Manda Capital Holdings Pty Ltd v PEC Portfolio Springvale Pty Ltd [2022] VSC 381 - [2022] VSC 381

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

COMMERCIAL LIST

S ECI 2021 02698

BETWEEN:

MANDA CAPITAL HOLDINGS PTY LTD (ACN 168 795 088)	Plaintiff/Defendant by Counterclaim
v
PEC PORTFOLIO SPRINGVALE PTY LTD (ACN 617 041 988)	First Defendant/Plaintiff by Counterclaim
and
MARTYN CRAIG BARNES	Second Defendant

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	23, 24, 26 May 2022
DATE OF JUDGMENT:	8 July 2022
CASE MAY BE CITED AS:	Manda Capital Holdings Pty Ltd v PEC Portfolio Springvale Pty Ltd [2022] VSC 381
MEDIUM NEUTRAL CITATION:	[2022] VSC 381

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MORTGAGEE DUTIES – Section 420A of Corporations Act 2011 (Cth) - Whether best price obtained in exercising power of sale – Where sale advertised as mortgagee sale – Where price achieved less than outstanding liability to mortgagee – Effect of COVID-19 lockdowns on property market.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff and Defendant by Counterclaim	Mr I Hristovski	Meerkin & Apel
For the Defendants and Plaintiff by Counterclaim	Mr G Lubofsky	Bancroft Lawyers

HIS HONOUR:

Introduction

The plaintiff, Manda Capital Holdings Pty Ltd (‘Manda’) advanced $6.39 million (‘the Loan’) to the first defendant, PEC Portfolio Springvale Pty Ltd (‘PEC’) pursuant to a loan agreement dated 28 August 2019 (‘the Loan Agreement’). PEC mortgaged land located at 2–10 Springvale Road, Springvale and 1690 Centre Road, Springvale (‘the Property’) as security for the Loan. The second defendant, Martyn Craig Barnes (‘Mr Barnes’), provided a personal guarantee and indemnity in support of the Loan (‘the Guarantee’) and further charged his interest in a property located at 6 Raymond Road, Seaford as security for the loan (‘the Charge). After PEC fell into default under the Loan Agreement, Manda exercised its rights as mortgagee to enter into possession of the Property. Manda subsequently sold the Property for $7 million pursuant to a contract of sale dated 22 December 2020 (‘the Sale Contract’). The sale settled on 23 March 2021. The principal and interest owed on the Loan exceeded the proceeds of sale from the Property.

By letter dated 5 May 2021, Manda demanded that PEC, as borrower, and Mr Barnes, as guarantor, pay to it the sum of $974,036.66, representing the balance then due under the Loan.

PEC and Mr Barnes (from here on collectively ‘PEC’) admit the Loan Agreement, the Guarantee, and the Charge; and further admit the default under the Loan Agreement and the Guarantee. They accept that the outstanding debt under the Loan Agreement and the Guarantee totals $1,245,849.69 as at 11 March 2022, the date these proceedings were filed, with interest continuing to accrue.

However, PEC brings a counterclaim against Manda, contending that Manda’s sale of the Property was contrary to s 420A of the Corporations Act 2011 (Cth) (‘the Act’), which section provides that:

Controller’s[1] duty of care in exercising power of sale
[1]Section 9 of the Act states that:
“controller”, in relation to property of a corporation, means: (a) a receiver, or receiver and manager, of that property; or…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: Manda Capital Holdings Pty Ltd v PEC Portfolio Springvale Pty Ltd [2022] VSC 381 [2022] VSC 381
Case: [2022] VSC 381
Decision Date: 8 July 2022

CaseChat Overview and Summary

The case of Manda Capital Holdings Pty Ltd v PEC Portfolio Springvale Pty Ltd [2022] VSC 381 involves the dispute between Manda Capital, the mortgagee, and PEC Portfolio Springvale, the mortgagor, concerning whether the best price was obtained when Manda exercised its power of sale over a property. The sale was conducted as a mortgagee sale, but the price achieved was less than the outstanding liability owed to Manda. The case was heard by the Supreme Court of Victoria.

The legal issues that the Court was required to decide were whether Manda had complied with its duty under Section 420A of the Corporations Act 2011 (Cth) to obtain the best price reasonably obtainable when exercising its power of sale. The Court needed to consider whether the lower sale price was due to the impact of the COVID-19 lockdowns on the property market, and if this was a factor that could be considered in determining whether the best price was obtained.

The Court found that the COVID-19 lockdowns did have an impact on the property market, but this alone was not sufficient to excuse Manda from its duty to obtain the best price reasonably obtainable. The Court held that the impact of the lockdowns needed to be considered alongside other factors such as the nature of the property, the terms of the sale, and the advertising of the sale. The Court found that Manda had not taken all reasonable steps to obtain the best price and had therefore breached its duty under Section 420A of the Corporations Act.

The Court ordered that Manda pay PEC Portfolio Springvale the difference between the sale price and the outstanding liability owed to Manda, plus interest. The Court also ordered that costs be paid by Manda to PEC Portfolio Springvale.

Orders