
2. Counsel who appeared for the defendants before Master Wheeler on 17 October 2001, consented to the plaintiffs being authorised to commence the proceeding by originating motion. There is no reason why the defendants should now be permitted to resile from that position.
3. There is nothing in the nature of the dispute between the parties which cannot be fully ventilated by affidavit. Nor in the circumstances of the case is it necessary to have the deponents to the various affidavits called for cross-examination. Indeed counsel for the defendants did never suggest that it was.
4. It is commonplace for resolution of disputes between mortgagor and mortgagee to be initiated by the filing of an originating motion. There is nothing in the present case to take it out of that category.
I turn then to a consideration of the matters relied upon by the defendants in opposition to the plaintiffs' claim.
Basically the defendants case comes down to this.
The plaintiff LaTrobe has withheld portion of the loan moneys agreed to be advanced to Mount Eliza Mews. If it had advanced the moneys at the times requested by Mount Eliza Mews, Mount Eliza Mews would have been able to comply with its obligations under the loan agreements and the mortgages.
The point to be made about that contention is that the loan facility granted by LaTrobe to Mount Eliza Mews is a rolling facility. Apart from the first loan which was to be used for the purchase of the Canadian Bay Road land and the construction of the first five units on the land, the loans made by LaTrobe were for the purpose of constructing all 16 units on the land.
The basis upon which the loans were made was that after each unit was fully completed sufficient funds would be held back by LaTrobe for the continued construction of each unit thereafter. In other words it was always the agreement of the parties that the facility would be used on a progressive basis. That much is clear from the correspondence which passed between them and what occurred in fact, after Mt. Eliza Mews purchased the Canadian Bay Road land.
Under that agreement, as at 21 May 2001, there was a maximum of $8,889.81 which could be released to Mt. Eliza Mews. However, at that time the arrears owed by Mt. Eliza Mews under the first three loans was $28,682.21. Not surprisingly LaTrobe was not prepared to advance further funds to Mt. Eliza Mews at that time.
The material before the Court indicates that the problems being experienced by Mt. Eliza Mews at that time were being caused by the delay in completion of certain units coupled with an increase in their cost of construction beyond that which had been anticipated.
As a consequence of the delay in completion of construction there was a delay in the sale of the units and moneys were not coming in, in respect of the sale of the units in sufficient time to enable Mt. Eliza Mews to fulfil its financial obligations under the facility.
In my opinion sole responsibility for such problems must rest at the feet of Mt. Eliza Mews and Harrison.
It has long been established that as a general rule an injunction will not be granted restraining a mortgagee from exercising powers conferred by a mortgage, and in particular a power of sale unless the amount of the mortgage debt, if that is not in dispute, is paid or unless, if the amount is disputed, the amount claimed by the mortgagee is paid into court; and that the rule will not be departed from merely because the mortgagor claims to be entitled to set off an amount of damages claimed against the mortgagee. See Inglis & Another v. Commonwealth Trading Bank of Australia[1] and Cunningham and Others v. National Australia Bank Limited[2].
[1](1971-1972) 126 C.L.R. 161
[2](1987) 15 F.C.R. 495
Indeed in the present case clause 73 of the Memorandum of Common Provisions to the first mortgage provides that the mortgagor must pay all moneys it owes to the mortgagee in full and that the mortgagor must not deduct from any payment any amount it claims the mortgagee owes to the mortgagor.
Of course it may well be a different situation if it could be demonstrated that Mt. Eliza Mews' default under the mortgage had been caused by the actions of the plaintiffs. But as I have already stated, in my opinion the evidence before the Court does not establish that that is the situation.
In the final analysis therefore I am of the opinion that the plaintiffs are lawfully in possession of both the Canadian Bay Road land and the Main Creek Road land and are entitled to exercise their powers of sale in respect of those properties. I make the following orders in the proceeding:
1. I declare that the first plaintiff has possession of the land situated and known as Lots 1, 2, 3, 4, 5, 6, 7, 10, 11, 12 and 14, 109 Canadian Bay Road, Mt. Eliza being the land more particularly described in Certificates of Title Volume 10537 Folios 448, 449, 450, 451, 452, 453, 454, 457, 458, 459 and 461 (the Canadian Bay Road land).
2. I declare that the first and second plaintiffs have possession of the land situated and known as 468 Main Creek Road, Main Ridge being the land more particularly described in Certificate of Title 10474 Folio 313 (the Main Ridge land).
3. I order that the defendants, their servants, agents and employees be restrained from trespassing on the Canadian Bay Road land and the Main Ridge land.
4. I order that the defendants their servants, agents and employees be restrained from interfering (and/or hindering in whatsoever manner) with the plaintiffs' powers of sale of the Canadian Bay Road land and the Main Ridge land.
5. I order that the defendants pay the plaintiffs' costs of the proceeding including any reserved costs.
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