Panorama Investments Pty Ltd v Mellos (No 2)
[2017] VSC 639
•13 OCTOBER 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2017 03283
| PANORAMA INVESTMENTS PTY LTD | Plaintiff |
| v | |
| NICK MELLOS AND STEPHEN ROBERT DIXON (AS JOINT AND SEVERAL TRUSTEES OF THE BANKRUPT ESTATE OF DR NICHOLAS WILLIAM SEVDALIS (A BANKRUPT)) AND OTHERS | Defendants |
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JUDGE: | ELLIOTT J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 13 OCTOBER 2017 |
DATE OF RULING: | 13 OCTOBER 2017 |
CASE MAY BE CITED AS: | PANORAMA INVESTMENTS PTY LTD V MELLOS (NO 2) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 639 |
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PRACTICE AND PROCEDURE — Interlocutory injunction — Sale of land by public auction — Registered proprietors insolvent and under administration — Land intended to be developed — Developer purchased land with notice of prior interest — Settlement not due to occur until end of month — Developer obtained planning permit — Proposed subdivision still unregistered — Developer entered into sale contracts for proposed subdivided lots — Alleged wrongful interference with sale contracts — Alleged unjust enrichment — Serious question to be tried — Balance of convenience — Delay — Application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr L Magowan | Barraket Stanton Lawyers |
| 1st, 2nd and 3rd Defendants | No appearance | - |
| For the 4th and 5th Defendants | Mr P Cawthorn QC with Mr D Connors | Rothwell Lawyers Pty Ltd |
HIS HONOUR:
A. Introduction
By summons filed 12 October 2017, the fourth defendant, NB Services (Aust) Pty Ltd (“NB Services”) and the fifth defendant, Champion Investment Group Pty Ltd (“Champion”), seek interlocutory injunctive relief. In terms they seek that, until further order of the court, the plaintiff, Panorama Investments Pty Ltd (“Panorama”), is restrained from:
(1)Exercising its power of sale in relation to properties situated at 895 Yang Yean Road and Bridge Inn Road, Doreen, in the State of Victoria (“the Properties”), by way of auction, private sale or otherwise.
(2)Further encumbering the Properties or in any way disposing, transferring or dealing with the Properties or any interest in the same without the leave of the court or the express written permission from NB Services and Champion.
In particular, NB Services and Champion seek that, until further order of the court, Panorama is restrained from proceeding with the auction of the Properties scheduled for this Sunday, 15 October 2017.
As a result of an exchange between the bench and counsel at the outset of the hearing of this application, it is now only Champion that moves the court for interlocutory relief. NB Services, as registered first mortgagee, is entitled to the proceeds of any sale in priority to Panorama. This position was expressly acknowledged by Panorama’s counsel. It was common ground that the sale price will far exceed the amount owing to NB Services.
For the reasons that follow, the application will be dismissed.
B. Background
The background to this proceeding is set out in a judgment of Digby J delivered orally on 22 August 2017.[1] There are a number of key facts that are not in contest and will not be in contest in any trial of the proceeding:
[1]Panorama Investments Pty Ltd v Mellos [2017] VSC 608.
(1) Panorama is a duly registered mortgagee of the Properties.
(2)The mortgage in question was registered on 29 September 2016 as a second mortgage, the interest secured having been the subject of a caveat since 31 January 2013.
(3)Pursuant to orders of this court, which were made on 22 August 2017 and have not been the subject of any application for leave to appeal to date,[2] Panorama is lawfully in possession of the Properties.
(4)Panorama, as second mortgagee, has a judgment from this court against a registered proprietor and a company associated with the other registered proprietor of the Properties, in the sum of $3,027,431.80, pursuant to an order made on 2 March 2017. This order has not been the subject of any application to contest its validity.
(5)Panorama is entitled, under its mortgage, to exercise a power of sale which it has duly decided to exercise, with a proposed sale to occur by public auction on Sunday, 15 October 2017.
(6)Panorama has advertised and otherwise marketed the Properties for sale[3] and has attracted significant interest in the Properties.
(7)The first and second defendants, who are the registered proprietors of the Properties, are both the subject of insolvency administration, 1 being a bankrupt and the other being in liquidation.
(8)Neither the trustees in bankruptcy nor the liquidator has been served with this application.
(9)By a contract of sale dated 21 November 2016, Champion agreed to purchase the Properties, with settlement due to occur on 31 October 2017 (“the Contract of Sale”).
[2]See pars 6-8 below.
[3]In addition to offering the usual undertaking as to damages, Champion offered to pay Panorama’s advertising expenses in the amount of $20,000 in the event an injunction were granted.
Champion has served a counterclaim.[4] It outlines a number of claims. Before turning to these, paragraph 44 of the proposed counterclaim alleges:
On 22 August 2017 [Panorama] obtained an order for possession of the [Properties] from the Supreme Court of Victoria but Champion has sought leave to appeal from the order or intends to do so.
[4]The counterclaim is dated 22 September 2017, and was served around this time. No evidence was put before the court to explain why the document had not been filed. On the contrary, an affidavit in support of the application wrongly stated that the document had been filed.
It is plainly incorrect to allege that Champion has sought leave to appeal. It has not. There is no evidence to suggest that, at the time the counterclaim was served, on or about 22 September 2017, any steps had been taken to apply for leave to appeal. The court was informed during argument that that is still the position.
I do note, however, that Digby J's oral reasons were only the subject of written reasons very recently.[5] Accordingly, based on what was stated by Champion’s senior counsel from the bar able, I will proceed on the basis that Champion may seek leave to appeal, albeit any application would be out of time.
[5]The written reasons were delivered late last Friday, 6 October 2017. See fn 1 above.
Champion alleges that, since November 2016, it has expended significant sums with respect to obtaining planning approval for a proposed subdivision of the Properties. A planning permit was issued on 23 February 2016 and, subject to subsequent amendments, remains on foot. There is also a proposed, but as yet unregistered, plan of subdivision in respect of the Properties.[6] These allegations, which are supported by affidavit evidence, are coupled with details of the expenses incurred by Champion in seeking to obtain development of the land, said to be in excess of $3 million.
[6]Plan of subdivision No PS803824A.
Further, there is evidence that Champion has entered into 59 contracts of sale, out of a total of 61 lots or proposed lots, from which it anticipates it will make many millions of dollars in profit (“the Lots Contracts”).
As for the causes of action pleaded by Champion, it is alleged:
In the event that [Panorama] exercises its purported right as second mortgagee to sell the [Properties] without regard to the rights of Champion (which it threatens to do and unless restrained by this Honourable Court will do) then it will have wrongfully interfered with the contractual relations between:
(a) Champion and the vendors under the Contract of Sale;
(b) Champion and the purchasers pursuant to the [Lots Contracts].
(Emphasis added.)
Further, a claim based in restitution is made. Finally, it is pleaded (again) that Panorama’s conduct may interfere with Champion’s rights under the Contract of Sale.
C. Legal principles
There was no dispute as to the relevant principles to be applied.
The granting of interlocutory relief is discretionary. In exercising its discretion, the court must be satisfied that there is a serious question to be tried, in the sense that an applicant must show a sufficient likelihood of success to justify the preservation of the status quo pending trial in the circumstances. The requirements of a serious question and the balance of convenience need to be examined together.[7]
[7]Bradto Pty Ltd v State of Victoria (2006) 15 VR 65, 74 [39], 82 [84] (Maxwell P and Charles JA).
Moreover, the court should always bear in mind that it “should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial”.[8]
[8]Ibid, 73 [35] (Maxwell P and Charles JA).
Further, an injunction will not be granted if damages would be an adequate remedy.[9]
[9]Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, 68 [19] (Gleeson CJ and Crennan J).
Finally, as the relief is discretionary, the court may consider any other factors relevant to the exercise of the court's discretion, such as delay.[10]
D. Consideration
[10]Bradto Pty Ltd v State of Victoria (2006) 15 VR 65, 81-82 [81].
D.1 Interference with the Lots Contracts
It is plain that if Panorama’s sale of the Properties goes ahead, there is likely to be interference with the Lots Contracts. If the land is sold to another person or entity on Sunday, this will give rise to serious, if not insurmountable, difficulties in Champion becoming the registered proprietor. However, why it is said that such interference is “wrongful” is completely unclear on the pleading. Panorama intends to do no more than exercise its lawful right under its mortgage, which existed and was registered before Champion acquired any interest in the Properties. Not only was there no recognised cause of action on the face of the counterclaim, none was identified on the application for interlocutory relief.
In my view, the claim as formulated with respect to the Lots Contracts has no real prospects of success. There is no serious question to be tried on this issue.
D.2 The restitutionary claim
Next, it is alleged:
Further or alternatively, in the event that [Panorama] exercises its purported rights as second mortgagee to sell the [Properties] without regard to the rights of Champion (which it threatens to do and unless restrained by this Honourable Court will do) it will take the benefit of the development expenditure and the subdivision permission without payment for them and will thereby have been unjustly enriched.
In the premises, Champion claims restitution against [Panorama] for sums expended on the development expenditure and the subdivision permission should [Panorama] remain in possession of the [Properties] and sell them.
(Emphasis added.)
I accept there may be a serious question to be tried with respect to these allegations. Panorama, and perhaps others, may reap a benefit as a result of the work performed by Champion, and to that extent Champion may have a valid restitutionary claim. However, this claim is made on the express basis that Panorama remains in possession of the Properties, and sells them. It does not provide a basis for an interlocutory injunction, and indeed, it is quite inconsistent with such relief.[11]
[11]Cf Papas v Grave [2013] NSWCA 308, [83] Emmett JA (with whom Sackville AJA agreed); Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, 218 [15] (Gleeson CJ).
D.3 The Contract of Sale
Lastly, it is alleged that the contractual relations between Champion and the vendors under the Contract of Sale will be wrongfully interfered with; and, similarly, if the Properties are sold by Panorama, such a sale “may defeat, hinder or adversely affect the rights of Champion as purchaser under the Contract of Sale”.
With respect to the latter of these allegations, as a matter of fact this may be so. But the facts as pleaded do not give rise to a valid cause of action which might provide a legitimate basis for preventing Panorama from exercising its power of sale as a duly-registered mortgagee, lawfully in possession of the Properties pursuant to orders of the court. Again, in my view, there is no serious question to be tried in this regard. Similarly, with respect to the earlier allegation, there has been no circumstance identified which would suggest that the likely interference would be wrongful.
D.4 Balance of convenience
What is noted above suffices to dispose of the application. For completeness, however, it is far from clear that the balance of convenience favours the relief sought by Champion.
The auction is proceeding on Sunday and may produce a sale. If an injunction were granted until the hearing and determination of this proceeding, the sale of the Properties may be deferred for an extended period of time. There is evidence from an agent involved in the sale of the Properties that if the sale were deferred until 2018, there is a real risk the Properties would be sold in a weaker market.
Further, other parties beyond Panorama and NB Services have claimed a secured interest in the Properties.[12] If the sale were deferred for a significant period of time, there may be either insufficient funds or, if there are already insufficient funds, even fewer funds available to secured creditors.
[12]By writ and statement of claim filed 5 October 2017 in this court, Down Town Visuals Pty Ltd (“Down Town”) has claimed a secured interest in the Properties pursuant to an assignment to it of a loan agreement and an accompanying charge between Gulf Country Investments Pty Ltd and the first and second defendants in this proceeding. On Monday of this week, Down Town applied unsuccessfully for an injunction to restrain Panorama’s sale of the Properties on Sunday: Down Town Visuals Pty Ltd v Panorama Investments Pty Ltd (unreported, 9 October 2017, Elliott J, proceeding SCI 2017 3990). Neither NB Services nor Champion was involved in this earlier application.
It is true that Champion may miss out on potential profits if the Properties are sold by Panorama to a third party, and may also suffer loss of moneys already spent in developing the Properties. However, Champion’s interest in the Properties was only ever acquired with full notice of Panorama’s pre-existing interest. Further, as Digby J noted, the Properties are vested in the trustee in bankruptcy and the liquidator, and so Champion is not presently in a position to complete the Lots Contracts.[13]
[13]Panorama Investments Pty Ltd v Mellos [2017] VSC 608, [21].
In any event, there is nothing stopping Champion or, for that matter, NB Services, paying out Panorama and thereby removing the basis upon which Panorama is entitled to sell.
Furthermore, there is no question that Panorama is significantly out of pocket. It has a judgment debt which is yet to be satisfied.[14]
[14]See par 5(4) above.
In all the circumstances, the balance of convenience would not support the granting of an injunction.
D.5 Delay
Finally, as a discretionary matter, it is my view there has been significant and unwarranted delay in Champion bringing this application. While the delay on the part of NB Services is explained by the fact that it has only very recently become a registered mortgagee, that does not explain the delay on the part of Champion. This application has been made the very last business day before the auction and not all interested parties have been served with the application.
This factor provides a further basis for the court to decline to exercise its equitable jurisdiction.
D.6 Further considerations
I have already noted the restitutionary claim as put is inconsistent with the granting of the injunction sought.[15] Further, although I consider there may be a serious question to be tried in this respect, the facts will need to be considered more fully when the case has been properly analysed and pleaded.[16]
[15]See par 20 above.
[16]Cf Woolcorp Pty Ltd v Rodger Constructions Pty Ltd [2017] VSCA 21, [12]-[13], [107] (Santamaria and Kyrou JJA and Elliott AJA).
Any settlement of a sale resulting from the auction on Sunday would be unlikely to occur for some time. With respect to the restitutionary claim, if the auction proceeds on Sunday and a sale occurs, Champion might make an application with respect to any proceeds received in due course.[17] If there ultimately is a serious question to be tried after full instructions are obtained, and such an application were made, the court would be in a position to properly consider whether or not an amount ought to be paid into court, which might reflect any benefit allegedly received from Champion’s work.[18]
[17]As recorded in Other Matters in the orders giving effect to these reasons, upon sale of the Properties, Panorama has been directed by the court to provide NB Services and Champion with a copy of the contract of sale, and inform them of the amount of any deposit received and by whom it will be held, and of any changes to the proposed settlement of the contract.
[18]In addition to any proceeds at any settlement, Panorama’s counsel indicated to the court that any deposit received from the potential sale on Sunday would be held on trust in the short term.
In summary, in the circumstances, there is sufficient time for Champion to seek protection by way of interlocutory relief if necessary, after making a proper assessment of any restitutionary claim.
E. Conclusion
For these reasons, Champion’s application will be dismissed.
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