Magar v Arab Bank Australia Ltd; Bournelis v Aldi Petroleum Pty Ltd

[2010] NSWSC 553

CITATION:	Magar v Arab Bank Australia Ltd; Bournelis v Aldi Petroleum Pty Ltd [2010] NSWSC 553
HEARING DATE(S):	13 May 2010
JUDGMENT DATE :	28 May 2010
JURISDICTION:	Common Law; Equity
JUDGMENT OF:	Ward J
DECISION:	2010/028376 Injunctive relief to be granted on an interlocutory basis, subject to undertakings to be settled 2010/099040 Receivers' application for declaratory relief and consequential orders refused
CATCHWORDS:	REAL PROPERTY - whether receivers appointed by mortgagee to mortgagor’s leasehold interest (and acting in their capacity as mortgagor’s agent) are entitled to possession of premises as against third party claiming under unregistered agreement to sub-lease - injunction sought by party claiming interest as sub-lessee to restrain receivers’ interference with occupation or possession of premises - HELD - declaration as to receivers’ entitlement to possession refused - serious question to be tried concerning the existence of a binding sub-lease agreement between mortgagor and alleged sub-lessee (and as to claim that mortgagor estopped from denying sub-lease) - balance of convenience considered - interlocutory injunction (subject to undertakings) granted to restrain receivers (acting in their capacity as agents of mortgagor but not otherwise) from interfering with possession by alleged sub-lessee pending determination of substantive proceedings or further order
LEGISLATION CITED:	Real Property Act 1900 (NSW) Trade Practices Act 1974 (Cth)
CASES CITED:	ACN 113 137 397 v Winterbottom [2010] NSWSC 421 AMEV Finance Ltd v Canagon Engineering Pty Ltd (1987) 6 BPR 13,899 Antar v Fairchild Development Pty Ltd (R&M App) and Ors [2008] NSWSC 638 Bahr v Nicolay No. 2 [1988] HCA 16; (1988) 164 CLR 604 ; (1988) 78 ALR 1 Eltran Pty Ltd v Westpac Banking Corp (1988) 32 FCR 195 Expo International v Chant [1979] 2 NSWLR 820 Harris v Western Australian Exim Corp (1994) 129 ALR 387 Lake Eerie Pty Ltd (Receiver and Managers appointed) Ltd v Flair Realty Pty Limited [1992] ANZ ConvR 627; (1992) Q ConvR 54-420 Re Leyland DAF Ltd [1994] 1 BCLC 264
TEXTS CITED:	Fisher & Lightwood’s Law of Mortgage, 2nd ed, Butterworths, 2005
PARTIES:	2010/028376 Adil Azir Magar (Plaintiff) Arab Bank Australia Ltd (First Defendant) Aldi Petroleum Pty Ltd (Second Defendant) Michael Hanna Ayoub (Third Defendant) 2010/099040 Jack Bournelis (First Plaintiff) Neil Geoffrey Singleton (Second Plaintiff) Aldi Petroleum Pty Ltd (First Defendant) N A Retail Solutions Pty Ltd (Second Defendant) Adil Magar (Third Defendant) Nabil Magar (Fourth Defendant) Bobby Bari (Fifth Defendant)
FILE NUMBER(S):	SC 2010/028376; 2010/099040
COUNSEL:	2010/028376 A Narayan (Plaintiff) J E Thomson (First Defendant) 2010/099040 J E Thomson (Plaintiffs) J R Young (First Defendant) A Narayan (Third Defendant)
SOLICITORS:	2010/028376 Law Partners (Plaintiff) DibbsBarker (First Defendant) 2010/099040 DibbsBarker (Plaintiffs) Good legal Lawyers (First Defendant) Law Partners (Third Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY LIST

WARD J

28 May 2010

2010/028376 ADIL AZIR MAGAR V ARAB BANK AUSTRALIA LTD
2010/099040 JACK BOURNELIS V ALDI PETROLEUM PTY LTD

JUDGMENT

1 HER HONOUR: Before me for hearing in the Duty List on 13 May 2010 were two applications brought in separate proceedings (one in this Division and one in the Common Law Division of this Court) relating to service station premises at Guildford (the Guildford Leasehold).

2 In the Equity Division proceedings, the plaintiffs (to whom I will refer as the Receivers) who were appointed in February 2010 by Arab Bank Australia Ltd as receivers and managers of the Guildford Leasehold, are seeking, by way of Summons, declaratory and other relief to enable them to take possession of the Guildford Leasehold. At the same time, in the Common Law Division proceedings, Mr Adil (Eddie) Magar (who claims an interest under an alleged agreement to lease the Guildford premises) is seeking an interlocutory injunction to restrain the Receivers from further interference with his possession of the Guildford Leasehold (either directly or through his servants and agents).

Background facts

3 The factual background to this dispute is set out in two affidavits sworn 22 April 2010 and 11 May 2010, respectively, by Mr Anthony Craig Whiddon (who is the head of Group Credit at Arab Bank) and an affidavit sworn 23 April 2010 by Mr Richard Boon Pin Yap (an accountant employed by the receivers as a senior manager with the day to day conduct of their receivership of the Guildford Leasehold), on the one hand, and an affidavit sworn 6 May 2010 by Mr Eddie Magar together with an affidavit sworn 6 May 2010 of Mr Michael Ayoub (the sole director of Aldi Petroleum Pty Ltd, which took an assignment of the Guildford Leasehold in December 2008), on the other hand. (The Receivers also rely on a number of other affidavits, being affidavits of service, affidavits sworn by solicitors acting for them - Mr David Sharpe’s affidavit of 21 April 2010 and Mr Ross Rydge’s affidavit sworn 23 April 2010 – and an affidavit, sworn 11 May 2010, by Mr Anthony James Mansour, a parishioner of St Patricks, Guildford, who says he is the volunteer manager of properties in that parish and is responsible for the administration of the Guildford lease by the head lessor.)

4 For the purposes of the applications before me, the relevant background in summary is as follows.

5 On 11 September 2006, the trustees of the Roman Catholic Church for the Diocese of Parramatta granted a lease, for a term of ten years with two ten year options, of the Guildford premises to Capita Investments No.5 Pty Ltd, a company with which Mr Eddie Magar (the plaintiff in the Common Law Division proceedings and a defendant in the Equity Division proceedings) and his brother, Mr Nabil (Bill) Magar (who is also a defendant in the Equity Division proceedings), were associated.

6 A mortgage was granted over the Guildford Leasehold (and a property owned by Capita in Carramar) in favour of Arab Bank, as security for guarantees given to Arab Bank by, among others, Capita and the Magar brothers in respect of loans from Arab Bank to another company owned and controlled by the Magar brothers (Azkanaad Pty Ltd).

7 The present dispute has its genesis in the default by Azkanaad under its Arab Bank loan agreement in late 2007. Mr Eddie Magar, in his affidavit, deposes to discussions in early 2008 with Mr James Wakim, the managing director of Arab Bank, in relation to the intention of the bank to appoint receivers to the secured properties for their sale. Mr Eddie Magar says that in early February 2008 he informed Mr Wakim of his intention to sell both the Carramar and the Guildford properties “with a lease back clause” due to the “pressure” he was under from the bank and that Mr Wakim indicated to him that that would be a “good solution”. However, discussions at that stage with a potential purchaser did not result in any sale.

8 In May 2008, Arab Bank appointed Mr Martin John Green and Mr Brian Raymond Silvia of GHK Ferrier Green Krejci Silvia as receivers and managers of the leasehold interest created by the lease to Capita. (For completeness, I note that in August 2008 receivers were also appointed by the bank to the Carramar property). It should be noted that the receivers appointed in May/August 2008 by Arab Bank under its securities, to whom I will refer as the Capita receivers, are not the Receivers in these proceedings (the latter not being appointed until February 2010).

9 In August or September 2008, Mr Malcolm Ayoub was put forward as a potential purchaser of the two properties. A succession of Indicative Letters of Offer were issued from Arab Bank to Mr Malcolm Ayoub and Mr Eddie Magar in relation to proposed loan facilities for use in connection with the restructuring of the Azkanaad loan and/or for the provision of working capital for a company associated with the Magar brothers (Future Fuels Australia Limited, which is now under external administration, and to which I will refer as FFA).

10 The first of those Indicative Letters of Offer, dated 1 October 2008, was addressed to Mr Malcolm Ayoub and Mr Eddie Magar and contemplated both a $5 million loan facility (in favour of FFA for working capital requirements) and a $3.7 million loan facility (in favour of Azkanaad as trustee for the Magar Sons Trust) by way of a restructuring of the Azkanaad loan. The letter specified that cross joint and several unlimited guarantees were to be provided (among others by Mr Malcolm Ayoub) and the bank’s security was to include not only a mortgage over the Guildford Leasehold but also a first registered mortgage over land at Moama owned by FFA Properties Pty Ltd, on which a bio-diesel plant operated by FFA was situated.

11 The second Indicative Letter of Offer dated 7 October 2008 was in broadly similar terms, though with some amendment the detail of which is not presently relevant.

12 Both these letters of offer made it clear that the offers contained therein were subject to final approval from Arab Bank and that no binding agreement was to arise unless and until acceptance of a formal offer. Indeed, each of the Indicative Letters of Offer (including the last one issued on 21 October 2008) contained a very clear statement to that effect at the conclusion of the letter, namely that:

This is an indicative proposal only and accordingly is not binding on either of us. No indication to the contrary, which may be made by any of our personnel, will create any legally binding obligation on the Bank to provide financial accommodation. The Bank is under no obligation to provide a loan and may withdraw at any time until acceptance of a formal offer of facilities. You should therefore not incur any expenses nor make any commitment in expectation of the facilities described above being made available to you . (My emphasis)

13 On 16 October 2008, Mr Malcolm Ayoub forwarded an email to Mr Wakim, advising him of a “collective decision” reached with his brother (Mr Michael Ayoub), Mr Eddie Magar and a financial controller (also apparently named “Eddie”) not to proceed at that stage with the $5 million (FFA) offer (due to a stated concern that this might prejudice their ability later to refinance with another incoming lender later for much more than that). Mr Malcolm Ayoub proposed a new arrangement, namely for his brother Michael (“who is a good friend of Eddie”) to assist by putting up two “good properties” of his (those being properties at Kembla Grange and Cringila) as collateral for the loan facility, presumably referring there to the $3.7 million Azkanaad restructure loan facility. It was said that whatever the Bank agreed to loan on those two good properties “together with the Guildford and Carramar properties of Eddie’s” should be good enough to secure to the Arab Bank the $3.7 million it was owed “and to raise working capital for Moama until we manage to get a proper report and raise say $20 or $30 million “.

14 Mr Wakim’s response (by email on 17 October 2008) was that he had lost confidence in the negotiations (apparently seeing the decision communicated to him the previous day as conveying that the then current Indicative Letter of Offer was highly unlikely to be exercised) and that he had passed all ongoing negotiations to the Bank’s ‘recoveries team’ headed by Mr Tony Whiddon and to the Bank’s receivers/lawyers.

15 Mr Eddie Magar, in his affidavit, nevertheless deposes that in October 2008, Mr Wakim of Arab Bank represented to him that if Mr Michael Ayoub purchased the Guildford and Carramar properties, and paid out the Azkanaad debt, the Bank would provide a $5 million facility secured over Moama. (I interpose to note that, while Mr Michael Ayoub’s company Aldi Petroleum did indeed purchase the properties, it seems there was no pay out of the Azkanaad debt.) Mr Wakim did not give evidence in the proceedings. Mr Whiddon’s evidence was that after the negotiations broke down with Mr Malcolm Ayoub on around 17 October 2008, Mr Wakim had informed him that he did not wish to be further involved. This would be consistent with the message conveyed to Mr Malcolm Ayoub and to Mr Eddie Magar by Mr Wakim in his 17 October email. If so, any discussion of the kind to which Mr Eddie Magar deposes could only have taken place prior to the email in which Mr Wakim was told of the “collective decision” not to proceed with the $5 million loan (a matter which seems to belie reliance by Mr Eddie Magar after 17 October on any earlier representation by the bank).

16 A third (and final) Indicative Letter of Offer, dated 21 October 2008, was subsequently issued. Significantly, this offer was still addressed to both Mr Malcolm Ayoub and Mr Eddie Magar but was only for the provision of a $5 million working capital facility for FFA (with no provision for a facility to provide for the restructuring of the Azkanaad loan) and the specified conditions precedent to draw down included that there was to be full clearance of the bank loans to Azkanaad “which are currently in default and undergoing recovery action”. The offer was again said to be subject to security being granted over the Moama land and a guarantee by Mr Malcolm Ayoub.

17 This offer was forwarded to Mr Malcolm Ayoub and Mr Eddie Magar by Mr Whiddon (who by then seems to have taken over the conduct within the bank of the negotiations in relation to the recovery of the Azkanaad debt, as had been foreshadowed in Mr Wakim’s 17 October email) by email on 21 October 2008 in which he stated that the ability of the bank to proceed with funding, if subsequently approved, would be subject, among other things, to full clearance of the Azkanaad debt. Reference was made in this email to discussions with Mr Michael Ayoub ”regarding possible funding scenarios” to assist him with this purchase of the Guildford and Carramar properties. Mr Whiddon’s email stated that:

We understand the sale of these properties is subject to satisfactory lease back arrangements being entered into by interests associated with Eddie (Volume Plus Group). Please note that the Bank needs to be satisfied with this arrangement as it relates to the provision of finance to Michael Ayoub for the purchase of the properties in question.

18 The reference to the proposed sale of the Guildford Leasehold to Mr Michael Ayoub being subject to a lease back arrangement being entered into by interests associated with Mr Eddie Magar is a matter on which some weight was placed by Counsel for Mr Eddie Magar, Mr Narayan, on this application. Nevertheless, it is clear that, while aware of the prospect that there might be a lease back arrangement sought to be put in place, Mr Whiddon had expressly reserved the Bank’s position as to the need to be satisfied with any such arrangement.

19 There was no acceptance, in its terms, of that final indicative letter of offer. A signed copy of the letter, bearing handwritten annotations which, (among other things), purported to increase the amount of the facility by a further $3 million and to delete the requirement for a guarantee from Mr Malcolm Ayoub, was returned to Mr Whiddon by facsimile transmission from Mr Eddie Magar on 30 October 2008. On its face, this amounted to a counter offer from Mr Eddie Magar.

20 Mr Whiddon does not appear to have rejected that (counter) proposal out of hand (despite the fact that he says he formed the view, and deposes to conversations in October 2008 with Mr Eddie Magar in which he says he made it clear, that he was not prepared to consider any proposal without a guarantee from Mr Malcolm Ayoub and a mortgage over Moamo), since he responded on 30 October 2008 acknowledging receipt of the signed letter of offer and seemingly indicated a preparedness (on receipt of the applicable credit application fee) to submit this to the Bank’s credit committee for consideration.

21 On 5 November 2008, Aldi Petroleum (as noted earlier, a company controlled by Mr Michael Ayoub) entered into a contract with the Capita receivers to purchase the Guildford Leasehold for $2 million. That contract, a copy of which was in evidence, was not expressed to be subject to any lease-back arrangement.

22 On 20 November 2008, two letters of offer issued from the Arab Bank to Aldi Petroleum for loan facilities in the sums of $4 million and $6 million, respectively, the first to enable Aldi Petroleum to complete the purchase of both the Carramar property and the Guildford Leasehold and the second to assist Aldi Petroleum to refinance then current loans from other financiers originally advanced to assist with the acquisition of properties (being offered as security for the Arab Bank loan) at Kembla Grange and Cringila and to clear a temporary overdraft in the name of Enviro Energy Australia Pty Ltd (which was providing a guarantee for the Arab Bank facility). These facilities were to be secured, inter alia, by mortgages from Aldi Petroleum over the Guildford Leasehold (and by mortgages over Mr Michael Ayoub’s properties at Kembla Grande and Cringila).

23 It can be seen, therefore, that Arab Bank was, at least to some extent, prepared to accept the so-called “good properties” of Mr Michael Ayoub as part of the security proffered in order to proceed with the loan facilities to Aldi Petroleum. What was not apparently agreed, however, were the terms of any additional loan facility for Mr Eddie Magar or Mr Malcolm Ayoub over and above the loans to Aldi Petroleum for the purpose of funding the pay out of the Azkanaad debt or for the provision of FFA working capital. Mr Eddie Magar did not accept the Indicative Letter of Offer as issued and there was no subsequent formal offer capable on its face of acceptance in that regard. (This is relevant insofar as Mr Eddie Magar now seeks relief based in part on an assertion that there was a representation by Arab Bank that it would provide additional funding.)

24 At that stage, ie in late November 2008, the position seems to have been that Mr Eddie Magar (and Mr Malcolm Ayoub for that matter) were aware that from Arab Bank’s point of view any sale of the Guildford Lease which carried with it an obligation for a lease back of the premises was something which required the approval of Arab Bank (which was requiring a first registered mortgage over the Guildford Leasehold as security for any loan facility) and that they could not assume that such approval would be forthcoming. Entry into any transactions on the expectation that such approval would be granted, could only have been at their risk. (Arab Bank’s indicative letters of Offer had put them squarely on notice of the inadvisability of entering into any commitments in the expectation of finance, without there being in advance a final approval by the Bank of any relevant loan facility.)

25 For Mr Eddie Magar/Aldi Petroleum, it is suggested, as I understand it, that the act of Arab Bank in proceeding with the finance for the acquisition of the Guildford Leasehold, without first having approved the terms of any lease-back arrangement, amounted to a waiver of the requirement for any such approval (or, perhaps, a representation that such approval would not be required as a condition of the making of the loan). However, whether or not that be the case, it does not seem to me to provide a basis for asserting (as Mr Eddie Magar seems to do) that Arab Bank had in fact consented to (and thus as registered mortgagee was bound by any particular lease).

26 On 22 December 2008, settlement of the sale of the Guildford Leasehold was completed and the Guildford lease was transferred by the Capita receivers to Aldi Petroleum. Mr Eddie Magar places emphasis on the fact that he was given the keys to the Guildford Leasehold at that time (and this is consistent with Mr Mansour’s recollection that the premises had been closed up but that subsequently the service station reopened). Arab Bank took a registered first mortgage over the Guildford Leasehold. At that stage, Arab Bank had been provided with nothing to indicate that the parties were in fact proceeding with a leaseback arrangement of the kind which had earlier been foreshadowed and had not been provided with a copy of any lease for approval.

27 There remained a residual Azkanaad debt. Both Mr Eddie Magar and Mr Whiddon deposed to discussions taking place as to how that was to be paid out. However, those discussions do not appear to have been fruitful.

28 The next critical step, for present purposes (though the date on which it is said to have occurred is unclear) is that, according to Mr Eddie Magar, in December 2008 a deed of sale relating to the Guildford Leasehold was signed by him with Mr Michael Ayoub and Aldi Petroleum. In evidence (Exhibit 2) was a copy of a deed of sale (undated and unstamped, though I note that during the hearing of the applications an undertaking to stamp the deed was proffered to the court).

29 The three parties to that deed are named as Aldi Petroleum, a company known as Grange Hill Properties Pty Ltd and Mr Eddie Magar. The deed recites that Arab Bank has taken possession of the Guildford Leasehold (and the Carramar property) as mortgagee in possession (in fact what it had done was to appoint receivers to the Guildford Leasehold); that Aldi Petroleum has exchanged contracts for the purchase of these properties; and that Aldi Petroleum has agreed to re-sell the properties to Mr Eddie Magar “and/or to his related [but unspecified] entities”. Recital E goes on to provide that:

Whereas Aldi and Adil [Eddie] have agreed that until the Properties are re-sold by Aldi to Adil or to his related entities, Adil and/or his related entities will lease the Properties in accordance with the terms of the Deed [there appears to be no definition of Eddie’s related entities] (my emphasis)

30 The deed then recorded an agreement by Aldi Petroleum to purchase the Guildford Leasehold and Carramar property for a price of $3.7 million and that, upon settlement of the purchase of the properties, “Adil and/or his related entities must lease the Properties from Aldi” on the terms set out in clause 2 of the deed. The term of the lease was to be 30 months; the rent was to be $52,500 or an amount equivalent to the mortgage repayment required to be made by Aldi Petroleum to Arab Bank in respect of that part of the loan secured by the properties, whichever was the greater, plus all outgoings in respect of the properties and, relevantly, that no rent under the lease shall be payable until Mr Eddie Magar and/or his related entities obtain “the loan” in the sum of $5 million from the Bank secured by a mortgage and “the unsecured loan” in the sum of $250,000. (The references to “the loan” appear to be a reference back to the statement recorded in Recital C that Arab Bank had offered Mr Eddie Magar “or his related entities” a loan sufficient to help and allow them to purchase the property from Aldi Petroleum.)

31 It is not suggested that Arab Bank was provided (at any time prior to the taking and registration of its mortgage over the Guildford Leasehold) with a copy of the said deed of sale. It is, however, said that Mr Whiddon knew that it was a condition of Mr Michael Ayoub (or, perhaps more precisely, Aldi Petroleum) purchasing the properties that Mr Eddie Magar and/or his related entities would lease back the Guildford premises. It is also not suggested that the head lessor provided any formal consent to a sub-lease, although it is asserted by Mr Eddie Magar that the Church was at all times aware of his occupation of the Guildford premises and adduced evidence of rent payments by a company with which he was associated, NA Retail Solutions Pty Ltd. (Mr Mansour disputes that the Church was aware of Mr Magar’s involvement.)

32 As to the requirement for head lessor approval, it is said that the head lessor would not be in a position reasonably to withhold consent, having regard to the provision contained in the lease in relation to subletting (I should add that although Mr Mansour deposes to his views on this matter it is not clear that he is in a position to make any final decision in that regard.) Mr Thomson in response refers to the absurdity of a submission of this kind in the face of a lease that, in its current form, would impose no obligation on the lessee to pay any rent at all. I also add that there is a real doubt in my mind as to enforceability of an agreement for lease which, on its face, lacks certainty as to the identity of the lessee - the agreement on which Mr Eddie Magar relies providing for the lessee to be him “and/or related entities”. In any event, at this stage at least no step seems to have been taken by the head lessor in this regard.

33 Aldi Petroleum subsequently defaulted on its loan obligations. Arab Bank served various demands and default notices in August/September 2009. The Receivers were appointed as receivers and managers to the Guildford Leasehold by Arab Bank on 11 February 2010 by a Deed of Appointment of that date.

34 Under the terms of the mortgage, clause 25.3 dealt with circumstances where a receiver was appointed and provided that “The receiver is your agent unless we notify you that the receiver is to act as our agent”. There is no suggestion that any contrary notification was given to Aldi Petroleum.

35 When the Receivers subsequently sought to take possession of the Guildford Leasehold they were met with opposition from persons whom they believe were or are associated with Mr Eddie Magar. Whether or not the persons resisting a retaking of possession were associated with Mr Eddie Magar, the Receivers then moved to seek orders to enable them to secure possession, by instituting these Equity Division proceedings against a variety of defendants including Aldi Petroleum, NA Retail Solutions, Mr Eddie Magar, Mr Bill Magar, and the occupant of the convenience store on the site (who has indicated that he wishes to take no part in the proceedings).

Proceedings

36 The Equity Division proceedings were commenced by summons filed 23 April 2010. Pursuant to the Summons, the Receivers seek a declaration that they are entitled to vacant possession of the Guildford Leasehold, an order that the defendants to these proceedings surrender possession of the premises and consequential orders in relation thereto, and an order restraining the defendants from preventing hindering or interfering with the taking of possession of the Guildford Leasehold premises. That summons came before me for hearing on 13 May 2010. So far as was apparent from the court file, the matter came before me for final hearing on the summons and this was the position of Arab Bank, which pressed for the whole of the relief in the summons. (I note that it was nevertheless submitted during the course of argument by Counsel for Aldi Petroleum, Mr Young, that the respective matters should be listed together for an expeditious hearing, with the status quo maintained in the interim.)

37 Meanwhile, shortly prior to the appointment of the Receivers, Common Law Division proceedings had been instituted by Mr Eddie Magar (by statement of claim filed on 1 February 2010) against Arab Bank, Aldi Petroleum (which by then was under administration) and Mr Michael Ayoub. In those proceedings, Mr Eddie Magar alleges that there was an agreement between himself and Arab Bank, in breach of which it is alleged that the Bank failed to advance to Mr Eddie Magar or “his related entities” an amount of $5 million and refused or failed to remove the receiver of Capita upon the exchange of contracts in respect of the sale of the Guildford property and another property (Carramar) to Aldi Petroleum. Mr Eddie Magar claims that the Bank engaged in unconscionable conduct and misleading and deceptive conduct within the meaning of ss 51AB and 52, respectively, of the Trade Practices Act 1974 (Cth). He claims damages, interest and costs in those proceedings.

38 As initially pleaded, there was no allegation of any sub-lease of the Guildford Leasehold in favour of Mr Eddie Magar or any of his ‘related entities’. However, Mr Eddie Magar has annexed to his affidavit a copy of a letter dated 23 April 2010, from his solicitors, in which consent was sought from the Arab Bank’s solicitors to the filing of an amended statement of claim in the Common Law Division proceedings. In the proposed amended Statement of Claim (which, as I understand it, has not yet been filed) Mr Eddie Magar seeks, among other things, a declaration that there is a valid and binding lease between he and Aldi Petroleum and, further or in the alternative, a declaration that both the Arab Bank and Aldi Petroleum are estopped from denying that there is a valid and binding lease between Aldi Petroleum and Mr Eddie Magar in respect of the Guildford Leasehold and/or that Aldi Petroleum holds the Guildford and Carramar properties on constructive trust for him.

39 The allegations which, by the proposed amendment, Mr Eddie Magar now seeks to make against Arab Bank relate to the making of alleged representations by Mr Whiddon in October 2008 (and in the 21 October 2008 Indicative Letter of Offer) to the effect that Arab Bank would advance to Mr Eddie Magar and/or his related entities the sum of $5 million plus $3 million for capital expenditure. The reliance pleaded on those representations is said to be that Mr Eddie Magar rejected and/or did not pursue other offers of loan from other potential lenders thereby suffering detriment.

40 The allegations against Aldi Petroleum are more extensive. It is asserted that a signed written lease in respect of the property was forwarded by Mr Eddie Magar to Aldi Petroleum in about mid-December 2008 (particulars of which are promised to be furnished following discovery and inspection though it seems that Mr Eddie Magar may there be relying on the undated deed of sale) and that, on the basis of an assumption and/or expectation that Aldi Petroleum had signed or would sign the written lease in respect of the Guildford Leasehold, Mr Eddie Magar had taken certain steps in relation thereto (including steps in relation to the fit-out of the service station premises and the payment of rent to the head lessor). The Receivers are not a party to the Common Law Division proceedings but were joined as respondents to the notice of motion filed in those proceedings.

41 By notice of motion filed in Court on 7 May 2010 (pursuant to orders by Bryson AJ), Mr Eddie Magar, who claims a declaration that there is a valid and binding lease between himself “and or his [unspecified] related entity/ies” and Aldi Petroleum in respect of the Guildford Leasehold, sought interlocutory relief restraining Arab Bank and/or the Receivers, until further order, from further interference with his possession of the Guildford Leasehold, either directly or through his servants or agents.

42 While it was only the interlocutory relief sought in paragraph 11 of the notice of motion which was before me, I note that the notice of motion filed in the Common Law Division proceedings also seeks a declaration that Arab Bank and/or Aldi Petroleum are estopped from denying that there is a valid and binding lease between Mr Eddie Magar and Aldi Petroleum and/or a declaration that Aldi Petroleum holds the property on constructive trust for Mr Eddie Magar; and an order that the Receivers be restrained from taking any step in their capacity as receivers of the leasehold property.

43 In essence, the Receivers claim an entitlement to possession of the Guildford Leasehold on the basis that they were neither privy to, nor did they approve, any sub-lease to Mr Eddie Magar or any related entity. (They say that any sub-lease, as asserted by Mr Eddie Magar, was one to which the head lessor’s consent has not been obtained (in breach of the provisions of the head lease) and hence that they are exposed to the risk that the head lessor will rely on the failure to obtain consent as a breach of the Aldi Petroleum lease entitling it to terminate the leasehold interest, thus putting at risk the security.)

44 Mr Thomson also submits that the undertaking as to damages proffered by Mr Eddie Magar, through his Counsel, is not to be regarded as having any value, particularly where there is no challenge to Arab Bank’s title to the securities but no payment into court has been tendered. As noted in Fisher & Lightwood’s Law of Mortgage, 2^nd ed, Butterworths, 2005, at [2038], payment into court is commonly seen to be a condition of a grant of an injunction to restrain a sale by a mortgagee and is generally required when a mortgagor is seeking to restrain a mortgagee (acting properly) from selling prior to any contract for sale having been made. It is noted that, however, the rule is not inflexible (Harris v Western Australian Exim Corp (1994) 129 ALR 387, at 399-400, per Hill J). (And in the context of interlocutory injunctive relief, in Eltran Pty Ltd v Westpac Banking Corp (1988) 32 FCR 195, where a lack of credit made it impossible for a mortgagor to give the usual undertaking as to damages and where the mortgaged property was likely to remain an adequate security for the mortgagee, such an undertaking might not be required.)

45 For the purposes of the interlocutory application before me, the Receivers did not press for any order for payment into court or for security to be provided for the undertaking as to damages.

46 For Mr Eddie Magar, it is submitted that similar questions arise under both proceedings, namely whether he has an arguable claim to the interest in the Guildford Leasehold and that, in those circumstances, the balance of convenience lies in granting an injunction to restrain the Receivers from taking any steps at this stage (given the asserted importance of the service station premises to his Volume Plus group of companies and the damage to the value of the property and to the reputation of the Magar entities of any taking of possession by the Receivers). For Aldi Petroleum it is similarly submitted that the balance of convenience lies in preserving the status quo until the issues based on the alleged representations made in late 2008 can be finally determined.

Issues

47 There are, therefore, two broad issues: first, irrespective of whether Arab Bank, as mortgagee, is bound by any sub-lease to Mr Eddie Magar, are the Receivers able to assert rights to possession of the Guildford Leasehold when acting in their capacity as agent for Aldi Petroleum (as mortgagor) which would be inconsistent with any sub-lease agreement entered into by Aldi Petroleum; and, secondly, turning to the application brought by Mr Eddie Magar, should the Receivers be restrained from taking any step, in their capacity as receivers of the Guildford Leasehold, which interferes with Mr Eddie Magar’s occupation of the premises pending a final determination of the issues in the Common Law Division proceedings.

(i) Are the Receivers able to assert rights inconsistent with the obligations of the mortgagor to third parties?

48 Counsel for the Receivers, Mr Thomson, contends that Arab Bank, as mortgagee, is not bound by any unregistered sub-lease to which it did not consent and, accordingly, that the Receivers are entitled to possession free of any leasehold interest of the kind Mr Eddie Magar asserts.

49 There is no dispute that a registered mortgagee is not bound by a subsequent unregistered interest to which it has not consented. However, Mr Narayan relies on the decision of Palmer J in Antar v Fairchild Development Pty Ltd (R&M App) and Ors [2008] NSWSC 638, for the proposition that (whether or not Arab Bank, as mortgagee, would be bound by any lease of the kind which Mr Eddie Magar asserts) the Receivers (who have been appointed as, and as a matter of common law act as, the agents of Aldi Petroleum) cannot assert an entitlement to vacant possession against a third party (Mr Eddie Magar) with whom Aldi Petroleum entered into an enforceable agreement for lease (assuming for this purpose that Mr Eddie Magar can establish a binding agreement for lease or one which Aldi Petroleum is estopped from denying). Mr Narayan submits that the effect of the decision in Antar v Fairchild is that the summons brought by the Receivers must be dismissed.

50 Palmer J in Antar v Fairchild held, in effect, that where a receiver is appointed as agent for the mortgagor, the receiver cannot enforce a right that the mortgagor could not have itself enforced. So that where (as between a mortgagor/lessor and lessee) an unregistered lease is binding on the mortgagor, then where the mortgagee exercises its rights to appoint a receiver that receiver acting as agent of the mortgagor cannot exercise rights to possession greater than the mortgagor enjoys (and s 53(4) of the Real Property Act 1900 (NSW) will not operate to give the receiver an ability to take possession as against any unregistered lessee).

51 For Aldi Petroleum, Mr Young places significance on the 21 October 2008 email from Mr Whiddon, which advises that Arab Bank needed to be satisfied with the lease-back arrangement before providing finance to Mr Michael Ayoub. He submits that, in circumstances where Arab Bank did in fact provide finance to Mr Michael Ayoub and knew that there was going to be a lease-back arrangement, then this raises a serious question as to whether Arab Bank is estopped from denying its consent (or acquiescence) to the Magar sub-lease. It was submitted that, Arab Bank having done nothing to satisfy itself as to the lease-back arrangement of which it was on notice, it cannot now be heard to say that it was not aware that such an arrangement was going to occur. As noted above, reliance was also placed on the fact that on 22/23 December 2008, Mr Eddie Magar had received back the keys to the Guildford Leasehold (although this was from the Capita receivers).

52 As noted, Mr Narayan places reliance on the decision of Palmer J in Antar v Fairchild. This has recently been followed by McDougall J in ACN 113 137 397 v Winterbottom [2010] NSWSC 421. Those authorities, as I read them, support the proposition contended for by Mr Narayan that where receivers are appointed by a mortgagee, as agent of the mortgagor, and the receivers are acting as agent for the mortgagor, then the receivers cannot enforce a right to possession which the mortgagor could not have asserted against an unregistered lessee, despite the fact that the mortgagee itself may not be bound by such a lease by reason of the application of s 53(4) of the Real Property Act or otherwise.

53 Against this, it has been submitted by Mr Thomson that this undermines the policy behind s 53(4) of the Act. Mr Thomson submits that, when regard is had to the authorities regarding the nature of the purpose and the functions of appointing a receiver to enforce a mortgagee’s security (there referring to the discussion in Fisher and Lightwood’s Law of Mortgage, at [18.5], as to the agency not being an ordinary agency but primarily a device to protect the mortgagee (see Needham J’s decision in Expo International v Chant [1979] 2 NSWLR 820 and Nicholls VC in Re LeylandDAF Ltd [1994] 1 BCLC 264, at 269) to ensure that the mortgagor is liable to third parties in respect of the conduct of the agents) and that the agency function in that regard is a limited one, then the result in Antar v Fairchild should not be followed.

54 In Antar v Fairchild, Palmer J considered the limits of the protection afforded to a registered mortgagee by s 53(4), as against an unregistered lessee of the mortgagor’s interest. After suggesting that s 53(4) does not invalidate or limit the rights and obligations between the lessor and the lessee themselves (at [11]) Palmer J drew a distinction between the situation where a mortgagee seeks to exercise its power of sale, in which case s 53(4) may operate to allow the registered mortgagee to take possession without being subject to any unregistered lease not consented to, and the situation where receivers have been appointed by the mortgagee, but nonetheless are acting as the agent of the mortgagor, and will be bound in the same way as the mortgagor, who, as lessor, is bound by the unregistered lease as between the lessor and lessee, despite the operation of s 53(4) (at [12]).

55 His Honour said, at [10]-[11]:

The Receivers … rely upon s 53(4) of the Real Property Act , which provides:

“A lease of land which is subject to a mortgage, charge or covenant charge is not valid or binding on the mortgagee, chargee or covenant chargee unless the mortgagee, chargee or covenant chargee has consented to the lease before it is registered.”

It is arguable that s 53(4) of the Real Property Act applies only when a leasehold interest is asserted against a mortgagee who has not consented to its grant; it does not invalidate the rights and obligations between the lessor and the lessee themselves. So, for example, a lease to which the mortgagee has not consented could not prevent the mortgagee from evicting the lessee in order to exercise its power of sale and to convey a title clear of the lease, but the lease would be enforceable by the lessee against the lessor and against anyone else other than the mortgagee: see e.g. Iron Trades Employers’ Insurance Association Ltd v Union of House & Land Investors Ltd [1937] Ch 313, at 317ff; Parkinson v Braham [1962] SR(NSW) 663, at 672.

56 His Honour noted that there was no exercise of the power of sale in that case. Rather the receivers, as agents of the mortgagor, were seeking to enforce a contract entered into by the mortgagor prior to their appointment. His Honour said, at [14]-[15] that:

It seems to me that, as matters presently stand, it is premature for the Bank as mortgagee to insist on removal of the caveat protecting Mr Antar's claimed leasehold interest. In the scenario which I have depicted, it may well never arise that the Bank has to exercise its power of sale because, as I have said, it may be that the contract with Northaxis will be specifically performed.

If, for some reason, the contract with Northaxis fails and is terminated by one side or the other so that the Bank is then directly and immediately confronted with the necessity to exercise its power of sale in its own right, as it were, rather than by adopting a contract made by Fairchild itself, then, if it wishes, it may prevail in its claim against Mr Antar so that his caveat does not stand in the way of a new sale.

57 Palmer J’s decision in Antar v Fairchild was briefly discussed, and applied, by McDougall J in Winterbottom. There, McDougall J confirmed that the operation of s 53(4) does not affect the enforceability of a lease as between lessor and lessee (whatever may be the rights of the mortgagee against the lessor as mortgagor) with the result that a receiver appointed to a lessor, when acting as agent of the lessor, will be exercising the rights of the mortgagor/lessor (not the rights of the mortgagee), and so will be bound by the terms of the lease and s 53(4) will not apply. Relevantly, McDougall J there pointed out that had the mortgagor instead exercised its powers under the mortgage to take possession in its own capacity, then it would have been able to do so without being subject to the lease, consequent upon s 53(4).

58 McDougall J distinguished the decision of the Full Court of the Supreme Court of Queensland in Lake Eerie Pty Ltd (Receiver and Managers appointed) Ltd v Flair Realty Pty Limited [1992] ANZ ConvR 627; (1992) Q ConvR 54-420 (which supported the proposition that receivers appointed by a mortgagee had not only their powers as agents of the mortgagor but also their powers as representatives of the mortgagee, and that their powers under the former head could be exercised in aid of their powers under the latter head). Whilst Lake Eerie might have appeared to suggest a contrary conclusion, insofar as there a receiver, acting as agent of the mortgagor, was nonetheless held not to be bound by a management agreement entered into by the mortgagor to which it had not consented (pursuant to which a third party was given the right to collect rents of a shopping centre and a charge in respect of such rents), McDougall J distinguished the case on the basis that the receivers in that case were not arguing the point of entitlement to possession as against an unregistered lessee but, rather, the rights of that unregistered lessee, pursuant to a deed of assignment, to receive the rents of the property in effect as agent of the lessor.

59 McDougall J stated (at [19]):

In Antar v Fairchild Development Pty Ltd (R&M App) [2008] NSWSC 638, Palmer J pointed out at [11] that even if s 53(4) of the Real Property Act 1900 (NSW) operated as between a lessee under an unregistered lease and a prior registered mortgagee, that had no impact "on the rights and obligations between the lessor and the lessee themselves". His Honour noted that a lease entered into without the requisite consent of the mortgagee could not prevent the mortgagee from evicting the lessee so as to exercise its power of sale with vacant possession. But even in those circumstances, his Honour concluded, “the lease would be enforceable by the lessee against the lessor and against any one else other than the mortgagee.” His Honour referred to authority which, in my view, makes good the propositions that I have quoted.

Mr Henskens sought to distinguish what his Honour had said on the basis that that case was not concerned with the exercise of a power of sale of the mortgaged property, but, rather, with an attempt by the receivers to sell other property of the mortgagor, for the purpose of which, they said, they needed vacant possession. That does not seem to me to matter. It does not have any impact on the proposition that as between lessor and lessee, a lease may be enforceable even though it is not enforceable against a prior registered mortgagee from the lessor.

In this case, if the bank had itself gone into possession, or had gone into possession through the defendants, and if the defendants had purported to exercise the bank's rights to possession, there could be no case for injunctive relief. But, as Mr Dubler submitted no doubt for good practical and legal reasons, the defendants chose to act not as the bank in possession, but as agent of Llerevni . It seems to me that if (as Palmer J said in Antar was the case) Llerevni could not evict Hotel Sands, then its agents, the receivers, acting in that capacity, could not do so. For those reasons, it seems to me, the notice to vacate given on 16 April 2010 is not effective in law as between Llerevni (or the defendants in their capacity as its agents) and Hotel Sands. (my emphasis)

60 Relevantly, for present purposes Mc Dougall J noted (at [37]) that:

It may be correct to say that the bank could rectify this position in the near future by going into possession itself, either directly or by appointing the defendants to receive the rents and profits of the property. If it did so, then its exercise of a right under the mortgage would undoubtedly enable it to obtain vacant possession as against the unregistered lessee… But in circumstances where the bank has chosen to act the way it did, and whether for it to act in other ways would mean that it attracted, among other things, legal obligations relating to its occupation and use of the mortgaged property, I do not think that relief should be refused simply on the grounds that the bank might take some further action . (my emphasis)

61 It was submitted by Mr Thomson that the argument based on Antar v Fairchild could only ever be on a technical and temporary basis to resist a claim by receivers in this context and that, if this were to be a problem, then the same orders would be sought but conditional on the bank retiring the receivers and appointing them, instead, as the bank’s agents in possession. However, following the approach adopted by McDougall J above, it seems to me that it is for the bank to take such action as it may be advised rather than to seek amended relief on a conditional basis and without the defendants having an opportunity to consider any objection they might then have to such a course.

62 I accept the reasoning espoused in Antar v Fairchild and Winterbottom. The Receivers cannot, as agents of Aldi Petroleum (even noting that theirs is a limited agency and one which at common law operates as a device to protect the mortgagee), assert a right to possession which would be inconsistent with that which Aldi Petroleum could itself assert. Therefore, if (as the evidence leads me to conclude) there is a serious question to be tried as to the existence of the sub-lease claimed by Mr Eddie Magar, as between Aldi Petroleum and himself (whatever may be the position in relation to the estoppel claimed against Arab Bank), then until that issue is determined the Receivers are not in a position to establish the basis for the declaratory and other relief sought by them in the Summons.

63 In those circumstances, as I understand it, Mr Narayan presses for the dismissal of the Summons. While Mr Thomson has adverted to steps which Arab Bank might seek to take in order to overcome the perceived technicality of the result in Antar v Fairchild, it does not seem to me that (absent amendment to the Summons and any further evidence or argument on the point) I should make orders (even of a conditional kind) as sought.

64 It is a matter for Arab Bank to determine whether it wishes to proceed to exercise its rights as mortgagee on the basis of its contention (which seems to me to have considerable force on the evidence before me) that it is not bound by any sub-lease of the kind claimed by Mr Eddie Magar (even if that sub-lease can be established by him). Therefore, subject to any application by the Receivers to amend the Summons in order to seek relief of the alternative kind foreshadowed during the course of the hearing of the present applications (or to consolidate the two sets of proceedings, as I discuss below) it seems to me that the appropriate order would be to dismiss the Summons.

(ii) Interlocutory relief claimed by Mr Eddie Magar

65 Mr Narayan submits that there is a serious question to be tried as to whether there is a valid and binding lease between Mr Eddie Magar and/or his related entities and Aldi Petroleum. As is apparent from the discussion above of the first issue, I agree. That is the basis on which I am unable to be satisfied that the Receivers are presently able to exercise their rights as agents of Aldi Petroleum to possession of the Guildford Leasehold.

66 While I accept that there is some doubt attaching to the circumstances in which a lease agreement was apparently concluded on the basis that no rent might ever become payable (and such a lease might well be one for which head lessor approval could reasonably be withheld), and there is a doubt in my mind as to the enforceability of a lease where the identity of the lessee seems to be somewhat up in the air, the evidence establishes that the prospect of a lease-back was on the table, so to speak, as at the time the Aldi Petroleum acquisition took place; there is evidence that Mr Eddie Magar or his entities took possession as at late 2008 (and that to some extent the head lessor may have been aware of this, though not necessarily in any way bound thereby); and that rent and other moneys have been expended by Mr Eddie Magar in relation thereto. There is a signed document in existence which contains an agreement for lease. Its authenticity and enforceability cannot be finally determined on the evidence before me.

67 Therefore I think there is a serious question to be tried on that issue. That said, the existence of a lease of the kind asserted would not in my view support a broader injunction than one to restrain the Receivers from acting, in their capacity as agents of the mortgagor, to interfere with Mr Eddie Magar’s occupation or possession of the premises pending determination of the Common Law Division proceedings. If they were to be appointed otherwise than as agents of the mortgagor, then no such issue would seem to me to arise.

68 Mr Narayan, however, submits that not only is there is a serious question to be tried as to whether there is a valid and binding lease between Mr Eddie Magar and/or his related entities and Aldi Petroleum, but also he submits that there is a serious question to be tried as to whether Aldi Petroleum and Arab Bank are estopped from denying a valid and binding lease and, alternatively, as to whether Aldi Petroleum holds the Guildford Leasehold on constructive trust for Mr Eddie Magar relying on Bahr v Nicolay No. 2 [1988] HCA 16; (1988) 164 CLR 604 ; (1988) 78 ALR 1.

69 I am by no means persuaded that there is a serious question to be tried that Arab Bank itself is estopped from denying the existence of a binding sub-lease. I consider that Arab Bank had made its position perfectly clear – namely that its consent was necessary for any lease-back arrangement (and that its indicative letters of offer themselves were not binding unless and until there was formal acceptance thereof). Therefore, had the question been as to whether Arab Bank should be restrained from exercising its powers as mortgagee to take possession, I would not have found on the evidence that there was a serious question to be tried that it was not entitled to do so.

70 As to the constructive trust claim, similarly, I am not satisfied on the evidence that there is a serious question to be tried. The evidence does not in my view support a claim that Arab Bank proceeded to register its mortgage having undertaken to Mr Eddie Magar that it would honour any unregistered lease-back arrangement which it had not first approved (so as to found the basis for a claim for relief of this kind).

71 As to the balance of convenience, Mr Boon Pin Yap’s affidavit notes that the Receivers require vacant possession for a number of reasons:

(i) for purposes of taking steps in relation to sales (against which Mr Narayan and Mr Young both submit that, where there is a question as to the existence of a binding lease, the approach advocated and followed by Young J (as his Honour then was) in AMEV Finance Ltd v Canagon Engineering Pty Ltd (1987) 6 BPR 13,899 should be followed and the Receivers should not be able to pre-empt a final determination of that issue by proceeding in advance with the application made in their Summons);

(ii) the Receivers suspect there has been non-compliance by Mr Eddie Magar with regulatory obligations in relation to petrol stations and this may have consequences as to the exposure of the Receivers to potential liability and potential breach of lease (as to which, Mr Narayan points to the evidence by Mr Eddie Magar that no such breach did occur and in any event to the rectification of any regulatory issues, on the basis of which it is said that there can be no assertion of any potential liability for breach of lease in this regard);

(iii) the Receivers’ concerns in relation to the state of repair of the service station premises (as to which Mr Narayan asserts that it is unlikely Mr Eddie Magar would not keep a valuable asset of this kind in good repair);

(iv) that the Receivers are incurring liabilities in relation to outgoings for the property (as to which there is a factual dispute, Mr Thomson asserting that the outgoings have been paid by the Receivers in order to avoid a default and Mr Narayan saying there is no specific evidence on this issue); and

(v) that there is an apparent breach of the head lease by reason of the sub-lease without written consent (as to which it is asserted by Mr Narayan that NA Retail Solutions Pty Ltd has been paying rent under the lease since March 2009 and that the Church is aware that Mr Eddie Magar and all related entities are occupying the station for some time; though I note in this regard that the evidence of Mr Mansour suggests otherwise and that the fact that a claim for relief against forfeiture might lie if the Church were to take action consequent upon any perceived breach of this kind might perhaps only be of small comfort to the Receivers).

72 Mr Narayan points to the damage which Mr Eddie Magar deposes he will suffer as to his cash flow, reputation, goodwill and the relationship with his suppliers if he is required to vacate the Guildford Leasehold and as to the anticipated adverse impact which the removal of equipment and the like (which would be necessary in order to vacate the property) would have on the value of the property and the leasehold interest.

73 Additionally, Mr Narayan points, by way of discretionary factors, to what he says was a lack of candour on the part of the Receivers in that there was no reference, when the Equity Division proceedings were commenced and the relief was sought, to the existence of the Common Law Division proceedings in which (though not yet pleaded as such) the defendants were on notice that issues in relation to the existence of a sub-lease might be raised; and as to the delay in that the Receivers were on notice as early as 16 February of the claimed lease but did not commence proceedings until April. As to this, I do not consider the delay would have been sufficient to warrant a refusal of relief had I otherwise considered it appropriate, nor do I need to address the asserted lack of candour in the commencement of the proceedings given that the foreshadowed claims by Mr Eddie Magar were well and truly before the court on this application, though not as yet pleaded against Arab Bank.

74 As noted above, I consider that there is a serious question to be tried as to whether Aldi Petroleum is bound by the sub-lease asserted by Mr Eddie Magar and that if Aldi Petroleum were to be so bound then it would not be open to the Receivers, acting in their capacity as agents for Aldi Petroleum, to assert a claim for vacant possession which is inconsistent with that sub-lease. As to the balance of convenience, provided the adverse consequences postulated by the Receivers may be met (for example, by placing conditions on the grant of any injunctive relief in favour of Mr Eddie Magar in order to protect against conduct which may adversely affect the value of the Guildford Leasehold) then it seems to me that the consequences (in terms of business losses and diminution in the value of the leasehold interest) which Mr Eddie Magar may suffer if required to vacate the premises pending determination of his entitlement under the alleged agreement to lease outweigh the prejudice which the Receivers may suffer by reason of a delay in exercising any right to possession and hence I consider that the balance of convenience is in favour of Mr Eddie Magar for some limited interlocutory relief (but subject to conditions which should preserve the value of the leasehold interest).

75 In that regard, I have in mind that, in addition to the usual undertaking as to damages, any injunctive relief should be subject to undertakings being proffered to the court by Mr Eddie Magar of the following kind (as to the detail of which I will hear submissions by Counsel):

a) to take all reasonable steps to maintain the Guildford Leasehold in good order and condition (including compliance with all regulatory obligations attendant upon the operation of service station premises);

b) to comply with all obligations under the existing head-lease of the premises, including the payment of rent and outgoings, so far as those would be applicable if he were the registered lessee; and

c) to prosecute with expedition the Common Law Division proceedings.

76 I should also note that while the concern of the Receivers as to the apparent breach by Aldi Petroleum of the prohibition against sub-letting seems to me not to be unwarranted, there seems to have been no action taken in that regard by the head lessor (and, if there were, questions as to any claim for relief against forfeiture may well arise). If it were to be the case that steps were taken by the head lessor consequent upon a failure by Aldi Petroleum to obtain consent to any arrangement it had entered into with Mr Eddie Magar, then this would be a matter which would weigh more heavily in considering the balance of convenience against maintaining the status quo. However, at this stage the balance of convenience seems to me to favour the status quo.

77 It should be noted that, consistent with my reasoning above, any interlocutory restraint on the Receivers from interference with Mr Eddie Magar’s possession of the Guildford Leasehold can only be a restraint on them so doing in their capacity as agents of Aldi Petroleum (in which capacity they are subject to any restrictions on the mortgagor’s right to possession arising under any unregistered agreement to lease which Mr Eddie Magar may be able to establish). It seems to me that there is no basis on the material before me to restrain Arab Bank from taking action (of the kind which McDougall J in Winterbottom recognised would have been an available alternative course for the mortgagee) to exercise its rights as mortgagee, to retake possession and to sell the Guildford Leasehold, whether in its own right or by appointing the Receivers or others as agents in possession and nothing in the injunctive relief I propose to grant should be taken to restrain Arab Bank from so doing or the Receivers from acting in any other lawful capacity to take steps to retake possession of the Guildford Leasehold.

Conclusion

78 In the Common Law Division proceedings I will hear submissions from Counsel as to the appropriate form of the undertakings to which the limited grant of injunctive relief should be subject before making final orders.

79 As indicated above, I consider the appropriate course is to dismiss the Summons in the Equity Division proceedings. However, in light of the suggestion that some amendment might be sought by way of conditional relief in those proceedings, I will hear submissions as to whether, in all the circumstances, the better course is not to dismiss the summons but to consolidate the two sets of proceedings and to order that they be heard together.

80 I will also hear any submissions as to costs.

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