Leitch, D.H. v Natwest Australia Bank Ltd
[1995] FCA 104
•9 MARCH 1995
CATCHWORDS
INTERLOCUTORY INJUNCTION - decision in action reserved following hearing - application for injunction to prevent sale of property - whether a claim for relief which affects the exercise of the bank's rights as a mortgagee to be determined by trial Judge - deterioration in value of property - applicant unable to provide security to safeguard bank's position.
MORTGAGEE SALE - sale by private treaty instead of auction, current valuations obtained
Trade Practices Act - ss 52,80,87
Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 Refd
Harvey v McWatters (1949) 49 SR(NSW) 173 Cons
Mainbanner Pty Ltd v Lubke & Ors (unreported decision 8.3.88 Pincus J) Refd
Town & Country Sports Resort (Holdings) Pty Ltd & Ors v Partnership Pacific Limited (1988) FCR 540 Refd
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Refd
Louth v Diprose (1992) 175 CLR 621 Refd
David Henry Leitch and Ors v Natwest Australia Bank Limited and Ors
No QG174 of 1991
Kiefel J Brisbane 9 March 1995
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. QG174 of 1991
BETWEEN:
DAVID HENRY LEITCH
First Applicant
AND:
ALMA MARGARET LEITCH
Second Applicant
AND:
GARY DAVID LEITCH
Third Applicant
AND:
GUDE PTY LIMITED (RECEIVER AND MANAGER APPOINTED)
Fourth Applicant
AND:
GLEN PACIFIC PTY LIMITED (RECEIVER AND MANAGER APPOINTED (IN LIQUIDATION)
Fifth Applicant
AND:
GLANDORE PTY LIMITED (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION)
Sixth Applicant
AND:
NATWEST AUSTRALIA BANK LIMITED
First Respondent
AND:
PETER MURRAY WALKER
Second Respondent
AND:
GLANDORE PTY LIMITED (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION)
Third Respondent
JUDGE MAKING ORDER: Kiefel J.
DATE OF ORDER: 9 March 1995
WHERE MADE: Brisbane
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The application for an injunction be dismissed.
The fourth applicant pay the first and second respondents' costs of and incidental to the application to be taxed.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. QG174 of 1991
BETWEEN:
DAVID HENRY LEITCH
First Applicant
AND:
ALMA MARGARET LEITCH
Second Applicant
AND:
GARY DAVID LEITCH
Third Applicant
AND:
GUDE PTY LIMITED (RECEIVER AND MANAGER APPOINTED)
Fourth Applicant
AND:
GLEN PACIFIC PTY LIMITED (RECEIVER AND MANAGER APPOINTED (IN LIQUIDATION)
Fifth Applicant
AND:
GLANDORE PTY LIMITED (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION)
Sixth Applicant
AND:
NATWEST AUSTRALIA BANK LIMITED
First Respondent
AND:
PETER MURRAY WALKER
Second Respondent
AND:
GLANDORE PTY LIMITED (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION)
Third Respondent
CORAM:Kiefel J.
DATE:9 March 1995
PLACE:Brisbane
REASONS FOR JUDGMENT
The fourth applicant (Gude Pty. Limited (Receiver and Manager Appointed)), seeks an injunction restraining the first and second respondents (Natwest Australia Bank Limited and its Receiver) from selling a property known as "Biram Stud". The injunction is sought pending a decision in the action which is reserved following an extensive hearing conducted over two periods in 1993 and in late 1994. The action involved claims by the remaining applicants (the second, fourth, fifth and sixth applicants) for loss they suffered as a result of the actions of the bank and said to amount to about $14M. The bank cross-claimed for monies due by various applicants and which total some $22M.
The bank has, during the course of the proceedings, sold other property and equipment (although not of this applicant). The material shows that it made known its intention to sell this property, the subject of a mortgage and guarantee executed by the fourth applicant in 1989, and that it consistently declined to give undertakings not to do so. The matter was not however raised by the applicant before His Honour at the conclusion of the proceedings or at any earlier time but I do not consider that in the circumstances this would disentitle the applicant, were a case for relief otherwise made out. I should add that the material discloses that there is nothing in the timing of the proposed sale which would suggest that the respondents are acting other than bona fide, given the course of negotiations with the particular purchaser and the evidence as to the deterioration of the property.
The basis for the injunction is of course to preserve the stud property until judgment. The first enquiry, as to whether there is a serious question, in these circumstances requires, at the least, that there was before His Honour at the conclusion of the proceedings, a claim for relief which affects the exercise of the bank's rights as a mortgagee. Strangely, in a case where it was pleaded that the bank had been guilty of unconscionable conduct in the taking of the mortgage and guarantee in question, there remains a doubt about this.
It is alleged in the statement of claim that, in the background of a dispute as to whether damage had been occasioned to the fourth applicant in the reconversion of a loan taken in foreign currency, a compromise was reached with the bank the terms of which included the release of the fourth respondent's existing securities to the bank. It is then alleged that the bank failed to honour that agreement and as a result the corporate applicants (and I apprehend some other entities) were unable to use their securities and to organise their affairs in ways they otherwise would have. The bank, it is alleged, at all times knew that the applicants functioned as a "group". The relief then sought at the conclusion of the hearing, it was confirmed to me in submissions, was an amount which represented the difference between what the "group" would have been worth if the bank had fulfilled its obligations and the group's value at trial ("global nett worth") following an analysis undertaken by an accountant. No other evidence was led as to the damage flowing from particular conduct. The result of the analysis showed the "group" would have had a "net worth" of $1.3M at date of trial, that is to say, on the basis that all assets were realised. The difficulties in such an approach to the question of damage, whether such damage flows from particular breaches of contract or conduct contravening s.52 Trade Practices Act and whether it can be converted to such claims to permit a set-off, are not matters I am concerned with. For my purposes it was confirmed that no orders setting aside the mortgage and guarantee were sought. In the case of the relief sought pursuant to s.87, which had been claimed in the original application, this was apparently disavowed during submissions. No equitable relief was sought in the application, but that is the basis upon which the injunction is now sought.
The statement of claim did contain an allegation that the bank acted unconscionably (and in breach of agreement) in requiring the fourth applicant to later execute the securities when, stating the matter shortly, the applicants financial position gave it no choice but to do so. But, as I have said, it seems that remedies for particular conduct to individual applicants were simply not further pursued. With respect to the mortgage and guarantee in question, there is an assertion in the applicants' written submissions placed before His Honour that they are liable to be set aside but in circumstances where no such relief was sought from the Court at the conclusions of submissions. I am now asked to conclude that the question remains one to be determined by His Honour. How that conclusion is to be arrived at was not however made apparent to me. Questions of procedural fairness or the elections made by parties aside, it might be thought possible that such relief could be granted at least in the sense that it is not inconsistent with a claim for damages. However, as I have said, the claim as made presupposes the sale of all assets although the solicitor appearing for the applicants was unable to explain how the trial Judge was, by orders made, to reach this result. Having regard to the conduct of the case as explained to me I consider there is a real doubt that there is presently such a question for His Honour's determination, (there being no issue that it would otherwise remain open to be litigated).
There are in any event other difficulties for the fourth applicant were the question to be regarded as a live one.
It was not suggested by the fourth applicant that the stud property is presently operating. Whilst the land on which it is conducted is said to have topographical features which are special in the region, it is not suggested that these cannot be reflected in the value it would have in the market. The purpose to which it is desired to put the property is to add it with other remaining assets (of other applicants) and to obtain re-finance on the "package" perhaps from an overseas source and which would enable payment out of any monies found to be due (I take it by other applicants) to the bank. Whilst the quantum of any sum due is presently unknown, it is conceded by the applicant that there will be a need to obtain some monies. The only alternative would be to realise the assets. I take it that I am asked to infer that the value of the property is greater as part of such a package, but this was not shown on the evidence. Nor could it be said that the evidence of Mr. Leitch suggests that the prospect of obtaining such finance, and to an amount which may be necessary, could be regarded as any more than speculative.
The bank, if it is successful, will not recover all that is due to it. For present purposes however it is relevant that it will at least lose the benefit of the earlier receipt of some monies and a sale in circumstances where the property has been underutilised for some time and the land and improvements, as a result, have continued to deteriorate so that further reductions in the value of the land are likely.
The applicant has a further difficulty. It is, on the material, insolvent. This property may be its only asset (the only other asset pointed to is dubious) and it frankly concedes that it is unable to offer any security or pay into Court any sum to safeguard the bank's position in the interim. The principle stated in Inglis v. Commonwealth Trading Bank of Australia(1972) 126 CLR 161 was however said by the applicants not to here apply since the exercise of the bank's right was itself the question in dispute. As I have said there is a difficulty with concluding that that is the case. But even were that so Harvey v. McWatters (1949) 49 SR (NSW) 173, 178 did not suggest that in every case a mortgagor would be exempt from some form of payment and here I would think the terms of any injunction ought require the applicant to pay in monies reflecting the potential interest lost on $750,000.00, the contract price, or to permit works to be undertaken to prevent further deterioration of the property. Furthermore, it cannot be the case that simply because such a question is raised by a party that the requirement to do equity is overcome (see per Pincus J. in Mainbanner Pty. Ltd. v. Lubke & Ors unreported decision 8.3.88). Necessarily I would think the question of the apparent strength of the applicant's case would need to be considered, an approach taken with respect to injunctions under s.80 Trade Practices
Act by this Court (Town & Country Sports Resort (Holdings) Pty. Ltd. & Ors v. Partnership Pacific Limited (1988) FCR 540).
In this respect Mr. Morris QC for the respondents submitted that the fact of a lack of choice resulting from the applicant's financial difficulties would be insufficient to constitute the requirement of a special disability necessary for the intervention of equity (Commercial Bank of Australia Ltd. v. Amadio (1983) 151 CLR 447, 461 and Louth v. Diprose (1992) 175 CLR 621, 637) and I think that is correct. The case as here pleaded (and I was not referred to any other relevant circumstance arising during the course of evidence) could hardly be regarded as strong.
At the commencement of the application and during its course I referred to the fact that the mortgagee here proposes to sell without public advertisement and by private treaty. These were matters which seemed to me to potentially raise a separate question as to the mortgagee's duty. The applicant however disclaimed any interest in these matters and did not dispute the evidence as to value. The material discloses however that, whilst the proposed price is less than the value of the property agreed upon by the parties during the course of the trial, there was not then a live issue as to its value and the value attributed was merely the mean taken between two competiting valuations. The proposed sale price is more than that placed upon the property by the bank's valuer at trial and the receiver has obtained two additional valuations. The Bank has now obtained two further valuations and all valuers concur that the price reflects market value. The further concern expressed by the receiver,
and as to which no issue was taken, was that if the property was now placed at auction this purchaser may reduce the price offered. It is common knowledge that the drought has broken in this area and it also occurred to me that this might increase values. However one valuer at least has confirmed his valuation as at the present date and it may be that it takes account of other factors such as the deterioration of the property. In any event, as I have said, the applicant took no issue with the proposed sale price.
There is in my view no justification for the grant of an injunction and the application is dismissed.
I certify that this and the preceding seven pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.
Associate
Date:9 March 1995
Solicitors for the applicant: Messrs Hewlett & Company
Counsel for the respondents: Mr A.J.H. Morris QC and Mr. L. Kelly
Solicitors for the respondents: Messrs Barwicks
Date of Hearing: 28 February 1995
Place of Hearing: Brisbane
Date of Judgment: 9 March 1995
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