MacKinnon v Marnong Farms Pty Ltd
[2015] VSC 415
•14 August 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2015 00974
| HAMISH ALAN MACKINNON AND MICHAEL FRANCIS QUIN IN THEIR CAPACITY AS JOINT AND SEVERAL RECEIVERS AND MANAGERS OF MARNONG PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 121 999 111) (and another) | Plaintiffs |
| v | |
| MARNONG FARMS PTY LTD (ACN 129 237 476) (and others) | Defendants |
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JUDGE: | SIFRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 10 August 2015 |
DATE OF JUDGMENT: | 14 August 2015 |
CASE MAY BE CITED AS: | MacKinnon & Ors v Marnong Farms Pty Ltd & Ors |
MEDIUM NEUTRAL CITATION: | [2015] VSC 415 (First Revision: 12 December 2016) |
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RECEIVERS AND MANAGERS — Limited direction sought in relation to the sale of land
— Section 424 Corporations Act 2001 (Cth) — Third party and unitholder in mortgagor (but
Not mortgagor) and surety oppose directions and offer principal and interest (as determined by the court) but not amount alleged by mortgagee to be owing — Inadequate tender — Direction given — Inglis v Commercial Bank of Australia (1971) 126 CLR 161; Re One.Tel Networks Holdings Pty Ltd (2001) 40 ACSR 83.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr M Galvin QC with Dr O Bigos | Thomson Geer |
| For the First, Second and Eleventh Defendants | Mr S A Levitt | Levitt Robinson |
| For the Third, Fourth, Sixth, Seventh, Eighth, Ninth and Tenth Defendants | Mr J L Evans | Madgwicks |
| For the Sixteenth Defendant | Mr S Rubenstein | Logie Smith Lanyon |
| For the Eighteenth Defendant | Mr P Murdoch QC with Mr A Kirby | Michael Flemming & Associates |
| For Glen John Franklin and Jason Stone, as liquidators of the Second Plaintiff | Mr C Lilley | Saxby’s Lawyers |
HIS HONOUR:
The First Plaintiffs (‘Receivers’) are the receivers and managers of the Second Plaintiff (‘Marnong’). By interlocutory process filed 21 July 2015, the Receivers apply under s 424 of the Corporations Act 2001 (Cth) for directions that they may sell the following properties of which Marnong is the registered proprietor:
(a) 2255 Mickleham Road, Mickleham, Victoria, 3064, being the land more particularly described in Certificate of Title Volume 11490 Folio 150;
(b) 45 Old Sydney Road, Mickleham, Victoria, 3064, being the land more particularly described in Certificate of Title Volume 11518 Folio 160; and
(c) 105 Old Sydney Road, Mickleham, Victoria, 3064, being the land more particularly described in Certificate of Title Volume 11490 Folio 148;
(together ‘Proposed Sale Lots’).
The proposed sale is to the offeror referred to in paragraph 32 of the affidavit of Hamish Alan MacKinnon sworn 21 July 2015, and in accordance with the draft contract of sale exhibited to that affidavit,[1] prior to realising any other properties of which Marnong is the registered proprietor, and disbursing the proceeds of sale in accordance with the terms of the mortgage over the Proposed Sale Lots held by Morlend Finance Corporation (Vic) Pty Ltd (‘Morlend’), and remitting any balance into court, or as the court otherwise directs.
[1]The contract of sale is required to be executed by the Receivers on 17 August 2015. The application was heard on 10 August and I indicated that my decision would be made on 14 August 2015. Given the urgency of the matter, I have endeavoured to deal with all of the relevant arguments raised.
In addition to the Proposed Sale Lots, Marnong is the registered proprietor of the following land:
(a) 195 Old Sydney Road, Mickleham, Victoria, 3064, being the land more particularly described in Certificate of Title Volume 11490 Folio 147;
(b) 255 Old Sydney Road, Mickleham, Victoria, 3064, being the land more particularly described in Certificate of Title Volume 11518 Folio 161;
(c) the land described in Certificate of Title Volume 08774 Folio 382 (‘Back Land’);
(together ‘the Remaining Lots’).
Marnong acquired all the land as trustee of the Marnong Unit Trust. Marnong is in liquidation. On 1 April 2015, I appointed Michael Carrafa as the new trustee because the liquidation of Marnong disqualified it from acting as trustee. The order has no effect on the Receivers’ control of all of the land.
The Receivers are of the view that they are justified in proceeding, as they propose to do, but seek the court’s imprimatur before doing so. The Receivers rely on the affidavits of Hamish Alan MacKinnon sworn 4 March 2015 and 21 July 2015. The Receivers have given notice of the application — and in fact joined as parties to the proceeding — all persons known to them who may have an interest in the subject matter of the application. The liquidators of Marnong, although not parties, have also been given notice.
In 2009 Commonwealth Bank of Australia (‘CBA’) advanced $3 million to Marnong as trustee of the Marnong Unit Trust, secured by a registered mortgage over all of the land (‘the Mortgage’), as well as a charge over Marnong’s assets and guarantees from Marnong’s officers and associates. On 31 July 2014, the facility expired and Marnong was in default. On 18 August 2014, CBA assigned its interest in the debt and securities, including the Mortgage, to one of Marnong’s directors, Costantino Ballan. On 3 December 2014, Mr Ballan assigned his interest in the debt and securities, including the Mortgage, to Morlend. Throughout the assignments, the facility remained in default. On 11 February 2015, Morlend issued default notices to Marnong. Marnong did not comply with the default notices. On 19 February 2015, Morlend appointed the Receivers.
The Receivers have an express power — both under the Mortgage[2] and under s 420(2)(b) of the Corporations Act — to sell the Proposed Sale Lots. They wish to realise the Proposed Sale Lots at the earliest opportunity so as to pay out the Morlend debt and thereby limit the interest which is being accrued on the Morlend debt and the costs of the receivership (‘the Secured debt’). They have determined that, having regard to the scale of litigation and the issues raised in various proceedings,[3] it would be convenient to sell the Proposed Sale Lots. The Proposed Sale Lots are not subject to any option claims. The Remaining Lots are subject to a claim for specific performance as referred to in the Judgment.
[2]Clause A22.5(d) of the memorandum of common provisions—Exhibit HAM-14.
[3]The context and background to these proceedings — essentially between unitholders of Marnong — is set out in my judgment in proceeding S CI 2015 00435 [2015] VSC 178 (‘the Judgment’). I will assume familiarity with the Judgment. Defined terms bear the same meaning.
The Receivers correctly submit that they are at liberty to realise the land in whatever manner they see fit. The Mortgage provides[4] that the mortgagee may exercise a right or remedy in any way that it considers appropriate.
[4]Clause A26.1 of the memorandum of common provisions — Exhibit HAM-14.
Where a mortgagee holds security over several lots of land and is aware that it is unnecessary to sell all of the lots because the sale of some of those lots would be sufficient to satisfy the mortgage debt and the costs of sale, the selection of which lots to sell is, as submitted by the Receivers, at the discretion of the mortgagee. The only limitations would be if the mortgagee were to sell more lots than required to satisfy the debt, or a sale driven by an ulterior purpose, or if the sale is in reckless disregard of the interests of the mortgagor: MBF Investments Pty Ltd v Nolan.[5]
[5][2011] VSCA 114 at [87]-[90].
In the present case the Receivers submit (and there was effectively no argument to the contrary[6]) that none of the limitations apply. For the reasons set out hereunder, I agree.
[6]The Chiavaroli interests raised a very narrow argument as referred to below.
The Receivers have obtained valuations for all the land,[7] and a marketing report for the Proposed Sale Lots.[8] They undertook a robust marketing campaign for the sale of the Proposed Sale Lots by tender. As a result of the marketing campaign, the Receivers’ agents received 110 direct enquiries and provided the Information Memorandum to 100 enquiring parties; tender documentation was provided to interest parties; and formal inspections of the Proposed Sale Lots was undertaken by 13 potential purchasers. A confidential offer was made for the Proposed Sale Lots which the Receivers consider to be far superior to any other offer.
[7]Confidential Exhibit HAM-49.
[8]Confidential Exhibit HAM-48.
The Receivers are concerned that if they progress the sale of the Proposed Sale Lots to the highest bidder in the absence of a direction from the court that they are justified in doing so, their decision would likely be subject to a legal challenge by one or other of the parties. There are, as pointed out, proceedings on foot between the unitholders (and others) in the Marnong Unit Trust — proceedings SCI 2015 00435 and S ECI 2015 00117 — which are bitterly contested.[9] There has also already been a considerable series of correspondence between the various parties. In summary, the Chiavaroli parties[10] oppose such a sale, and contend that the Secured debt should be refinanced.
[9]The background and nature of the dispute is set out in the Judgment at [2], [3], [5]-[8], [13]-[36].
[10]It is convenient to refer to the Chiavaroli parties, even though the offers, referred to below, were made by a third party and in the case of the latest offer, a security provider.
The Receivers submitted that given the background to the receivership of Marnong, the correspondence referred to above, and the propensity of the parties to engage in disputes and litigation with respect to the land, they seek the direction of the court that they may sell the Proposed Sale Lots.
As explained by Austin J in Re One.Tel Networks Holdings Pty Ltd,[11] it is usually only proper to exercise the power where the matter involves guidance to the insolvency practitioner on matters of law or principle to protect him against accusations of acting unreasonably, and the court does not usually consider it proper to make the Practitioner’s commercial decision for him.
[11](2001) 40 ACSR 83, [31] (by reference to Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115, a liquidator case).
In the present case, the Receivers seek the court’s guidance on matters of law or principle to protect them against accusations of acting unreasonably. The direction sought is very limited and does not include the mode of sale or the marketing campaign. Rather, it is limited to whether they are justified in selling the Proposed Sale Lots. I am satisfied that in all of the circumstances seeking such a direction is justified.
The unreasonableness alleged relates to the inability on the part of the Chiavaroli interests to refinance the Secured debt. The enforceability of the Mortgage is not challenged. The amount secured is. The Chiavaroli interests were repeatedly, over a long period of time, not provided with proper payout figures in circumstances where the indebtedness of Marnong to Morlend and secured by all of the land has increased substantially. Further, they are[12] willing to pay the principal and interest component of the Secured debt and allow Morlend to retain its security over the Remaining lots while they contest the costs and expenses associated with the receivership. In other words, they do not tender or offer the full amount of the Secured debt alleged to be owing by Marnong.
[12]The original offer was made by a third party, Mr Egan, who is not the mortgagor or a unitholder. It is unclear to whom and on what basis the funds would be advanced.
The Ballan and Cimono interests, representing the other unitholders, submitted that there was no basis on which either Marnong or Michael Carrafa have established that they are in a position to redeem (or compel a discharge of) the Mortgage over the Marnong Land, or otherwise enjoin the Receivers from exercising the power of sale.
The present case, they submit, is a perfect example of the application of the rule in Inglis v Commercial Bank of Australia.[13] There is no dispute as to the validity of the mortgage, or the appointment of the Receivers, and the existence of the power to sell. In such a situation they referred to a statement by Walsh J in Inglis at 164-5, where his Honour stated:
[13](1971) 126 CLR 161.
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.
The rule, as it affects the exercise by a mortgagee of the power of sale, is stated in the following terms in Halsbury’s Laws of England, 3rd ed., vol. 27, p.301:
“The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute, or because the mortgagor has commenced a redemption action, or because the mortgagor objects to the manner in which the sale is being arranged. He will be restrained, however, if the mortgagor pays the amount claimed into court, that is, the amount which the mortgagee swears to be due to him, unless, on the terms of the mortgage, the claim is excessive.”
Then there is a reference to a special case where the mortgagee was the mortgagor’s solicitor. The plaintiffs contend, however, that such a rule can have no application in this case, in which the action brought by them is brought to establish a claim that upon balance there is no debt due by them to the defendant, but on the contrary, there is a balance due to them. They contend that that action is not one in which they seek to maintain rights in the capacity of mortgagors.
In my opinion, the authorities which I have been able to examine establish that for the purposes of the application of the general rule to which I have referred, nothing short of actual payment is regarded as sufficient to extinguish a mortgage debt. If the debt has not been actually paid, the Court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due.
In the present case, Morlend has provided an estimated payout figure as at 7 August 2015, of $4,408,000.[14] A calculation of all known amounts has been provided. Of course there are ongoing costs and expenses and interest at the rate of $2,563 per day, although this figure is variable. There is, as was submitted, no evidence of any unconditional offer to either pay that amount to Morlend, or to pay it into court. The affidavit of Michael John Matthew Egan sworn on 7 August 2015 indicates:
[14]Affidavit of Myles Watson sworn on 7 August 2015, at exhibit ‘MPW1’.
(a) maximum available funds to Mr Egan of $3,950,000;
(b) a conditional basis on which Mr Egan would advance a sum of between $3,300,000 and $3,400,000, including the imposition of terms on Morlend’s manner of calculating the amounts payable to it (at paras 5 and 6);
(c) that Mr Egan would not pay out the amounts claimed by Morlend in respect of costs and expenses (but principal and interest only), and would instead consent to a new mortgage, ranking behind his own security for repayment of the $3,300,000 to $3,400,000, to secure the payment of those amounts (at para 7);
(d) that Mr Egan’s offer is conditional upon the court restraining the sale of the Proposed Sale Lots.
Mr Egan’s proposal (‘the Egan offer’) does not, it was submitted, approach satisfaction of the rule in Inglis’ case, as set out above. It also requires the consent of Marnong’s liquidators and Mr Carrafa as trustee, and that consent does not appear to have been sought. In my opinion there is substance in this submission.
A revised open offer was made in court, during the course of argument. It is not necessary to consider this offer.
A further revised offer (‘the Revised Offer’) was made by Miranda Investments Australia Pty Ltd, a guarantor of the Secured debt, on 12 August 2015. It is contained in an affidavit of Stewart Alan Levitt, sworn 12 August 2015 (‘Levitt’s affidavit’). It is as well to set the offer out in full:
REVISED OFFER
(a)Miranda Investments Australia Pty Ltd ACN 005 167 975 (“Miranda Investments”) will pay directly to Morlend the full amount assessed by this Honourable Court, on an interlocutory basis, as being due and payable to Morlend as owed by Marnong Pty Ltd (in liquidation), comprised of the principal debt balance as at 3 December, 2014 and interest presently secured by Morlend’s mortgage and charge(s) over all of the assets and undertakings of the Marnong Unit Trust.
(b)Miranda Investments will pay into Court the amount assessed by this Honourable Court, on an interlocutory basis, as being properly due and payable to Morlend on account of expenses and disbursements incurred and chargeable to the mortgagor under its mortgage and charge(s) over the assets and undertakings of the Marnong Unit Trust, such funds to be discharged and disbursed to Morlend only pursuant to an order or direction of this Honourable Court.
(c)Pending the Court’s making an order or direction pursuant to paragraph (b) above, each of Miranda Investments, Peter Chiavaroli, Michael Egan, Michael Egan Group and Marnong Venture Pty Ltd ACN 605 809 149, undertakes to this Honourable Court to meet any additional costs which may be ordered against them in favour of Morlend, should Miranda Investments or any other person, including any surety or former surety of the assigned CBA Debt, initiate an enquiry into the Receivers’ fees and charges, under s. 423 of the Corporations Act 2001 (Cth) or otherwise challenge claims made by Morlend to be covered for charges (including, without limitation, for interest), fees and expenses, allegedly payable by the mortgagor.
(d)Immediately upon the payments being made, referred to in paragraphs 8(a) and (b) hereof, Miranda Investments will assign to Marnong Venture Pty Ltd ACN 605 809 149, all of its right, title and interest in and to the debt and security which Miranda Investments is assigned by Morlend as a consequence of the occurrence of the matters described in paragraphs (a) and (b) above, by dint of section 52 of the Supreme Court Act (Vic) 1986 or otherwise, by operation of law.
(e) the terms on which the funds advanced by Miranda Investments are to be repaid are set forth hereunder:
(i)First mortgage security and charge(s) to be assigned by Morlend to Miranda Investments, over all of the assets and undertakings of the Marnong Unit Trust, as described in the CBA Facility Agreement, Mortgage and Charge(s);
(ii) Peter Chiavaroli to provide his personal guarantee;
(iii)Subject to the agreement of the Liquidators and of the Independent Trustee, the terms of the loan and interest terms and conditions will be varied (improved for the mortgagor) to provide for:
(a)a loan term of 18 months with no penalty on discharge, only after 180 days;
(b)interest @ 2% p.a. plus NAB base rate plus margin, with the composite rate to be 7.5% p.a., capitalised monthly for the first five (5) months and then, paid monthly in arrears;
(c)a default rate of interest of 12.5% (5% above the composite base rate);
(d)interest to run from the date of assignment of the Morlend mortgage and charge(s), to coincide with the advance of funds by Miranda Investments and securities being assigned to Miranda Investments, as specified in (i) above;
(e)terms and conditions otherwise to be as per the CBA Facility, to be assigned by Morlend, to Miranda Investments;
(f)a $10,000 establishment fee, with the professional costs and disbursements of preparing and reviewing debt and securities assignment documentation, to be charged to the debtor as an additional advance, subject to the same terms and conditions as the mortgage loan, as will be all of the statutory charges and imposts, such as stamp duty, security interest registration fees and titling charges.
(iv)If the Liquidators’ and Independent Trustee’s agreement is not forthcoming to varying the mortgage terms as aforesaid, the terms and conditions of the CBA facility are to remain in place and unchanged;
(v)Miranda Investments and its lawful assignee, Marnong Venture Pty Ltd, will undertake to the Court not to take any action to exercise the mortgagee’s power of sale or to enforce its charge(s), or appoint receivers to do so, over Lots 1, 5 or the Back Land, without the prior leave of this Honourable Court.
It was submitted on behalf of the Chiavaroli interests that the Egan offer and a revised open offer made in court, during the hearing of the application, and indeed the Revised offer, were adequate and sufficient to enable the court to decline to give the Receivers the requested directions. Why, it was submitted rhetorically, should the Receivers be permitted to sell the Proposed Sale Lots in circumstances where the principal and interest was offered (or pursuant to the Revised Offer an amount determined by the court on an interlocutory basis) and the mortgagee, Morlend, retained other security sufficient to cover the remaining amounts secured by the mortgage?
The thrust of the submissions, by reference to authority, was to the effect that it was not necessary or mandatory to bring or pay the entire amount alleged to be owing by the mortgagee into court[15] in order to restrain a sale, or in this case oppose the limited direction as to sale sought by the Receivers. Rather, the amount required was an amount ‘reasonably demanded’ by the mortgagee. In this regard, it was submitted that the amount demanded was unfair and excessive and would be challenged. Further, it was submitted that the Remaining Lots constituted adequate security. Finally it was submitted that, presumably the Chiavaroli interests, were entitled to query the costs and expenses of the Receivers, Liquidators and indeed mortgagee,[16] without making payment of the amount alleged, given the particular circumstances referred to.
[15]Reference was made to a number of decisions, including Westpoint Finance Pty Ltd v Chocolate Factory Apartments Ltd [2002] NSWCA 287 (‘Westpoint’), Notaras & Anor v Hugh & Ors [2003] NSWSC 440; Australian Barter Currency Exchange Pty Ltd v Uniting Church NSW Trust Association Limited ]2009] NSWSC 607 (‘Australian Barter’); Bayblu Holdings Pty Ltd & Another v Capital Finance Australia Ltd [2011] NSWCA 39 (‘Bayblu’).
[16]Reference was made to three New South Wales decisions made in 2014 dealing with the scrutiny of costs expenses and remuneration of insolvency practitioners: AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 (No 2) [2014] NSWSC 1270; On Q Group Limited (in liquidation) (subject to deed of company arrangement ACN 009 104 330) [2014] NSWC 1428; Joe & Joe Developments Pty Ltd (subject to a deed of company arrangement) [2014] NSWC 1444.
The authorities are not entirely consistent, although this may simply be a manifestation of the need to consider each case on its own facts, particularly where discretionary considerations intrude. The exceptions to the ‘general rule’ — which has been repeated time and time again notwithstanding Campbell JA’s suggestion[17] that its limits be defined with precision — and the exceptions are indeed as the authorities demonstrate very limited, particularly in circumstances where the enforceability of the mortgage or the said process is not disputed.
[17]Bayblu at [57].
In most cases, as the authorities demonstrate, the matter proceeds by way of an injunction application by a mortgagor to restrain a sale. Often the basis is the enforceability of the mortgage or the method of sale or other matters relating to the sale. In such cases discretionary considerations are highly relevant, particularly to the balance of convenience, and in this regard equivalent security and amounts tendered or available are highly relevant factors. The species of cases with which we are concerned relate to the redemption (or payout) of the mortgage, usually by the mortgagor, but in this case by a surety or third party. In this case, is the full amount as alleged by the mortgagee required, or is some lesser amount sufficient, given the mortgagor’s desire to challenge the figures?
The cases where a lesser amount is sufficient, in the context of redemption, are few and turn on their peculiar circumstances. In Bayblu, money was not paid into court and this was held to be a relevant discretionary consideration in determining whether to grant injunctive relief. However, the case involved a challenge to the mode of sale. In Australian Barter an undertaking as to damages was given and the proposal for refinancing of the full amount alleged to be owing was very ‘likely to be fulfilled’. There were no conditions and no request for an interlocutory taking of accounts.
In my opinion, any injunction application would fail.[18] It is necessary, as the authorities demonstrate, to tender the amount alleged by the mortgagee in circumstances where the enforceability of the Mortgage is not challenged, and where it is sought to redeem the Mortgage. It is this very tender that gives the mortgagor grounds for an assertion that there is a serious issue to be tried and, of course, it is also relevant to the balance of convenience. The full amount has self-evidently not been tendered. It is not sufficient or appropriate to leave it to the court. Despite forceful submissions, the amount claimed by Morlend appears to be ‘reasonably demanded’. I am not in a position, nor is it desirable or appropriate, for the court to embark on this process at this stage. Further, the reason for equivalent security is to protect the interests of the mortgagor by preventing any diminution in the value of the security. Finally, of course the costs and expenses can be challenged and, of course, as pointed out by the authorities referred to, the court is concerned about excessive costs and expenses. However, this must necessarily take place later. In my opinion the Westpoint case is fatal to the position of the Chiavaroli interests and the third party.
[18]Notwithstanding the form of the proceeding, the application was to a great extent heard as if it was an injunction application. However, those opposing the application did not deal with the application in the usual way so far as injunctions are concerned.
In Westpoint, Young CJ in Eq, sitting in the Court of Appeal[19] said:
[19]Handley JA and Foster AJA agreed with Young CJ in Eq.
[32]It is important to realise that the present proceedings were proceedings between a mortgagor and a mortgagee. Mortgagors have relatively few rights to proceed against their mortgagee. Once the mortgagee’s powers have arisen, the mortgagor is only entitled to restrain the exercise of those powers on very limited grounds. A dispute as to the quantum of the mortgage debt where there is no dispute as to whether has been a default does not entitle a mortgagor to an injunction: Harvey v McWatters (1948) 49 SR (NSW) 173.
[33] I should add that there is no right to an interlocutory account, and a mortgagor is not entitled to a partial account. A mortgagor cannot pick out one or more aspects of the accounts between the parties and litigate that alone. The Court of Appeal has decided this on numerous occasions: see eg Colin D Young Pty Ltd v Commercial & General Acceptance Ltd (1982) NSW Conv R 55-097, Kennedy v General Credits Ltd (1982) 2 BPR 9456 and Adams v Bank of New South Wales [1984] 1 NSWLR 285.
[34]To succeed then, the plaintiff had to show that (a) there is an arguable case; (b) that the balance of convenience favours the grant rather than the refusal of the injunction; and (c) damages are not an adequate remedy. This case concerns (a).
[35]Accordingly, unless the plaintiff could convince the court on a prima facie basis that nothing was owing under the mortgage, its application for an interlocutory injunction had to be dismissed.
…
[54]The usual rule where there is a dispute as to the amount owing under the mortgage is that the mortgagee can require as the price of a discharge that the mortgagor pay the amount reasonably demanded for principal, interest and costs to date plus a reasonable sum to cover the costs of taking the accounts: Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225.
…
[57]Accounts will have to be taken between mortgagor and mortgagee. These may be taken as an adjunct in the proceedings in which Constructions is also a defendant, or they may be taken separately before the other issues are determined. Although the mortgage has been discharged, accounts can still be taken between mortgagor and mortgagee: Adams v Bank of New South Wales [1984] 1 NSWLR 285 at 295.
The Revised Offer is in conflict with and undermines the rationale underpinning the well-established principles. These principles clearly give the mortgagee the upper hand. The most important aspect, clearly established, is that as between mortgagor and mortgagee, all of the risk and burden is transferred to the mortgagor. The mortgagee need not engage in debate as to the amount owing, and the court generally has no role to play in this regard. A statement as to the amount owing by a mortgagor to a mortgagee is akin to an irrevocable letter of credit. The concept is pay up and then dispute. This is the bargain of the parties and the developed jurisprudence. It is for this reason that in practice it is not uncommon for payment — as alleged — to be made under protest. The authorities do not support the interlocutory or preliminary taking of accounts.
Accordingly, the Revised Offer does not assist the opponents of the application. It is, in light of the relevant principles, self-evidently inadequate essentially and substantially for reasons submitted by the Cimono/Ballan interests in the email of 12 August 2015 from their solicitor. I accept these submissions. The critical factor is that the involvement of the court as a precondition to payment and the deferring of the payment of costs, expenses and remuneration until such time as the court has determined this amount, albeit on an interlocutory basis, is entirely inconsistent with the authorities. Further, absent a proper tender, there is no basis for interlocutory relief.
In all of the circumstances I propose to grant the limited direction sought. I do not propose to make any order as to costs.
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