P & R Holdings Pty Ltd v Walthamstow Pty Ltd - [2020] WASC 284

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   P & R HOLDINGS PTY LTD -v- WALTHAMSTOW PTY LTD [2020] WASC 284
CORAM:   MASTER SANDERSON
HEARD:   29 JUNE 2020
DELIVERED          :   29 JUNE 2020
PUBLISHED           :   4 AUGUST 2020
FILE NO/S:   CIV 1580 of 2020
BETWEEN:   P & R HOLDINGS PTY LTD
Plaintiff

AND

WALTHAMSTOW PTY LTD
Defendant

Catchwords:

Injunction - Application by owner of property to restrain sale by mortgagee - Turns on own facts

Legislation:

Corporations Act 2001(Cth)

Result:

Plaintiff's application for interlocutory injunction dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	E Hensler
Defendant	:	S Davies

Solicitors:

Plaintiff	:	Corporate Counsel Lawyers
Defendant	:	Taylor Smart

Case(s) referred to in decision(s):

CME Properties (Australia) Pty Ltd v Prime Capital Securities Pty Ltd [2016] WASC 231
Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161

MASTER SANDERSON:

This was the plaintiff's application for an interlocutory injunction restraining the defendant from selling a property located at Seven Oaks Street, Cannington. At the conclusion of the hearing, I dismissed the plaintiff's application and I indicated I would provide reasons for my decision. These are those reasons.
The defendant is the mortgagee in possession of the property.[1] It has entered into a contract of sale with the City of Canning as the purchaser of the property.[2] The purchase price under the sale contract is $1,304,225.[3] Under cl 4.2 of the contract the defendant must at its cost, remove all improvements from the property prior to settlement of the sale. Since at least 31 March 2020, under cl 9 of the contract, both the defendant and the City of Canning have been able to terminate the contract by written notice.
[1] Affidavit of Steven Alick Masel sworn 16 June 2020 par 29; Annexures SAM‑10A, SAM‑11.
[2] Affidavit of Steven Alick Masel sworn 16 June 2020 par 120; Annexures SAM‑45.
[3] Affidavit of Steven Alick Masel sworn 16 June 2020 par 119; Annexures SAM‑44A.
The essential complaint of the plaintiff is that the property is being sold under value.[4]
[4] Plaintiff's outline of submissions in support of injunction filed 21 June 2020 pars 5(e) and 5(f).
In support of its application the plaintiff relied on an affidavit of Peter Tilley sworn 18 May 2020. Appearing as attachment PT5 to Mr Tilley's affidavit is a report dated 10 January 2020 prepared by Property Valuation & Advisory (WA). The report is both professional and comprehensive. It puts value on the property of $1,850,000. The report was issued on 15 January 2020. Given the uncertainty around commercial transactions resulting from the COVID‑19 pandemic it must be open to question how accurate any report issued before March 2020 might be. However, counsel for the defendant while expressing some reservations as to the currency of the valuation report acknowledged it was evidence in the hands of the plaintiff.
It was alleged by the plaintiff the defendant had breached its duty in two respects. First, it had breached its statutory duty of sale by failing to take steps of a reasonable and prudent person pursuant to s 420A of the Corporations Act 2001 (Cth) to obtain the best possible price.[5] Second, the defendant had breached its common law duty not to act recklessly or wilfully sacrifice the interests of the plaintiff.[6] Both parties referred to the decision of CME Properties (Australia) Pty Ltd v Prime Capital Securities Pty Ltd [2016] WASC 231 at 18. Nor was there any dispute between the parties as to the applicable principles for the grant of an interlocutory injunction. The parties accepted it was necessary for the plaintiff to show there was a serious question to be tried and the balance of convenience favoured the grant of the injunction. In the end, I was satisfied the plaintiff had not established either of these requirements.
[5] Plaintiff's outline of submissions in support of injunction filed 21 June 2020 par 7.
[6] Plaintiff's outline of submissions in support of injunction filed 21 June 2020 par 8.
It should be noted at the outset that the plaintiff had not satisfied and was in no position to satisfy what is generally referred to as the rule in Inglis: Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161. As a general rule, restraint of the mortgagee sale is not granted unless the debt owed to the mortgagee is paid into court. Of course that rule is not inflexible and must depend upon the circumstances. But any party seeking to restrain a mortgagee in possession must either comply with the rule or provide cogent reasons why it has not done so. In this case, the debt owed by the plaintiff to the defendant was as at 8 June 2020, $4,281,843.50.[7] It is clear sale of the property, even if it was sold at or about the figure in the plaintiff's valuation, would leave the defendant with a very substantial shortfall. The debt owed by the plaintiff to the defendant continues to rise ‑ the plaintiff is not making any payments pursuant to the mortgage. This, in itself, is a compelling reason why the injunction ought not be granted.
[7] Affidavit of Steven Alick Masel sworn 16 June 2020 par 138; Annexure SAM-48.
Leaving the rule in Inglis to one side, the difficulty for the plaintiff is that it is by no means clear what its cause of action against the defendant might be. That is to say there is nothing in the evidence to suggest the defendant has not properly exercised its rights under the mortgage. The plaintiff was in default under the mortgage and when called upon to do so, did not rectify that default. So any cause of action the plaintiff might have is limited to the claim the property is being sold under value. This is not a case where the plaintiff suggests there are grounds for setting aside the mortgage or otherwise restraining the plaintiff from selling the property.
In opposition to the application the defendant relied on an affidavit of Steven Alick Masel sworn 16 June 2020. Mr Masel is a director of the defendant.[8] At [104] through to [137] of his affidavit Mr Masel sets out the circumstances which led to the contract for sale of the property. Mr Masel says that in February 2018 on behalf of the defendant he obtained a valuation of the property from Hemsley Paterson. A copy of that valuation appears as attachment SAM‑41 to Mr Masel's affidavit. The value put on the property was $1,300,000. After receiving the valuation Mr Masel became aware the City of Canning had an interest in purchasing the property. He held discussions with the City. Discussions took place and Mr Masel negotiated the purchase price up from an initial offer of $900,000 to the present purchase price. The contract for the sale of the property was signed on 21 August 2019. Mr Masel refers to what he describes as a 'sunset' provision in the contract. That provision effectively allows either party to terminate by a particular date. The original date has long since passed and has been extended on a number of occasions. Whether it will be further extended is open to question.
[8] Affidavit of Steven Alick Masel sworn 16 June 2020 par 1.
Two things emerge from Mr Masel's evidence. First, he did not simply settle on a value without professional advice. True it is there is a significant difference between the valuation obtained by the plaintiff and the valuation obtained by the defendant. But that is not the issue. What has happened here is that the defendant did obtain a valuation from a reputable source. Second, Mr Masel persuaded the City of Canning to pay slightly more than the valuation. If he had accepted the initial offer from the City of just over $900,000, the plaintiff may have had an argument. The disparity between the valuation obtained by the defendant and the offer made by the City was considerable. But when the City was prepared to pay an amount just over the valuation it is impossible to conclude the property is being sacrificed. After reading all of the evidence it is difficult to conclude anything but Mr Masel obtained the best possible price for the property in all of the circumstances.
In my view, there is no serious question to be tried in this matter. Moreover, the balance of convenience does not favour the plaintiff. If this sale is lost there may be difficulties in the future obtaining the price the City are prepared to pay, let alone a higher price. Given the extent of the indebtedness of the plaintiff to the defendant, to run the risk of this sale falling over is not in any one's interest.
For these reasons I dismiss the plaintiff's application. The plaintiff should pay the costs of the application, including the reserved costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
4 AUGUST 2020