Oakleigh Acquisitions Pty Ltd (in Liq) v Johnstone-Hall
[2006] WASC 306
•22 DECEMBER 2006
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS |
| CITATION | : | OAKLEIGH ACQUISITIONS PTY LTD (IN LIQ) -v- JOHNSTONE-HALL & ORS [2006] WASC 306 |
| CORAM | : SIMMONDS J | ||
| HEARD | : 22 FEBRUARY 2006 | ||
| DELIVERED | : 22 DECEMBER 2006 | ||
| FILE NO/S |
| ||
| BETWEEN |
|
AND
KARLYN ANNETTE JOHNSTONE-HALL
First Defendant
ANDREW ROLAND HINDLEY As Executor of the
Estate of ANDREW ROLAND HINDLEYSecond Defendant
TIM WALL
Third Defendant
Catchwords:
Enforcement of subordinate mortgage on land - Postponement agreement - Construction of correspondence in that regard - Promissory estoppel - Misleading or deceptive conduct - Statement as to future facts - Relief for breach of contract, by reason of estoppel, or by reason of misleading or deceptive conduct - Principle in In re James - Relief in mortgage enforcement action
[2006] WASC 306
Legislation:
Corporations Act 2001 (Cth), s 601EE
Fair Trading Act 1987 (WA), s 9, s 10, s 74, s 77
Law of Property Act 1925 (UK), s 81(1)
Property Law Act 1969 (WA), s 34, s 51(1), s 60(1)
Trade Practices Act 1984 (Cth), s 51A, s 52, s 80, s 82, s 87
Transfer of Land Act 1893 (WA), s 109(1)
Result:
Judgment for the plaintiff
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr C G Colvin SC & Mr B R Gannon |
| First Defendant | : | Mr D H Solomon |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Clayton Utz |
| First Defendant | : | Solomon Brothers |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
Case(s) referred to in judgment(s):
Australian Consumer and Competition Commission v Z-Tek Computer Pty Ltd
(1997) 78 FCR 197
Bridgewater v Leahy (1998) 194 CLR 457
Burton v Arcus [2006] WASCA 71
Campomar Sociedad Limitada v Nike International Limited (2000) 202 CLR 45
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR
337
[2006] WASC 306
Conlan v Registrar of Titles (2001) 24 WAR 299
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance
(Australia) Ltd (1986) 160 CLR 226
Doyle v Doyle [1992] 3 NZLR 170
Drake v Templeton (1913) 16 CLR 153
Hartogen Energy Ltd (in liq) v Australian Gas Light Co (1992) 36 FCR 557
Hillboi Nominees Pty Ltd v Evenwood Pty Ltd [2000] WASCA 66
ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38
FCR 248
Marks v GIO Australia Holdings Limited (1998) 196 CLR 494
Pacific Carriers Ltd v BNP Paribas (2004) 208 ALR 213
Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd (2005) 220 ALR 211
Re Condon; Ex parte James (1874) LR 9 Ch 609
Taco Co of Australia Inc v Taco Bell Ltd (1982) 42 ALR 177
Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd (2004) 219 CLR 165
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Case(s) also cited:
Allen v Carbone (1975) 132 CLR 528
Bank of New South Wales v Hartman (1955) 72 WN (NSW) 382
Barns v Queensland National Bank Ltd (1906) 3 CLR 925
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1997) 180 CLR 266
Browne v Dunn (1893) 6 R 67
Cheah Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472
Commonwealth v Verwayen (1990) 170 CLR 394
Currie v Misa (1876) LR 10 Ex 153
Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq)
(1948) 76 CLR 463
Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847
Eng Mee Yong v Letchumann [1980] AC 331
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Federal Commissioner of Taxation v Sara Lee Household & Body Care (Aust)
Pty Ltd (2000) 201 CLR 520
Fisher v Rural Adjustment & Finance Corporation of Western Australia (1995)
57 FCR 1
Gould v Vaggelas (1985) 157 CLR 215
Hawkins v Gaden (1925) 37 CLR 183
Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549
Hennessy v Rourke (1893) 15 LR (NSW) 33
Hypec Electronics Pty Ltd (in liq) v Mead (2003) 179 FLR 295
[2006] WASC 306
Kirby v Cowderoy [1912] AC 599
Lane v Conlan (2004) 28 WAR 337
Maggbury Pty Ltd v Hafele Aust Pty Ltd (2001) 210 CLR 181
Maye v Colonial Mutual Life Assurance Society Ltd (1924) 35 CLR 14
McCann v Switzerland Insurance Aust Ltd (2000) 203 CLR 579
Metal Manufacturers Pty Ltd v Lewis (1988) 13 NSWLR 315
MJW v The Queen (2005) 222 ALR 436
Motor Credits (Hire Finance) Ltd v Pacific Motor Auctions Pty Ltd (1963) 109
CLR 87
Niesmann v Collingridge (1921) 29 CLR 177
Noyes v Pollock (1886) 32 Ch D 53
Patroni v Conlan [2004] WASC 16
Re Cunningham & Co Ltd (Simpson's Claim) (1887) 36 Ch D 532
Re Oakleigh; Ex parte Conlan [2003] WASC 75
Sutton v A J Thompson Pty Ltd (in liq) (1987) 73 ALR 233
Tay Bok Choon v Tahansan SDN BHD [1987] 1 WLR 413
Thomas v Thomas (1842) 2 QB 851
Thompson v Palmer (1933) 49 CLR 507
Ting v Blanche (1993) 118 ALR 543
Tobin v Broadbent (1947) 75 CLR 378
Webb v Jonas (1888) 39 Ch D 660
[2006] WASC 306
SIMMONDS J
SIMMONDS J:
Introduction
This is an action arising out of the enforcement, to the point of sales and their settlement, of mortgages over interests in two properties.
2 The action is brought by the plaintiff, as one of the two mortgagees
under the first registered mortgage, principally for the distribution to it of the remaining proceeds of enforcement in relation to the property to which their mortgage.
3 The plaintiff is also one of the three mortgagees under the second
registered mortgage on the property to which the first registered mortgage relates. The second registered mortgage is also registered against the other property, while the other mortgage is not. The plaintiff's action is also brought for the distribution to the plaintiff of the remaining proceeds of enforcement in relation to the property to which the second registered mortgage relates but the other mortgage does not.
4 There are also claims for other relief, including for compensation for
the delays in the settlement of the sales of both properties, delays for
which the plaintiff says the defendant is responsible.
The plaintiff had the conduct of the mortgage enforcement proceedings in respect of both properties.
The first defendant and third defendants are the other mortgagees under the second registered mortgage.
The second defendant is the other mortgagee under the first registered mortgage.
8 It is alleged by the first defendant that there was an agreement or
representations that the proceeds of the sales of the two properties would be applied without regard to the mortgage shown as the first registered mortgage on one of them. It is alleged that the agreement was made with, or the representations made by, the plaintiff. It is further alleged that the first defendant relied upon this agreement and those representations, to her detriment. On the bases of the agreement and the representations she is not liable to compensate the plaintiff for the delay in settlement, which it says was the result of the failure of the plaintiff to acknowledge the agreement. The first defendant also claims to set off all of the amounts payable to her pursuant to her counterclaim against any amounts payable by her to the plaintiff. The first defendant also makes a claim for relief
[2006] WASC 306
SIMMONDS J
based on the status of the plaintiff as a company in liquidation, the liquidator of which the first defendant says is under an obligation not to insist on the strict application of the rules of law or equity in the determination of claims against her where such insistence would produce an unjust or dishonest result.
On the bases of the agreement and the representations, as well as the pleaded obligation, the first defendant also counterclaims.
10 There is a further pleading by the first defendant that the plaintiff had
no authority to enter into the agreement she contends for. There indeed appeared to be no dispute that plaintiff did not have any authority from the second defendant to enter into any such agreement. However, the first defendant's pleading does not appear to base her counterclaim on this lack of authority. I return below to what appears to be the relevance of this pleading in this case.
11 Pursuant to the directions in that regard, the trial of the action before
me was heard in chambers and was conducted on affidavits filed in the
matter. There was no cross-examination on those affidavits.
The second and third defendants indicated a wish not to take part in these proceedings, and to abide by the results in them.
13 I first outline the factual background, which as will be seen is
principally to be drawn from the correspondence between the solicitors for the plaintiff and the first defendant annexed to a number of the affidavits. That correspondence for the most part represents letters faxed to their addressees, and, where faxed, so far as was made apparent to me faxed on their dates. I then describe these proceedings, and the evidence and the issues in the hearing before me. I then consider the evidence with respect to the issues, providing my findings. The final section is my conclusions and orders.
Background
I begin by describing the two mortgages in this case in more detail.
15 By an instrument dated 15 December 1994, Brian Richard Carter and
Irene Elizabeth Carter (collectively, "the Carters") mortgaged the fee simple in a portion of Plantaganet Location 4526, being the whole of the land comprised in Certificate of Title Volume 448 Folio 18A, to Andrew Roland Hindley and Ruth May Hindley (collectively, "the Hindleys");
[2006] WASC 306
SIMMONDS J
Tom Trentham Warren and Olga Gray Warren (collectively, "the
Warrens"); and the plaintiff.16 On 15 January 1995 that mortgage was registered at the Department
of Land Information ("DOLI"), as F777556. I call the mortgage so registered "the F Mortgage", and the land the subject of the freehold interest so mortgaged, "the Homestead Property".
17 Ruth Hindley, in her personal capacity, and in her capacity as
executor of the deceased estate of Andrew Hindley, is the second
defendant.18 The F Mortgage was expressed to secure the principal sum of
$200,000. In cl 27 it is provided that "the principal sum is advanced" by
the mortgagees, and their shares are held, in the following manner:
• $25,000 by the Hindleys, the mortgage held as joint tenants as to 25 undivided 200,000th shares; • $10,000 by the Warrens, the mortgage held as joint tenants as to 10 undivided 200,000th shares; and • $135,000 by the plaintiff, the mortgage held as 135 undivided 200,000th shares.
19 There is no express reference to whether the mortgagees hold as
between themselves jointly or as tenants in common, which may be contrasted with the corresponding clause for the G Mortgage, below. However, it would seem that any of the mortgagees (or, in the case of mortgagees holding as joint tenants, they together) could sue to enforce the personal covenant as to that mortgagee's own share; alternatively, they could sue jointly for the entire amount advanced: see Property Law Act 1969 (WA), s 51(1); and see Law of Property Act 1925 (UK), s 81(1) and Halsbury's Laws of England, current, Deeds and Other Instruments, at [263]; see also on the position before such provisions: Drake v Templeton (1913) 16 CLR 153, and Doyle v Doyle [1992] 3 NZLR 170, Gambrill M.
It will be noted that the total of those three amounts is $170,000, not $200,000. I return to this matter below.
On 15 January 2001, a transfer of 10 undivided 200,000th shares from the Warrens to the plaintiff was registered at DOLI.
[2006] WASC 306
SIMMONDS J
22 The effect of these matters was that from that date the plaintiff and
the second defendant were shown as the mortgagees under that mortgage
on the Certificate of Title for the Homestead Property.23 By an instrument dated 9 May 1996, the Carters mortgaged the
Homestead Property and another property to the first defendant; the third defendant; and Ronald Alva King and Dorothy Frances King (collectively, "the Kings").
24 The additional property the subject of the later mortgage was
Lease I219832 (formerly Crown Lease 423/1994) over Lot 124 on deposited plan 192052 contained in Crown Land Title Volume LR3011 Folio 970. I call this property "the Industrial Property".
On 13 January 1997 the later mortgage was registered at DOLI, as G371574. I call this later mortgage so registered "the G Mortgage".
26 It is common cause that the only encumbrance on the Homestead
Property registered prior to the G Mortgage was the F Mortgage. It is also common cause that there was no encumbrance on the Industrial Property registered prior to the G Mortgage.
27 The G Mortgage was expressed to secure the principal sum of
$200,000. In cl 29 it is provided that "the principal sum is advanced" by
the mortgagees and the mortgage held in the following manner:
• $120,000 by the first defendant, the mortgage held as to 120 undivided 200th shares; • $10,000 by "Tim Wall Trust for Ying Wall Family Trust", the mortgage held as to 10 undivided 200th shares; and • $70,000 by the Kings as joint tenants, the mortgage held as to 70 undivided 200th shares.
28 The clause provides that all of the mortgagees hold "as tenants in
common". This would appear to make the position clear in respect of the possibility for action by any of the mortgagees (or in the case of joint mortgagees, them together) severally, for their separate shares, or jointly for the whole amount advanced: see the references for the corresponding clause (cl 27) in the F Mortgage above.
On 15 January 2001 the plaintiff was registered as mortgagee under the G Mortgage as to "the 70/200th shares" of the Kings "only".
[2006] WASC 306
SIMMONDS J
30 The effect of these matters was that from that date the mortgagees
under that mortgage were the first defendant, the third defendant and the plaintiff, as shown on the Certificate of Crown Land Title for the Industrial Property.
31 By letter dated 7 August 2000, from the liquidator of the plaintiff to
the first defendant and the person I understood to be her husband, the liquidator informed them the Carters were "in default of their repayments to [the plaintiff]" under the G Mortgage. I note at this point that it is not disputed that the Carters were also at all material times in default under the F Mortgage.
32 The liquidator indicated he had instructed solicitors "to commence
legal proceedings for recovery of the outstanding principal and interest pursuant to [the G Mortgage]". He added that "as registered mortgagee" he sought "your consent to joining with [the plaintiff] in this action". The letter went on:
"All recovery costs, such as selling costs (in need), valuation costs, settlement agents fees etc, which can be recovered pursuant to the mortgage will be deducted from the settlement proceeds.
Funds recovered as a result of any action under the mortgage will be applied in repayment of outstanding interest in priority to outstanding principal. Should there be a shortfall between the amount recovered, after payment of outstanding interest and the outstanding principal, that shortfall will be shared proportionately between those who claim to have a registered interest pursuant to the mortgage."
The letter went on to say:
"Should you not wish to join with Oakleigh in these proceedings I may need to make application to the Supreme Court in this matter."
34 It may be noted, as I did previously, that an action to enforce the
payment of the entire amount of the principal and interest due under the G Mortgage – or indeed the F Mortgage – would appear to require the consent of all of the mortgagees in each case: see Drake (supra), per Griffith CJ, at 158, and Burton v Arcus [2006] WASCA 71, per Busse JA, Steytler P and McLure JA agreeing, at [134]. It is therefore not clear on what basis proceedings might be brought to enforce payment of
[2006] WASC 306
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the entire amount if the consent of the first defendant was not secured. For the plaintiff it was put to me I could assume that such a basis existed. However, in the face of the authorities I have listed, I am unable so to assume.
35 I note, however, that if the arrangements under the F Mortgage and
under the G Mortgage were each an unregistered managed investment scheme for the purposes of Corporations Act 2001 (Cth), s 601EE, it might have been possible to wind up the scheme so as to achieve something like the effect I was to assume: see Burton, the appeal in which was pending at the time of the hearing before me. However, no argument was addressed to me on that point, although counsel for the first defendant made me aware of the determination there was no managed investment scheme in the judgment appealed from.
36 The letter, a copy of which forms part of the Hearing Bundle, has on
it the legend that the first defendant agreed "to join with [the plaintiff] in commencement of legal proceedings against [the Carters] for recovery of the outstanding principal and interest pursuant to [the G Mortgage]", a legend which the first defendant had signed. It appears that the letter so endorsed was sent under cover of a letter dated 26 September 2000 addressed to the liquidator for Rowena Nominees Pty Ltd by the solicitors for the first defendant, Solomon Brothers. I return to this letter shortly. The legend so signed bears the reference to the G Mortgage in the form "mortgage No: FG371574", with the "F" crossed out. It is not clear who crossed the "F" out, or when: the only other crossing out on the legend bears what appear to be the first defendant's initials.
37 By letter dated 22 August 2000, from Solomon Brothers, as solicitors
for the first defendant, addressed to the liquidator of Rowena Nominees, Solomon Brothers, under the heading "Graeme Grubb Finance Broker - Folio 4512 - Carter", indicated their "understanding" that "action on the default of the Carters is being taken on behalf of all registered and unregistered mortgagees in respect of this folio and other folios". This I understood to be a reference to the folios for investors in mortgages part of finance broking activities of Rowena Nominees Pty Ltd ("Rowena Nominees"), previously trading as Graeme Grubb, Finance Broker, of which the liquidator in his letter dated 7 August 2000 informed the Johnstone Halls he had been appointed liquidator and supervisor of its finance broking activities. As will be seen the reference "Graeme Grubb Finance Broker - Folio 4512" with a reference to the Carters appears in later correspondence from both Solomon Brothers and the then solicitors for the plaintiff, Clark Whyte. I note that there is background to the way
[2006] WASC 306
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the plaintiff and Rowena Nominees operated as part of what could be described as the business of Graeme Grubb Finance Brokers which appears in Conlan v Registrar of Titles (2001) 24 WAR 299, per Owen J, at 304 and 305. I note, as counsel for the defendant reminded me, that Conlan came after the letter dated 22 August 2000, and that that decision confirmed the priority position of the registered mortgagees who had participated in contributory mortgages, of the sort represented by the F Mortgage and the G Mortgage, arranged by that business.
38 The letter from Solomon Brothers dated 22 August 2000 went on,
among other things, to "advise at this stage" of their client's "indefeasible
claim" under the G Mortgage, which:
"…will only be subject to prior registered mortgage F777556 [the F Mortgage] over [the Homestead Property], and will not be subject to any other claim in respect of Crown Lease 423/1994 [the Industrial Property]."
39 There was the same letter sent from the liquidator of the plaintiff to
the third defendant as that sent from the liquidator to the first defendant dated 7 August 2000. The copy of the letter in the Hearing Bundle bears an endorsement for him signed by the third defendant without any material variations from that of the first defendant.
40 Subsequently, by letter dated 26 September 2000, to which I have
previously referred, from Solomon Brothers to the liquidator of Rowena Nominees, Solomon Brothers, under the heading "Graeme Grubb Finance Broker - Folio 4512 - Carter Br", enclosed:
"A copy of our client's, Ms Johnstone-Hall, signed letter agreeing to the commencement of legal proceedings against the mortgagor under registered mortgage G371574 [the G Mortgage]."
41 Between September 2000 and October 2001 the Carters made efforts
to refinance their obligations under the F Mortgage and the G Mortgage. There is no indication that any proceedings in relation to those mortgages were taken until December 2001.
42 By letter dated 23 October 2001 from the then solicitors for the
plaintiff, Clark Whyte, to Solomon Brothers, under the heading "Graeme Grubb Finance Broker – Folio 4512 Brian Richard & Irene Elizabeth Carter", Clark Whyte indicated that their client had instructed them that, unless they received the consent of the first defendant:
[2006] WASC 306
SIMMONDS J
"To proceed against [the Carters] for possession of their property, within 7 days of the date of this letter, we will proceed to issue a summons in the Supreme Court joining your client as a defendant."
43 I note that it not clear on what basis the plaintiff could have initiated
proceedings to take possession of the Homestead Property or the Industrial Property under the G Mortgage without the consent of the other registered mortgagee under it: see the references for cl 27, above. However, there is no doubt that the plaintiff could, with the consent of the second defendant, have initiated proceedings to take possession of the Homestead Property under the F Mortgage without the concurrence of the registered mortgagees under the G Mortgage: see ELG Tyler, PW Young and C Croft, Fisher and Lightwood's Law of Mortgage, 2nd Australian ed, Sydney, Butterworths, 2005, at [20.10].
44 By letter dated 2 November 2001 from Solomon Brothers to Clark
Whyte, under the heading "Graeme Grubb Finance Broker – Folio 4512 - Carter", and referring to the letter dated 23 October 2001, Solomon Brothers:
"Hereby advise[s] that our client consents to proceedings being instituted by registered mortgagees under F777556 and G371574 to obtain possession of Crown Lease number 423/1994 and Certificate of Title volume 4526 folio 18A to enable a mortgagee sale to occur."
The letter went on:
"Our client gives her consent on the basis that the transfers of mortgage of Mortgages F777556 and G371574 to [the plaintiff] from the various mortgagees were as a result of those mortgagees being repaid their mortgage entitlement by either Rowena Nominees Pty Ltd or [the plaintiff]. Please note that our client's consent is conditional upon our client being able to apply any moneys received from legal action in the above matter as they see fit, including for example, to outstanding principal first."
46 I note that the reference to the F Mortgage and to the G Mortgage in
the letter from Solomon Brothers dated 2 November 2001 is not matched by any such identifying reference in the letter from Clark Whyte dated 23 October 2001.
[2006] WASC 306
SIMMONDS J
47 I also note that, as I have already explained, there is no requirement
for the registered mortgagees under the G Mortgage to give their consent to the registered mortgagees under the F Mortgage taking proceedings for the possession of the Homestead Property under their mortgage. However, as I will indicate in more detail below, it is possible for a subsequent registered mortgagee of land under the Transfer of Land Act 1893 (WA) to take action for possession of the mortgaged property, and proceed to its sale. Any such action and sale would be subject to the position of the prior registered mortgagee.
48 By letter dated 14 November 2001, from Clark Whyte to Solomon
Brothers, Clark Whyte, under the heading I set out below, replied to the letter dated 2 November 2001. In view of the importance of this reply for the case for the first defendant, I set out the letter in full text.
"GRAEME GRUBB FINANCE BROKER – FOLIO 4512 BRIAN RICHARD & IRENE ELIZABETH CARTER YOUR CLIENT: KA JOHNSTONE-HALL
I refer to your letter dated 2 November 2001.
The funds received from the sale of the Carters' properties will be allocated as follows:
1. Firstly, to pay the legal costs of taking possession of and selling the mortgaged properties;
2. Secondly, to pay the selling costs and maintenance costs involved in the possession and sale of the mortgaged properties;
3. Thirdly, in payment of the outstanding debt under Mortgage G371574. The funds will be allocated to each mortgagee according to their share in the registered mortgage.
I assume what your letter is asking is whether your client may apply any monies she receives in accordance with 3 above as she sees fit.
I confirm that your client's application of the monies she receives is at her own discretion. Of course, I would recommend they be applied in accordance with the method set out in the mortgage, if any.
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Please find enclosed a draft Writ of Summons which we intend to file at the Supreme Court. If all is in order, please confirm that we should proceed with filing the Writ."
It will be noted that only the G Mortgage is referred to. There is no reference to the F Mortgage.
50 It will also be noted there is no reference to the transfers of the
F Mortgage and the G Mortgage to the plaintiff which were referred to in the letter dated 2 November 2001. However, there is a reference to the order of application of the funds received from the sale of the Homestead Property and the Industrial property. There is no reference to any such order of application in the letter dated 2 November 2001.
51 It will further be noted that the letter's description of that order of
application was not in accordance with the legal position otherwise applicable in respect of the distribution of the proceeds of the sale of the Homestead Property, if the sale were being conducted under the F Mortgage. In that case the third priority in distribution would be to the registered mortgagees under the F Mortgage, followed by the registered mortgagees under the G Mortgage: see Transfer of Land Act, s 109(1). However, on the same provision, that description was in accordance with the legal position otherwise applicable in respect of the distribution of the proceeds of the sale of the Industrial Property where the sale could only be conducted under the G Mortgage.
52 However, the statement of application of proceeds for both properties
would be correct if the sales of both properties were conducted under the G Mortgage subject to the priority position of the F Mortgage. As I will explain below, a subordinate mortgagee may sell subject to the interest of a prior mortgagee. The subordinate mortgagee may only sell so as to extinguish that prior interest with the concurrence of the holder of that interest.
53 By letter dated 20 November 2001, under the same heading as for
their letter dated 2 November 2001, from Solomon Brothers to Clark Whyte, Solomon Brothers made two inquiries, one with respect to the F Mortgage, and the other with respect to a security, "in relation to the above folio", which they indicated Graeme Grubb Finance Broker had informed their client was also offered as security their loan. There is no issue before me as to that latter security.
As to the F Mortgage, the letter dated 20 November 2001 said this:
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"We note that Mortgage F777556 ('the Mortgage') has a principal amount of $200,000.00, but clause 27 of the Mortgage records the entitlement of the mortgagees as $170,000.00. Please advise what you intend to do in response to this discrepancy in the Mortgage."
55 By letter dated 4 December 2001, from Solomon Brothers to Clark
Whyte, Solomon Brothers, under the heading "Graeme Grubb Finance
Broker - Folio 4512 - B & I Carter", began as follows:"We refer to your letter dated 14 November 2001. As to the way in which the funds received from the sale of the Carters' will be allocated, we respond as follows. The legal costs of taking possession and selling the respective mortgaged properties under mortgage G371574, in addition to the selling and maintenance costs involved in the possession and sale of the respective mortgage properties, should be borne by each respective mortgaged property (i.e. deducted from the net sale proceeds of each respective property). As the costs of obtaining possession of the mortgaged properties cannot be distinguished then they should be divided equally between the mortgaged properties. The funds arising from the sale of reach respective property then should be allocated in payment of the registered mortgages according to their priority under the Transfer of Land Act 1893 (WA). To the extent this is not the basis on which all parties are proceeding, please advise us accordingly before taking any further steps."
56 The remainder of the letter commented on the draft writ of summons
and draft statement of claim with which Clark Whyte had provided
Solomon Brothers.57 I note there appears to have been no advice provided by the plaintiff
to the first defendant of the sort requested in the letter dated 4 December
2001.58 By letter dated 5 December 2001, from Clark Whyte to Solomon
Brothers, and referring to the letter dated 20 November 2001, Clark Whyte indicated, with respect to the inquiry as to the discrepancy in relation to the F Mortgage, that they had communicated with the Department of Land Administration ("DOLA") in that regard, indicating to it that the evidence held by the liquidator confirmed the Warrens were "the owners of 40 undivided 200th shares in the mortgage, not 10
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undivided 200th shares as stated in the Mortgage". Correspondence with DOLA enclosed with the letter dated 5 December 2001 indicates that Clark Whyte intended to forward a statutory declaration to DOLA confirming the interest of the Warrens under the F Mortgage was "40 undivided 200th shares", and they would request the transfer by the Warrens to the plaintiff previously registered with DOLA be amended accordingly.
The author of the letter dated 5 December 2001 concluded as
follows:
"I also note that we are waiting on your consent to proceed with filing the Writ of Summons in relation to the recovery of the debt under Mortgage G571574. My client is anxious to proceed as soon as possible and I would appreciate your prompt response in that regard."
60 It is common cause that Solomon Brothers in fact settled the
description of the parties and the statement of claim in what became
proceedings commenced on 19 December 2001 in CIV 2939 of 2001.61 It is also not in dispute that CIV 2939 of 2001 was an action under
the G Mortgage in respect of both the Homestead Property and the Industrial Property. The statement of claim with the writ of summons in that action, lodged on 19 December 2001, shows the plaintiff, the first defendant and the third defendant in this action as plaintiffs in that action, and the Carters as defendant. The principal relief sought in that action was possession of the Homestead Property and the Industrial Property. Judgment for possession of the two properties was entered 15 January 2003, to which I will return below.
62 It is of course the case that a subsequent mortgagee may take action
to enforce the subsequent mortgage without effect on the priority position of any prior mortgage: Property Law Act 1969 (WA), s 60(1); and see Fisher & Lightwood (supra), at [20.10]. Any resultant sale would thus be subject to the prior interest, unless there were concurrence in the extinguishment of the prior interest by the holder of that interest: Fisher & Lightwood, at [20.10]. In this case, it is clear that at the ultimate settlement on the sale of the Homestead Property the purchaser was given title free of both the F Mortgage and the G Mortgage, which were discharged accordingly, as will appear below.
63 Subsequently, a settlement proposal was put for the Carters, an
analysis of which the liquidator of the plaintiff provided by letter dated
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28 August 2002, to Solomon Brothers, the third defendant and the second defendant. The conclusion to that analysis was that the proposal did not meet two "benchmarks". The first was that "Oakleigh would achieve a greater return than that estimated from bankruptcy proceedings". The second was that the proposal "had to demonstrate viability to my satisfaction and that of the Court".
64 Schedule 3 to the letter dated 28 August 2002 was the "Estimated
realisation from registered mortgages". It showed in respect of the Homestead Property "payments" to the plaintiff and the second defendant under the "First mortgage F777556" (the F Mortgage) of amounts in a sum exceeding the "forced sale value" of the Homestead Property less "selling expenses" and "legal expenses".
65 The amounts for "payments" for the F Mortgage were apparently the
amounts calculated as outstanding to the mortgagees under the F Mortgage at the time of the letter. The total of those amounts was $285,000, although I note there was a further amount referred to in Sch 2 to the letter as owing to the plaintiff, under cl 21 of the F Mortgage, of $50,000.
66 The "forced sale value" of the Homestead Property was shown as
$275,000, "selling expenses" as $10,000 and "legal expenses" also as
$10,000.67 Schedule 3 also showed in respect of the Homestead Property, as
"payments" under the "Second mortgage G371574" (the G Mortgage), in relation to that value less those expenses, to the first defendant, the third defendant and the plaintiff under "Mortgage G371574", the entry "no equity". I return shortly to the amount Sch 3 showed as outstanding under that mortgage.
68 Schedule 3 further showed in respect of the Industrial Property
"payments" to the plaintiff, the first defendant and the third defendant of amounts in a sum exceeding the "forced sale value" of the Industrial Property.
69 The amounts for "payments" for the G Mortgage were apparently the
amounts calculated as outstanding to the mortgagees under the G Mortgage at the time of the letter. The total of those amounts was $290,000, although I note there was a further amount referred to in Sch 2 to the letter as owing to the plaintiff under cl 21 of the G Mortgage of $50,000, apparently the same $50,000 as shown for the F Mortgage.
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70 Schedule 3 concluded by showing under the heading "Overall
Oakleigh position following realisation of mortgages" as "Recoveries from sale of lands (above)", the sum of the amounts shown as "payments" to the plaintiff under the F Mortgage and in respect of the Industrial Property under the G Mortgage.
By letter dated 3 October 2002 from Solomon Brothers to the liquidator of the plaintiff, Solomon Brothers confirmed:
"That our client requires you to continue to attempt to obtain a commercial settlement proposal from the Carters between now and the Case Evaluation conference listed in the related Supreme Court proceedings on 4 November 2002. As the liquidator of Oakleigh, you are to attempt to obtain the best possible return for the mortgagees under registered mortgage G371574 and any settlement proposal of any nature put forward by the Carters it to be forwarded to us."
72 In the event the proceedings in CIV 2939 of 2001 continued, and
leave to enter judgment for possession was granted on 14 January 2003, of which Solomon Brothers and the third defendant were informed by facsimile dated 15 January 2003. Judgment was entered on 15 January 2003.
73 By letter dated 20 January 2003, from Solomon Brothers to Clark
Whyte, under the heading "Oakleigh Acquisitions Pty Ltd (in liq) & Ors v Carter Supreme Court CIV 2939 of 2001" and referring to the facsimile of 15 January 2003 and a subsequent telephone conversation, Solomon Brothers stated:
"We require that your client not enter into possession of the mortgaged properties on behalf of our client until such time as we have been able to take instructions in response to your latest facsimile and respond."
74 By letter dated 31 January 2003, from Solomon Brothers to Clark
Whyte, under the same heading as in the letter dated 20 January 2003, and referring to "previous correspondence in the above matter", Solomon Brothers said:
"Please confirm that the proceeds of sale from Certificate of title volume 448 folio 18A and Crown lease number 423/1994 are agreed to be distributed between the mortgagees in the manner detailed in your letter to us dated 14 November 2001.
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When we have that confirmation, our client can then finalise her position in respect of this matter."
75 By letter dated 7 February 2003, from Clark Whyte to Solomon
Brothers, under the heading "Oakleigh Acquisitions Pty Ltd (in liquidation) ("Oakleigh") and others v Carter - Supreme Court Action CIV 2939 of 2001 Your Client: KA Johnstone-Hall", and referring to the letter dated 31 January 2003, Clark Whyte said:
"We confirm the proceeds of the sale of the mortgaged properties will be distributed between the mortgagees in the manner detailed in our letter to you dated 14 November 2001."
76 The letter went on to refer to the costs of negotiating "a commercial
settlement proposal from the Defendant's [the Carters] on behalf of your clients" as well as of the action for possession, the amount involved in those respects to the date of the letter, and the difficulty in estimating future costs. The letter concluded:
"Therefore, although the distribution of the sale proceeds will be carried out in accordance with our letter dated 14 November 2001, we seek your client's further consent to deduct my client's costs from the sale proceeds, which we believe he is entitled to do as they are costs incurred in relation to obtaining possession and arranging maintenance and sale of the mortgaged properties."
77 It will be noted that in both the letter dated 31 January 2003 and the
letter dated 7 February 2003 there is a reference to "the mortgagees" without other identification except as might be gleaned from the headings to the letters. Those headings were for an action under the G Mortgage, as I have indicated.
78 By letter dated 4 March 2003, from Clark Whyte to Solomon
Brothers, under the same heading in all material respects as the letter dated 7 February 2003, and referring to that letter, Clark Whyte stated their client was "anxious to proceed with taking possession of the mortgaged properties in order to enable a mortgage sale to occur".
79 The letter dated 4 March 2003 went on to indicate that the author
was "still waiting on confirmation from your client that we may proceed".
The letter concluded:
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"In order to prevent the mortgagees' position from worsening, we request that you provide us with your client's instructions as a matter of urgency".
80 By letter dated 12 March 2003, from Solomon Brothers to Clark
Whyte, under the same heading as the letters dated 20 January and 31 January 2003, and referring to "previous correspondence in relation to the above matter including your facsimile to us dated 7 February 2003", Solomon Brothers said:
"On the basis that your client has agreed that the proceeds of sale of Certificate of Title Volume 448 Folio 18A and Crown Lease number 423/1994 (collectively the 'Properties') are agreed to be distributed between the mortgagees under registered mortgage G371574 in the manner detailed in your letter to us dated 14 November 2001, our client is agreeable to entering into possession of the Properties and conducting a mortgagee sale of the Properties."
81 The letter concludes by stating that the first defendant gave her
consent to the deduction of the costs of the plaintiff from the sale proceeds
"as detailed in your facsimile to us dated 7 February 2003".82 It will be noted that the letter dated 12 March 2003 specifies the
mortgagees under the G Mortgage, and makes no specific reference to the F Mortgage or the mortgagees under it. For the defendant, as I will explain, it is submitted that a reference to those mortgagees and that mortgage should be understood from the clear terms of the letter dated 14 November 2001 incorporated by reference into the 12 March 2003 letter.
No letter sent in response to the letter dated 12 March 2003 was drawn to my attention.
84 By letter dated 19 May 2003, from Clark Whyte to Solomon
Brothers, the author confirmed that the plaintiff had "now taken possession of the mortgaged properties", and went on:
"The authority obtained form your client relates to taking proceedings with the purpose obtaining possession of the mortgaged properties only. Therefore, as a matter of urgency, will you please arrange for your client's authority to appoint an agent in respect of the properties and to attend to sale and settlement of the mortgaged properties."
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85 A further exchange of correspondence between the two law firms
culminated in a letter dated 29 May 2003, from Solomon Brothers to
Clark Whyte, in which Solomon Brothers said:"We are instructed that our client is prepared to give your client authority to appoint a real estate agent to sell the mortgaged properties of which possession has been taken. Our client had requested us to pass on that your client should appoint an appropriate agent on an urgent basis so that the mortgaged properties can be sold as soon as possible."
86 By 29 August 2003 there had been sales at auction of the Homestead
Property and the Industrial Property, and under cover of a letter of that date, from Clark Whyte to Solomon Brothers, Clark Whyte enclosed two "Transfers of Land for signing by your client's attorney", and referred to "settlement of the properties" as "due by 9 September 2003". As I will indicate below, there is some uncertainty on the material before me whether, at least in one case, settlement was to take place on 8 September 2003 or on 9 September 2003.
87 By letter dated 3 September 2003, from Clark Whyte to Solomon
Brothers, Clark Whyte inquired when they could "expect to receive the Transfers of Land for the properties" which were "required as a matter of urgency to enable the other parties to execute those documents". The letter added "in relation to Certificate of Title Volume 448 Folio 18A" (the Homestead Property) a confirmation of the F Mortgage "in favour of" the plaintiff and the Hindleys, and said:
"The principal sum and interest outstanding under mortgage F777556 is expected to exceed the amount to be realised from the sale of that property. Therefore, it is not expected that there will be any proceeds of the sale of [the Homestead Property] to be allocated to mortgage G371574 [the G Mortgage]."
88 By letter dated 3 September 2003 from Solomon Brothers to Clark
Whyte, apparently prepared before Solomon Brothers had received the letter of the same date from Clark Whyte, Solomon Brothers indicated that "our client's consent will be required before settlement on the sale of each of the Properties can take place", and added:
"Our client's consent will only be provided after it is made clear as to the distribution that will be made to our client from the settlement on the sale of the respective mortgaged property."
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89 By letter dated 4 September 2003, from Clark Whyte to Solomon
Brothers, apparently in reply to their letter dated 3 September 2003, Clark Whyte proposed payment of the net proceeds there calculated from the sales of each of the Homestead Property and the Industrial Property into a trust account controlled jointly by Clark Whyte and Solomon Brothers on behalf of the mortgagees pending agreement on the payment of:
• legal fees, • the fees of the firm of liquidators of the plaintiff, and • in the case of the Homestead Property, the "amount outstanding" under the F Mortgage and "the balance (if any) towards the amount outstanding" under the G Mortgage, or • in the case of the Industrial Property, the "amount outstanding" under the G Mortgage.
By letter dated 8 September 2003, from Solomon Brothers to Clark Whyte, referring to their letters dated 3 September and 4 September 2003, Solomon Brothers described an order of distribution of proceeds of the sale from the Homestead Property and the Industrial Property using the words that I have quoted from the letter of 14 November 2001, at the numbers 1, 2 and 3, above, and stating that the liquidator of the plaintiff had agreed to that order of distribution, calling that the "Agreement", the Homestead Property the "Property" and the G Mortgage the "Mortgage". In material part, the letter added:
"The proceeds of sale from the Property are to be applied in the order set out above (to the extent of your client's share under registered mortgage F777556 to the net proceeds of sale from the Property).
…
Our client does not agree to the balance settlement proceeds being paid into an interest bearing trust account and will not provide the documents necessary for settlement other than in exchange for the money owing under the Mortgage in accordance with the Agreement."
91 By a letter dated 9 September 2003, from Clark Whyte to Solomon
Brothers, the author, after referring to the letter from Solomon Brothers
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dated 8 September 2003, stated his understanding of the priority of the F Mortgage as a "well accepted principle of law", and referred to the letter from Solomon Brothers dated 22 August 2000, as an acknowledgement of that position.
Following a further exchange of correspondence between the two law firms, the present proceedings were commenced.
These proceedings
93 These proceedings were commenced by writ of summons filed on
22 September 2003. At that time the only parties to the proceedings were
the plaintiff and the first defendant.94 By interim orders and directions following a hearing on 6 October
2003 of an interlocutory application filed on 3 October 2003, Wheeler J ordered the first defendant to do all things necessary to promptly facilitate the execution, settlement and registration of all documents required to settle the sales of the Homestead Property and the Industrial Property.
The orders and directions also required the plaintiff, in the case of the sale of the Homestead Property, to pay:
"The net proceeds of the sale (being the balance of the sale proceeds after deducting all usual costs, charges and expenses of and incidental to the sale pursuant to the registered mortgages F777556 and G371574, but not including the costs of the liquidator of the plaintiff) into an interest bearing account maintained by Solomon Brothers to be held until final determination of the plaintiff's interlocutory application dated 3 October 2003 or further order."
96 The orders and directions for the application of the net proceeds of
the sale of the Industrial Property "(being the balance of the sale proceeds after deducting all costs, charges and expenses of an incidental to the sale pursuant to registered mortgage G371574)" called for payment of those proceeds into such an account to be held in the same way.
97 It should be noted that it is clear from the terms of this order that the
sale of the Homestead Property was pursuant to both the F Mortgage and
the G Mortgage, so as to give the purchaser title free of them.98 On 17 October 2003 the settlement of the sale of the Homestead
Property occurred and the net proceeds of settlement were paid into an interest bearing trust account pursuant to those interim orders and
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directions. The seller settlement statement on this sale showed a sale price of $240,000, and the amount due at settlement after the deductions was shown as $223,665.39.
99 On 2 December 2003 the settlement of the sale of the Industrial
Property occurred and the net proceeds of settlement were paid into an interest bearing trust account pursuant to those interim orders and directions. The seller settlement statement on this sale showed a sale price of $105,000, and the amount due at settlement after the deductions was shown as $88,592.90.
100 It also appears from the seller settlement statement for the sale of the
Homestead Property that an amount of $2,242.62 as "Penalty Interest" at the rate of $59.02 per day for 38 days was deducted from the proceeds of that sale. It may be noted that the period given of 38 days is the difference between the settlement date of 17 October 2003 and the latest date for settlement of 9 September 2003 given in the letter from Clark Whyte to Solomon Brothers dated 29 August 2003, above.
101 It also appears, from the seller settlement statement for the sale of the
Industrial Property, that no deduction of that sort was made from the proceeds of the sale of that property.
By orders following a hearing before E M Heenan J on 6 April 2004, his Honour ordered the joinder of the second and third defendants as parties to these proceedings.
103 His Honour also ordered Solomon Brothers to make certain
payments out of the trust accounts. Out of the trust account in respect of the proceeds of the sale of the Homestead Property, they were ordered to pay to the second defendant the sum there referred to "in part satisfaction" of the second defendant's claims under the F Mortgage. Out of the trust account in respect of the proceeds of the sale of the Industrial Property, Solomon Brothers were ordered to pay to the first and third defendants, and to the plaintiff, the sums there referred to "in part satisfaction of their entitlements" under the G Mortgage, with the further direction that Solomon Brothers were to continue to hold the balance of the proceeds of sale pending further order.
Those orders also provided for the action to be heard on affidavit evidence before a Judge in chambers, which was the hearing before me.
The plaintiff's further amended statement of claim in these proceedings claims the following relief:
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• a declaration that the exercise of the power of sale of the Homestead Property conferred by the G Mortgage was subject to the rights of the mortgagees with registered shares in the F Mortgage, and those mortgagees have the entitlement to be paid from the proceeds of the sale of the Homestead Property in priority to the mortgagees who had registered shares in the G Mortgage; • compensation for any penalties or interest payable to the purchasers by reason of the delay in settlement; • interest on the money that should have been received by the plaintiff on the dates upon which settlement should have taken place; • an order that the first defendant by her solicitors Solomon Brothers pay to the account of the plaintiff the entire balances of the funds, including accrued interest, held in the trust accounts; and • costs.
106 At the hearing before me as I will indicate the plaintiff submitted a
minute of proposed orders for final relief upon which I comment in the
concluding section below.
The evidence and the issues in this matter
The affidavits for the purposes of the hearing before me were:
•
that of Mark Anthony Conlan, the liquidator of Rowena Nominees and of the plaintiff, sworn 3 October 2003, and its annexures;
•
that of Peta Vanessa Whyte, a partner in Clark Whyte, sworn 3 October 2003, and its annexures;
•
that of Ms Whyte, sworn 6 October 2003, and its annexures;
•
that of Bradley Ryan Gannon, a solicitor in the employ of Solomon Brothers, sworn 8 January 2004;
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• that of Joel Christopher Yeldon, a solicitor in the employ of Clayton Utz, the plaintiff's solicitors in these proceedings, sworn 19 March 2004, and its annexures; • that of the first defendant, sworn 21 May 2004, and its annexure; and • that of Mr Conlan, sworn 21 January 2004, and its annexures.
All of these affidavits were contained in the hearing bundle prepared
for the hearing.
In addition at the hearing two further affidavits were tendered into evidence by consent. They were:
• that of Mr Gannon, sworn 20 February 2006; and • that of Ms Whyte, sworn 22 February 2006.
The issues as they emerged in the hearing before me were the
following:
•
Was there an agreement between the plaintiff and the first defendant for postponement of the interests under the F Mortgage as contended for by the first defendant? This on the first defendant's submissions went to the matter of the construction of the exchange between the parties beginning with the letter Solomon Brothers to Clark Whyte dated 15 January 2003 and ending with the letter from Solomon Brothers to Clark Whyte dated 12 March 2003.
•
If there were such an agreement, was it enforceable as a contract? This went to the matter of whether or not there was the intention to enter into contractual relations, whether or not any writing requirement for any such contract was met, and whether or not there was consideration moving from the first defendant.
•
If there were not such a contract, was there nonetheless a claim for relief in equity in respect of a promissory estoppel in this case, or under the Trade Practices Act 1984 (Cth), s 52, if necessary read with s 51A of that Act, and their State counterparts, Fair Trading Act 1987
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(WA), s 10, if necessary read with s 9? This went to the matter whether or not there was conduct that would found such an estoppel or represent such conduct.
•
If so, what form or forms of relief were appropriate, in equity and under the statute? This went to the matter of whether or not such relief could and should be given by a postponement of the interest of the plaintiff under the F Mortgage to the interest of the first defendant under the G Mortgage.
•
If there were not such a contract, and no such claim for relief in equity or under the statute, was there nonetheless a claim for relief under the principle in Re Condon; Ex parte James (1874) LR 9 Ch 609?
•
If the first defendant is not entitled to relief under any of these heads, is the plaintiff entitled to each of the forms of relief it seeks?
Was there an agreement as contended for by the defendant?
111 For the first defendant there was reliance on the terms of the letter
from Solomon Brothers to Clark Whyte dated 31 January 2003, in which they requested that Clark Whyte "confirm that the proceeds of sale from [the Homestead Property and the Industrial Property] are agreed to be distributed between the mortgagees in the manner detailed in your letter to us dated 14 November 2001".
112 It was put to me that this letter required that the material words in the
reply from Clark Whyte dated 7 February 2003 be read simply in their own terms, by which I understood it to be submitted that those words should be read literally as a statement of the priorities in the payment of the proceeds of the two properties. The material words of that reply were:
"We confirm the proceeds of the sale of the mortgaged properties will be distributed between the mortgagees in the manner detailed in our letter to you dated 14 November 2001."
On the submissions for the first defendant, this had the effect of incorporating by reference the terms of the letter dated 14 November 2001 from Clark Whyte to Solomon Brothers to the extent of the following words appearing in that letter:
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"The funds received from the sale of the Carters' properties will
be allocated as follows:1. Firstly, to pay the legal costs of taking possession of and selling the mortgaged properties;
2. Secondly, to pay the selling costs and maintenance costs involved in the possession and sale of the mortgaged properties;
3. Thirdly, in payment of the outstanding debt under Mortgage G371574. The funds will be allocated to each mortgagee according to their share in the registered mortgage."
114 The first defendant also relied on the material words of the letter
from Solomon Brothers dated 12 March 2003 that was the ultimate reply to the letter dated 7 February 2003. The material words of that reply were:
"On the basis that your client has agreed that the proceeds of sale of Certificate of Title Volume 448 Folio 18A and Crown Lease number 423/1994 (collectively the 'Properties') are agreed to be distributed between the mortgagees under registered mortgage G371574 in the manner detailed in your letter to us dated 14 November 2001, our client is agreeable to entering into possession of the Properties and conducting a mortgagee sale of the Properties."
115 For the first defendant, it appears to have been put that the terms of
the four letters just quoted taken together are clear. They are that the registered mortgagees under the G Mortgage were to be paid out of the proceeds of the sales of both the Homestead Property and the Industrial Property next after the stipulated costs were paid (including the costs of the plaintiff "as detailed" in the letter dated 7 February 2003). No reference to surrounding circumstances is admissible to resolve any ambiguity, as there is none. The meaning is to be understood objectively, from the language the parties used. That meaning entails that it was agreed that the interests under the F Mortgage were to be postponed to those under the G Mortgage in respect of the Homestead Property.
116 The first defendant did not contend that there was an agreement to
postpone only the interest of the plaintiff under the F Mortgage. The first defendant accepted that, to the extent of the purported postponement of
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the interest of the second defendant, the agreement was unenforceable, because, as was common ground, the plaintiff lacked any authority, actual or apparent, to bind the second defendant to any such agreement. The first defendant also accepted that the agreement she contends for purports to re-order the priorities for the benefit of all of the registered mortgagees under the G Mortgage, including for the third defendant. I consider this would have effect on the relief claimed by the first defendant under her counterclaim, at least to the extent that, as the parties accepted before me, and as I will return to, neither the second defendant nor the third defendant had received their full entitlements under the F Mortgage and the G Mortgage respectively. It seems to me that the agreement contended for by the first defendant can only be enforced in accordance with its terms, to the extent it is enforceable. I return to the matter of enforcement of the agreement in more detail below.
117 As will appear, the matter of the agreement contended for by the first
defendant is the central issue in this case. If the first defendant's contended for meaning of the exchange is not the correct meaning, then as will appear there is not likely to be a basis for a claim, not only in promissory estoppel, but also for misleading or deceptive conduct under the statutes. Further, if the first defendant's contended for meaning is not the correct meaning, then as will also appear it is not likely there is a basis for the claim for relief under the principle in Ex parte James. If none of these bases for relief is made out, then, subject to the final determination of the amounts due under the F Mortgage and G Mortgage after distributions to date, and subject to the determination of whether or not there is a basis for the claim for compensation and for interest, the plaintiff is entitled to the relief it seeks.
118 I do not consider that the first defendant's contended for meaning is
the correct meaning. In my view, the correct meaning of the material terms of the three letters and the incorporated portion of the fourth is that contended for by the plaintiff, that the order of distribution of the proceeds being referred to is that on an enforcement proceeding for the benefit of a subordinate mortgage, as the parties had indicated previously to one another that they understood that order. That is the objective meaning of those terms for these parties.
119 I begin by noting that the terms must be extracted from a chain of
correspondence, as I have indicated, and as the first defendant's contention entails. This in my view requires attention to be paid to the terms of that correspondence, as the first defendant's contention requires. However, it also requires attention to be paid to the context of that correspondence,
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including the purposes of the correspondence as they were understood by
both parties, and their other relevant shared understandings.120 There is considerable authority on the correct approach to the
construction of contracts. No authority on the construction of contracts to be found in an exchange of correspondence, as opposed to a single document executed by the parties, was cited to me indicating that the approach on that authority is materially different. I consider, however, that in relation to a contract to be extracted from an exchange of correspondence it is important to attend to the possibility that the parties' exchanges have given the words they used particular meanings.
121 It seems to me I need only take extracts from two authorities on the
general approach to the construction of contracts. The first is Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, per Mason J, at 352, a passage often quoted, at least in part: see for example Hillboi Nominees Pty Ltd v Evenwood Pty Ltd [2000] WASCA 66, per curiam, Ipp, Owen and Steytler JJ, at [39]. In Codelfa, Mason J at 352 said this (emphasis added):
"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid
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of construction, though admissible in an action for
rectification."
I note there is no claim for rectification in this case.
123 The other authority from which I take an extract is Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd (2004) 219 CLR 165, per curiam, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ, at [40], where the Court referred to its decision in Pacific Carriers Ltd v BNP Paribas (2004) 208 ALR 213, saying this:
"This Court, in [Pacific Carriers (supra)], has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction [Pacific Carriers at [22]].
124 It is indeed the case, as the first defendant contends, that agreements
for the re-ordering of priorities between mortgages are common, and appear to require no particular form of words. The question is the ordinary one of construing the terms the parties have used to determine if that is what a reasonable person would understand those terms to mean using the approach in the authorities I have quoted from: see Fisher and Lightwood (supra), at [24.3].
125 In this case I note, as the headings to and content of the four letters
relied upon by the first defendant indicate, they concern action to be taken under the G Mortgage or at least the "folio" maintained by Grubb Finance Brokers that covered that mortgage. There is no reference in any of the letters to the F Mortgage, nor any indication that the plaintiff purported to act for the other registered mortgagee under the F Mortgage, the second defendant, although, as I will indicate, the letter from Solomon Brothers
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dated 2 November 2001, to which the letter dated 14 November 2001 was a response, referred to the first defendant's consent to proceedings under both the F Mortgage and the G Mortgage. The Certificate of Title for the Homestead Property, on which the F Mortgage was registered, showed that, as I have indicated, as a result of the transfers of the shares of the mortgage there registered, the registered mortgagees at the time of the letter of 14 November 2001 were the plaintiff and the second defendant.
126 Further, it would have been apparent to the first defendant's solicitors
that there was a further registered mortgagee's interest under the F Mortgage arising from the reply dated 5 December 2001 from Clark Whyte to the letter dated 20 November 2001 from Solomon Brothers concerning the "discrepancy" in the principal amount and the sum of the shares under the F Mortgage. I also note the response from Solomon Brothers in their letter 20 December 2001 noting the material sent by Clark Whyte to DOLA, and asking to be kept informed in relation to the action for possession.
127 Indeed, I consider that exchange of correspondence to be more
consistent with a concern about the priority position of all of the interests under the F Mortgage than, as counsel for the first defendant appeared to put to me, an indication that the first defendant wished to measure the extent of the advantage a postponement would bring her.
128 Indeed, the letter dated 2 November 2001 from Solomon Brothers
indicated that the first defendant's consent to proceedings for possession under the F Mortgage and the G Mortgage being taken was, among other things:
"On the basis that the transfers of mortgage of Mortgages F777556 and G371574 to Oakleigh Acquisitions Pty Ltd ('Oakleigh') from the various mortgagees were as a result of those mortgagees being repaid their mortgage entitlement by either Rowena Nominees Pty Ltd or Oakleigh."
129 I consider that passage is an indication that the first defendant
through her solicitors was aware of the remaining registered mortgagee under the F Mortgage shown on the Certificate of Title after those transfers, other than the plaintiff.
130 Similarly, there was the matter of the position of the third defendant,
the remaining mortgagee under the G Mortgage. There was no indication of any attempt by either the plaintiff or the first defendant to deal on his behalf.
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131 Of course, it might be suggested that the agreement might be read as
one meant to relate to all of the mortgagees' interests under the F Mortgage and the G Mortgage which the plaintiff and the first defendant had the power to affect by a postponement. However, such a reading does not, it seems to me, emerge with clarity from the letters relied upon.
132 In the plaintiff's submission, the critical sentence in the letter of
14 November 2001 is the second alongside the number "3" in the order of allocation in the letter, and follows the reference to the "outstanding debt under Mortgage G371574" in the preceding sentence. The second sentence, previously set out in its full context in the letter, reads:
"The funds will be allocated to each mortgagee according to
their share in the registered mortgage."
133 It was put to me that these words were inapt to cover funds in respect
of which a prior mortgagee not a mortgagee under the mortgage referred to in the preceding sentence would otherwise have a prior claim. However, I consider this to be a circular argument. The question is the meaning of "the funds", which raises the matter of whether or not the correspondence should be understood as being an agreement to postpone.
134 It was also put to me by the plaintiff that the construction contended
for was commercially implausible. The first defendant had not asked for a re-ordering in the communications that led to the letter dated 14 November 2001, and she had been informed, in the letter from Clark Whyte to her solicitors dated 23 October 2001, that the plaintiff intended to seek an order of the Court to bring about a result equivalent to consent to a taking of possession if she did not agree.
135 However, I have already indicated my view that it is not clear such
proceedings would have been successful in this case, at least as to the Industrial Property, if not for the Homestead Property, in respect of which the plaintiff was of course a mortgagee under the F Mortgage as well as the G Mortgage. I am not convinced on this argument that it was not a matter of significance to the plaintiff whether or not the first defendant gave her consent to the proceeding for possession.
136 In any event, I note that the plaintiff had pressed the first defendant
for her consent, both in the correspondence preceding the 14 November 2001 letter, and in the correspondence preceding the 7 February 2003 one. This indicates to me that there was for the plaintiff significance in the consent sought.
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Of course, as the plaintiff pressed on me, the first defendant had, by the letter from Solomon Brothers dated 2 November 2001, consented to:
"Proceedings being instituted by registered mortgagees under F777556 and G371574 [the F Mortgage and the G Mortgage, respectively] to obtain possession of Crown Lease number 423/1994 [the Industrial Property] and Certificate of Title volume 4526 folio 18A to enable a mortgage sale to occur."
It was put to me that this was sufficient to indicate consent had by this point had been given, and so the letter dated 14 November 2001 should not be understood as going to the matter of any such consent.
139 However, I disagree. The letter of 2 November 2001 referred to the
"basis" for that consent in relation to the circumstances in which the plaintiff had acquired its interest under the F Mortgage and the G Mortgage, and a condition as to how the first defendant would be able to apply any moneys she received from the sale. The latter condition was explicitly addressed in the 14 November 2001 letter. In my view, the course of correspondence indicates that the matter of consent was not considered by the parties to be have been fully dealt with until at least the 14 November 2001 letter. Indeed that letter went on to call for the consent of the first defendant to the terms of the proceedings to be commenced that became CIV 2939 of 2001.
140 There is, of course, ample authority that the fact a literal meaning
might benefit one party more than another, at least short of an absurdity, will not be a reason for departing from the literal meaning or for implying a term. See Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, per Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ, at 241; Seddon N C and Ellinghaus, M P Cheshire and Fifoot's Law of Contract 8th Australian ed, Sydney, LexisNexis Butterworths, 2002, at [10.35]. Although it was contended that an absurdity might be discerned in the plaintiff giving up a substantial priority position on the higher valued Homestead Property in return for a consent to proceeding on the G Mortgage, any such contention is in my view fatally weakened if consent from the other contributory mortgagees is required or seen to be required for proceedings to sale under that mortgage.
141 I also note below, when I consider the question of consideration
under the agreement contended for by the first defendant, that her consent
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to the action for possession leading to sale would mean in due course her exposure to the liability of a mortgagee in possession proceeding to a sale. I accept that there was no issue of such liability expressly raised in the correspondence by the plaintiff or the first defendant. However, such liability appears to me to be a further reason to consider the matter of the first defendant's consent to the proceedings to be one of significance, in this case to the first defendant.
142 In relation to the liability exposure to which I have referred, it was
put to me for the first defendant that this was a reason to prefer the interpretation she contended for. There was no contest, it seems to me, that on the circumstances as they were known to the parties at the time at least of the letters in 2003 (see in particular the letter from Clark Whyte to Solomon Brothers and to the second and third defendants dated 28 August 2002) there was a strong likelihood there would be no return to the first defendant, or the other mortgagees under the G Mortgage, from the sale of the Homestead Property. A consent to incur the liability of a mortgagee in possession with a view to sale of that property would represent a matter of no benefit to the first defendant.
143 However, I consider that the same reasoning applies to this argument
of the first defendant as applies to the corresponding analysis of the plaintiff's argument from commercial implausibility. It was not made apparent to me that, if the meaning of the terms in the correspondence was that no postponement was being agreed to, there was an absurdity revealed by the first defendant's argument which made the other reading appropriate. I repeat that there was no indication in the correspondence that the matter of the liability exposure referred to was referred to by the parties to be one of significance to either of them, except as might be implicit in the first defendant's initial response to the request for her consent. The net proceeds from sale of the Homestead Property had of course been indicated in the letter dated 28 August 2002 from Clark Whyte to Solomon Brothers to be below the amounts shown as outstanding under the F Mortgage. However, it was not apparent from that letter that subsequent changes in value might not, on the differential that letter referred to, change that position to the benefit of the mortgagees under the G Mortgage.
144 Senior counsel for the plaintiff pointed to the position of the third
mortgagee under the G Mortgage, the third defendant. The third defendant made it plain there was no indication to him of any payment except in the order of mortgages. Counsel put to me this is some evidence that no impression of the sort the first defendant contends was conveyed
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to her was intended to be or should be seen to have been conveyed by the plaintiff to the mortgagees under the G Mortgage. I consider, however, that this evidence is precisely of the sort that the authorities I quoted from at the outset indicate should not be admitted in relation to the issue of construction of concern to me. The evidence is of subjective understanding, indeed such understanding by some one not clearly a party to the agreement, whether as contended for by the first defendant or otherwise.
145 Counsel for the first defendant, for his part, referred me to the
affidavit of the first defendant sworn 21 May 2004, which he pointed out had not been contradicted. That letter confirmed that the first defendant had only agreed to enter into possession of the Homestead Property and entered into the contract of sale in respect of it on the basis of and in reliance on an order of distribution of the proceeds of sale which follows the terms of the 14 November 2001 letter, at its numbers 1 to 3. I do not consider this assists me in my construction task. It repeats the language I must construe. To the extent it reflects an understanding of the words used as contended for by the first defendant, it encounters the difficulties on the authorities to the correct approach to construction of contracts, in terms of subjective understandings, that I have already considered.
146 However, it seems to me that the terms used in the 14 November
2001 letter need to be understood on the evidence of the parties' shared understandings of the meaning of those terms, as indicated by the letter dated 4 December 2001 from Solomon Brothers to Clark Whyte.
147 In that letter, as the passage from it quoted above indicates, after
referring to the letter dated 14 November 2001, and setting out how "legal costs of taking possession and selling the respective mortgaged properties" under the G Mortgage, "in addition to the selling and maintenance costs involved in the possession and sale of the respective mortgaged properties", should be borne, the author goes on to indicate his view that "funds arising from the sale of each respective property should be allocated in payment of the registered mortgages according to their priority under the Transfer of Land Act 1893 (WA)".
The letter then goes on to ask for advice from Clark Whyte "to the extent this is not the basis on which all parties are proceeding".
149 I consider this letter is clearly inconsistent with an understanding on
221 My view is that the appropriate relief would have been to award
compensation to the first defendant equivalent in amount to the recovery the first defendant would have obtained under the relief in respect of the contract as contended for by the first defendant. I have already indicated my view of that relief. However, unlike the position at common law for breach of contract, it seems to me an order in the nature of specific relief cannot be made under s 82; nor is it clear to me that an order of the sort I indicated was appropriate under that common law may be made under s 87. I return to this matter below, in relation to the relief claimed under
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s 80. However, in view of the conclusions I have arrived at in relation to misleading or deceptive conduct, I do not consider it is appropriate for me on the arguments put to me to go any further than I have indicated in relation to this matter.
Should the first defendant be granted an injunction in respect of the
conduct complained of?
222 Trade Practices Act, s 80(1), provides for the Court to grant an injunction in a case where a person "has engaged or is proposing to engage" in conduct that constitutes a contravention of s 52. The corresponding provisions in the Fair Trading Act are s 74 and s 76. Again, no distinction between the provisions of the Acts was drawn for my purposes, and from now I make reference only to the Commonwealth Act.
On the conclusion I have reached as to the contravention of s 52, read if necessary with s 51A, the question of relief under this provision does not arise. However, in deference to the arguments addressed to me at the hearing in relation to this provision I should indicate my views with respect to relief to the first defendant under it.
224 For the first defendant, I was referred to authorities that I am
satisfied establish the propositions that the Court has a broad discretion to make the appropriate orders under this provision, including mandatory injunctive orders, whether or not, as s 80(5) provides, the person against whom the order may be made intends to refuse or fail again or continue to refuse or fail to do the act or thing to be enjoined, and whether or not there is an imminent danger of substantial damage to any person in case of such refusal or failure: see ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248 (FC), per Lockhart J, at 256 - 257, per French J, at 268, and per Gummow J, at 267; and Australian Consumer and Competition Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197, Merkel J, at 201 and 203 – 204.
225 The first defendant put to me that these authorities thus established
that s 80 would empower the Court, in a case like this one, to grant a mandatory injunctive order to give effect to the agreement in the exchange of correspondence that the first defendant contended for.
226 While I consider the authorities justify that conclusion, it seems to
me that the Court should be careful about granting an injunction of the sort called for if there is a remedy otherwise arising under the statute in respect of the loss or damage said to flow from the conduct complained
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of. I note for this purpose the discretion of the Court in relation to the granting of relief under the provision, and the emphasis in the authorities referred to on the public interest to be served by such relief. I have already considered that question. If such public interest can be otherwise served, that it seems to me is a consideration for the Court to bear in mind in determining whether to grant the relief sought.
227 Further, in determining the terms of the order that would be
"appropriate" as provided for in s 80(1), the Court should consider whether there was any other form of order that would protect the first defendant against any liability as mortgagee in possession or exercising its power of sale. I have considered a closely related question in relation to the issue of compensation under s 82 and s 87. I considered, however, that the appropriate order there would have been an order for compensation equivalent in amount to the recovery the first defendant would have obtained under the relief in respect of the contract as contended for by the first defendant. I also considered that an order for the same sort of specific relief as was possible in the context of the contract claim was not available or not clearly available under s 82 or s 87.
My view is that, in view of those conclusions, relief under s 80 should be ordered in the same terms as for the relief in the context of the contract claim. That form of relief better secures the first defendant, so far as an order under the relief provisions in the Trade Practices Act permit, against the effects of the misleading or deceptive conduct complained of.
229 However, again, in view of the conclusions I have arrived at in
relation to whether or not there was the misleading or deceptive conduct complained of, I do not consider it is appropriate for me on the arguments put to me to go any further than this in relation to these matters.
Does the first defendant have a claim to relief under the principle in Ex
parte James?
230 The first defendant put to me that even if there were no agreement as
she contended, and no misleading or deceptive conduct or corresponding basis for the application of the principle in Walton Stores (supra), the Court should not permit the plaintiff, through the liquidator as its representative, in these proceedings to adopt a position inconsistent with the agreement the first defendant contended for. The basis for this argument was put as the principle in Ex parte James (supra).
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231 There is a considerable difficulty, acknowledged in the authorities to
which the first defendant referred me, in stating the principle, although it is one that has support in this country. For my purposes I note the following, from Hartogen Energy Ltd (in liq) v Australian Gas Light Co (1992) 36 FCR 557, Gummow J, at 571:
"What is the rule in Ex parte James?
Riley J detected 'a note of understandable resignation' in the remark in Halsbury's Laws of England (4th ed, 1973), Vol 3, p 289, that the extent of the operation of this rule 'can only be defined by the case law': Re Roberts; Official Receiver v Lincoln Investments Ltd (1976) 26 FLR 330 at 335. In its widest form the rule has been said to be that a liquidator or trustee in bankruptcy, as an officer of the court, will not be permitted to do anything which would be regarded as dishonourable or unconscionable for an ordinary man to do. Latham CJ regarded such authorities as illustrating 'the difficulties involved in applying a criterion of honest and high minded conduct': Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (1948) 76 CLR 463 at 476.
Certain aspects of the rule are, in Australia, relatively settled. Ex parte James was a bankruptcy case but the rule has since been applied to liquidators of companies in compulsory winding up on the basis that they too are officers of the court and acting under its control: see B H McPherson, The Law of Company Liquidation (3rd ed, 1987), pp 266-267. Secondly, in Downs Distributing Co (supra) at 482 Williams J said that the authorities as a whole appeared to show that it was only in exceptional cases that the rule would be applied where the trustee or liquidator or his predecessor in office had not been personally concerned in the transaction in question. See also Re Byfield (A Bankrupt); Ex parte Hill Samuel & Co Ltd v Trustee of the Bankrupt [1982] Ch 267 at 271-272."
232 In this case, of course, the plaintiff was personally involved in the
transaction in question, that represented by the exchange of correspondence relied upon by the first defendant. However, I take from the authorities the need for a cautious approach to the grant of relief under the principle.
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233 I consider that there is an arguable basis for the application of the
principle to the extent the first defendant, in giving her consent to the taking of possession of the mortgaged properties with a view to sale, was operating under a mistaken belief as to whether or not the exchange of correspondence was one which included an agreement to postpone the F Mortgage. See Hartogen Energy (supra), Gummow J, at 573, on locating the "doctrinal basis" for the principle in Ex parte James in the "law as to the recovery of mistaken payments".
234 The evidence as to her mistaken belief is not clear, however. I have
previously referred to her affidavit in that regard. There is, of course, the letter from her solicitors dated 8 September 2003 making clear the understanding of the exchange of correspondence as the first defendant contended. There is thus some evidence of such a mistaken belief.
235 However, I consider there is no evidence that the plaintiff
contributed to that belief or had reason to believe the first defendant had such a belief. I so consider for the reasons I have given as to the construction of the exchange of correspondence I indicate should be preferred. The first defendant was of course throughout professionally advised, so far as was apparent to the plaintiff, on the correspondence I have quoted from at some length. All of the correspondence before me except for the letter from the plaintiff to the first defendant dated 7 August 2000 was directed to her solicitors, and the firm did not change over the period material to the present issue.
236 In those circumstances, I do not consider that there is a sufficient
reason to apply the principle of Ex parte James in this case. That is, I do not consider that permitting the plaintiff the relief it seeks is something that should be regarded "as dishonourable or unconscionable for an ordinary man to do".
Is the plaintiff entitled to each of the forms of relief it seeks?
I previously summarised the plaintiff's claim to relief.
238 It follows from my conclusions that none of the bases on which the
first defendant relies to resist the plaintiff's claims to have the proceeds of the sales of the Homestead Property distributed in accordance with the order of priority of the F Mortgage and the G Mortgage have been made out. I did not understand the first defendant to contend in that case that the declaration the plaintiff seeks should not be made. I would so order.
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With respect to the plaintiff's claim for any penalties or compensation or interest payable to the purchasers on the sales of the mortgaged properties by reason of the delay in settlement, there is on the evidence before me only one such amount. It is that for penalty interest as shown on the seller settlement statement for the sale of the Homestead Property.
240 I consider that there is a basis for such a claim in the agreement
between the plaintiff and the first defendant for the latter to consent to possession being taken of that property and for its sale evidenced by the letter from Solomon Brothers dated 12 March 2003, quoted from above. For the reasons I gave previously I consider that part of a contractual arrangement, although not the one contended for by the first defendant. Alternatively, there was a contract to consent to the sale by auction of the Homestead Property evidenced by a letter from Solomon Brothers to Clark Whyte dated 8 August 2003 with respect to authorising the sale that subsequently occurred. In any event on the pleadings the first defendant admits to having agreed to the sale of the Homestead Property with settlement to occur on 8 September 2003, which in my view represented a contractual arrangement between the parties for the same reasons. I consider that there was an implied term in each contract that the parties would not refuse to do all such things as were necessary on their part to enable the parties to have the benefit of the contract. Such a term is implied to give business efficacy to the parties' relationship: see Cheshire & Fifoot (supra), at [10.55], [10.56]. One such thing would be to sign the instruments necessary for settlement.
241 It is not in contest that the first defendant refused to provide an
instrument executed by her, being the transfers of land required for settlement of the sales of both the Homestead Property and the Industrial Property, other than in exchange for the moneys owing under the G Mortgage in accordance with the postponement agreement the first defendant contended for: see the letter from Clark Whyte to Solomon Brothers dated 29 August 2003, and the letter from Solomon Brothers to Clark Whyte dated 8 September 2003.
242 There is a confirmation of the readiness, willingness and ability to
settle of the purchaser of the Homestead Property on the date of 9 September 2003 in a letter from what appear to be the purchaser's solicitors dated 9 September 2003, which also confirms the purchaser's intention to claim interest under the conditions of sale for delay in settlement. This letter was to Clark Whyte and was apparently copied by
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the latter to Solomon Brothers under cover of the letter from Clark Whyte
to them dated 9 September 2003.243 I note that the first defendant in her pleadings admits the plaintiff's
pleading of the first defendant's agreement to sales of the Homestead Property and of the Industrial Property with a settlement date in both cases of 8 September 2003; however, as I previously indicated the penalty interest appears to be reckoned on a settlement date of 9 September 2003, and other correspondence from Clark Whyte referred to settlement due by 9 September 2003. Nothing in my view turns on this, in view of the admission, and as the penalty interest appears to be calculated as I have indicated.
244 However, the first defendant put to me there is no evidence why the
sale of the Homestead Property did not settle until 17 October 2003, and that the "only inference" for a delay of that sort was that the plaintiff or a person other than the first defendant was not ready to settle until that date.
245 I disagree. On the evidence before me I have just described, and the
history of these proceedings to which I previously referred, there is sufficient for me to conclude that the settlement of the sale of the Homestead Property was delayed until 17 October 2003 because of the failure of the first defendant to execute the transfer of land except on conditions which I have held she was not entitled to have met.
246 I consider that the plaintiff has made out a claim to the penalty
interest deducted from the sale proceeds. I consider that the claim is, however, to have the penalty interest brought to account for the benefit of the registered mortgagees under the F Mortgage, being the plaintiff and the second defendant.
247 I note that in the plaintiff's minute of proposed orders there is no
readily apparent claim for this amount. I assume that if there were no
such claim, such was an oversight. I return to this matter below.248 The plaintiff also makes a claim for interest on the money that should
have been received by the plaintiff on the dates upon which settlement should have taken place. I take this amount to be without any deduction for penalty interest in the case of the sale of the Homestead Property. The interest payable would of course be in respect of the sales of both mortgaged properties.
249 The basis for this claim is to be put, in my view, as for the claim for
penalty interest. In that respect, I note there is a confirmation of the
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readiness, willingness and ability to settle of the purchaser of the Industrial Property on the date of 8 September 2003 in a letter from what appear to be the purchaser's solicitors dated 9 September 2003 to Clark Whyte.
250 I further note that in their letter to Solomon Brothers dated
4 September 2003 concerning settlement, Clark Whyte proposed to the first defendant that the proceeds of settlement after certain deductions, listed in the letter and set out in the description of the letter above, "be held in a trust account controlled jointly by Clark Whyte and Solomon Brothers on behalf of the Mortgagees" pending agreement on the payment of the amounts listed, including the amount outstanding on the F Mortgage and the G Mortgage, or the G Mortgage, as the case may be. I consider this to be a clear indication of the loss faced by those entitled if the settlements of the sales were delayed.
251 The first defendant made no submissions against this claim other
than as I understand her counsel to have done by implied reference to the same submissions as were put against the plaintiff's claim for the penalty interest. I have already dealt with those submissions.
252 In those circumstances, I am of the view the plaintiff has made out a
claim for its share of the interest that would have been earned had settlement taken place when it was due and the balances paid into the accounts which were opened subsequently, pursuant to the orders of 6 October 2003 in these proceedings to facilitate the settlements, to receive the proceeds of settlement. The interest would cease to accrue from the time those accounts were opened except as to the amount of the penalty interest. The determination of the deductions to arrive at the amounts on which interest would be calculated would it seems to me be as provided for in the orders referred to that interest, while the rate or rates of interest would be those for the credit balances in those accounts as they would have been until the accounts were in fact opened, and as they were thereafter, as the case may be.
253 I note, however, that in the plaintiff's minute of proposed orders, as
explained to me at the hearing before me, appears to quantify the amount for this claim. It is not readily apparent to me how the quantification was arrived at. I consider the matter should be the subject of further submissions. It is possible, for example, that the claim for penalty interest is bound up in the interest claim.
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254 The plaintiff also sought an order for the payment to the plaintiff of
the entire balances of the interest bearing accounts held in the name of Solomon Brothers for the proceeds of the sales of the Homestead Property and the Industrial Property respectively. I have previously described the origins of those accounts in orders made in these proceedings. There is no contest before me as to the deductions made to generate those proceeds.
255 However, I note that there was some question at the hearing before
me as to the measure of the entitlements of the parties to those balances. It is evident from the orders for distribution out of those accounts previously made in these proceedings that those distributions were in part satisfaction only of the parties' claims, and this appears to have become common cause at the hearing before me. It is also evident from the transcript of the hearing before E M Heenan J at the hearing at which the orders were made that there were unresolved matters of the amount of the costs of enforcement that might be debited against the proceeds of enforcement, and how those costs should be apportioned between the mortgagees under the F Mortgage and the mortgagees under the G Mortgage. I was told by senior counsel for the plaintiff that those matters did not fall for resolution as a result of the hearing before me, which was directed to the priority questions. Counsel for the defendant did not appear to disagree with this proposition. However, there is no question, as I understand it, of any payments having been made that might now have to be refunded because of the conclusions at which I have arrived.
256 In the plaintiff's minute of proposed orders handed up at the hearing,
orders for the distribution of the proceeds in the two trust accounts were put forward, which, it was said, left that matter for later determination to the extent there continued to be a dispute. In the crafting of orders to give effect to my conclusions, I would wish to hear further submissions from the parties particularly as to any such orders.
257 Accordingly I will hear from the parties as to the determination of
the amounts payable in consequence of my other conclusions, which would appear simply to be a mathematical determination using the shares of the parties, and the amounts paid out to them.
My conclusions and orders
258 I have concluded that the first defendant has not made out the basis it
sought to establish for the contract it contended for, for the application of the principle in Walton Stores (supra) on which it relied, for a contravention of Trade Practices Act, s 52, read if necessary with s 51A,
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and their corresponding provisions in the Fair Trading Act, and for the application in this case of the principle in Ex parte James (supra). Those were the principal bases on which the defendant resisted the claims of the plaintiff in this case.
I have also concluded that the plaintiff has made out its claims for relief, subject to the qualifications I have described.
I will hear from the parties as to the orders to be made to give effect to these conclusions.
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