Panorama Investments v Mellos
[2017] VSC 608
•22 August 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2017 3283
| PANORAMA INVESTMENTS PTY LTD (ACN 148 905 864) | Plaintiff |
| - and - | |
| NICK MELLOS AND STEPHEN ROBERT DIXON AS JOINT AND SEVERAL TRUSTEES OF THE BANKRUPT ESTATE OF DR NICHOLAS WILLIAM SEVDALIS (A BANKRUPT) and Ors (according to attached Schedule of Parties) | Defendants |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 18 and 22 August 2017 |
DATE OF JUDGMENT: | 22 August 2017 |
CASE MAY BE CITED AS: | Panorama Investments v Mellos & Ors |
MEDIUM NEUTRAL CITATION: | [2017] VSC 608 |
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WRIT – Application for orders for possession – Injunctions restraining the sale – Transfer or encumbrance of land – Defaults in respect of loans and related guarantees under registered second mortgage security – Position of unregistered transferee of first mortgage – Serious issues to be tried – Balance of convenience considerations – Transfer of Land Act 1958, ss 76(1) and 77.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Newton with Mr L Magowan | Barraket Stanton Lawyers |
| For the First Defendant | Ms E Lucas, Solicitor | Piper Alderman |
| For the Second Defendant | No appearance | |
| For the Third Defendant | Mr M Johns, Solicitor | Maddocks |
| For the Fourth & Fifth Defendants | Mr D Connors | Rothwell Lawyers |
HIS HONOUR:
Urgent relief sought
In this matter the plaintiff Panorama Investments Pty Ltd (Panorama) bring an urgent application by Summons dated 10 August 2017 (filed 15 August 2017) pursuant in which the plaintiff seeks:
(i) interlocutory and final injunctive relief restraining the defendants from selling, transferring, further encumbering or entering into any agreement to sell, transfer, or further encumber a property comprised in Certificate of Title Volume 10300 Folio 2013, being the property at 895 Yan Yean Road, Doreen in the State of Victoria (the Yan Yean Road property), without first providing Panorama’s solicitors with at least seven business days’ written notice of any such existing or proposed transaction;
(ii) similar, urgent interlocutory and final order in respect of a property described in Certificate of Title Volume 08580 Folio 808 at 880 Bridge Inn Road, Doreen in the State Victoria and 895 Yan Yean Road, Doreen in the State of Victoria (the Bridge Inn Road property);
(iii) Panorama also seeks orders for possession pursuant to a registered second mortgages, AM 141967E and AN 141996W, in respect of which Panorama is the registered proprietor in relation to the Yan Yean Road property and the Bridge Inn Road property respectively.
Background facts
Panorama’s allegations and cause of action are set out at paragraphs [7]-[28] of its Statement of Claim dated 9 August 2017, filed 15 August 2017. Panorama’s presently relevant allegations and claims are in summary as follows:
(a) Dr Nicholas William Sevdalis (the Bankrupt), in respect of whom the first defendants are trustees, is recorded in the register of land maintained under the Transfer of Land Act 1958 (the Act) as the registered proprietor of the property comprised in Certificate of Title Volume 10300, Folio 203, being a property more commonly known as 895 Yan Yean Road, Doreen, in the state of Victoria (Yan Yean Road).
(b) The second defendant (Native Bond), a company at all material times controlled by the Bankrupt and presently in liquidation, is recorded in the register of land maintained under the Act as the registered proprietor, of the property comprised in Certificate of Title volume 08580, Folio 808, being a property more commonly known as 880 Bridge Inn Road, Doreen in the state of Victoria and/or 895 Yan Yean Road, Doreen in the state of Victoria (Bridge Inn Road).
(c) The properties referred to in sub-paragraphs (a) and (b) are adjoining properties and are herein collectively referred to as the ‘Doreen Property’.
(d) The third defendant (Bendigo and Adelaide Bank) is recorded in the register of land maintained under the Act as the first registered mortgagee of the Doreen Property.
Particulars
(a)Mortgage AJ925641C registered 24 September 2012 on the title for Yan Yean Road;
(b) Mortgage AJ925648M registered 24 September 2012 on the title for Bridge Inn Road.
(e) On 26 July 2017 the following dealings were recorded in the register of land maintained under the Act for Yan Yean Road:
(iv)dealing number AQ080398E in which Bendigo and Adelaide Bank authorised the nomination of the electronic certificate of title for Yan Yean Road to a transfer to the fourth defendant (N.B. Services);
(v) dealing number AQ076547N in which Bendigo and Adelaide Bank authorised the nomination of the electronic certificate of title for Yan Yean Road to a Discharge of its Mortgage (Mortgage AJ925641C);
(vi)dealing number AQ078051J in which Bendigo and Adelaide Bank authorised the withdrawal of the nomination of the certificate of title for Yan Yean Road.
(f) On the following dates the dealings shown below were recorded in the register of land maintained under the Act for Bridge Inn Road:
(i) on 25 July 2017 dealing number AQ076429U was recorded in which Bendigo and Adelaide Bank authorised the nomination of the electronic certificate of title for Bridge Inn Road to a discharge of its mortgage (Mortgage AJ925648M);
(ii) on 25 July 2017 dealing number AQ078013S was recorded in which Bendigo and Adelaide Bank authorised the withdrawal of the nomination of the electronic certificate of title for Bride Inn Road;
(iii) on 26 July 2017 dealing number AQ080355Y in which Bendigo and Adelaide Bank authorised the nomination of the electronic certificate of title for Bridge Inn Road to a transfer to N.B. Services.
(g) By an agreement between Panorama and a company known as Summit Tower Pty Ltd (Borrower) made 18 January 2013, Panorama agreed to lend the Borrower $2,454,700 (Loan Agreement).
Particulars
The Loan Agreement is in writing and contained in a loan offer from Panorama to the Borrower dated 17 January 2013 and signed for the Borrower by the Bankrupt as director of the Borrower on 18 January 2013.
(h) The Loan Agreement included terms to the following effect:
(i) the loan will be a fully drawn advance up to the maximum amount of $2,454,700.51 [clause 1(a)];
(ii) the term of the loan is 6 months from 25 January 2013 [clause 1(c)];
(iii) the loan amount shall be fully repaid by the Borrower to Panorama on 25 July 2013 [clause 1( e)];
(iv)Panorama will accept interest at a rate of 20% per annum provided that all amounts payable by the Borrower under the terms of the Loan Agreement are paid within 7 days of becoming due and at all other times interest at the rate of 28% per annum shall apply [clause 1(f)];
(v) the Borrower shall be responsible for any and all legal costs, enforcement expenses, fees, charges and other costs including but not limited to any reasonable costs for Panorama’s time where there is a default by the Borrower of the terms and conditions of the Letter of offer and/or any security [clause 4(c)].
(i) On or about 18 January 2013 Panorama advanced the sum of $2,454,700.51 (Loan) in accordance with the Loan Agreement.
Particulars
The Loan was disbursed in accordance with the Loan Disbursement Statement & Authority signed by the Bankrupt on behalf of the Borrower on 18 January 2013.
(j) By Deed of Guarantee and Indemnity between Panorama and the Bankrupt (as guarantor) dated 21 January 2013, the Bankrupt unconditionally guaranteed to Panorama the Borrower’s obligations under the Loan Agreement and unconditionally and irrevocably indemnified Panorama with respect to the Borrower’s obligations under the Loan Agreement (Bankrupt Guarantee and Indemnity).
Particulars
The Bankrupt Guarantee and Indemnity is in writing and was executed as a Deed and signed by the Bankrupt.
(k) The Bankrupt Guarantee and Indemnity included terms to the following effect:
(i) the Bankrupt unconditionally guaranteed to Panorama the due and punctual payment by the Borrower of all moneys due and payable under the Loan Agreement and the due and punctual observance and performance by the Borrower of all its liabilities, obligations to Panorama in connection with the Loan Agreement [clause 2.1];
(ii) if the Borrower defaults in the due and punctual payment of any moneys due and payable under the Loan Agreement, the Bankrupt must pay that money to, or as directed by Panorama, immediately on demand [clause 2.2];
(iii) if the Borrower defaults or fails in the due and punctual performance of any of its liabilities, obligations under the Loan Agreement, the Bankrupt must indemnify Panorama immediately against all losses, liabilities, damages, costs and expenses (including legal expenses on a full indemnity basis) which may be incurred (directly or indirectly) by Panorama by reason of that default or failure [clause 2.3];
(iv)the Bankrupt’s obligations are principal obligation and are not ancillary or collateral to any other right or obligation [clause 3.1];
(v) the Bankrupt’s obligations are absolute, unconditional and irrevocable [clause 3.3];
(vi)the Bankrupt Guarantee and Indemnity may be enforced in the absolute discretion of Panorama against the Bankrupt without first having recourse to any other security or right, and without taking any steps or proceedings against the Borrower, or any other surety, and notwithstanding that any other security may be, in whole or part, unenforceable by reason of any rule of law or equity [clause 3.4].
(vii) if the Bankrupt provides any security in support of the Bankrupt’s Guarantee and Indemnity, Panorama may retain that security until seven months after the Borrower’s obligation and the Bankrupt’s obligations have both been fully satisfied [clause 3.12].
(l) By Deed of Guarantee and Indemnity between Panorama and Native Bond (as guarantor) dated 18 January 2013, Native Bond unconditionally guaranteed to Panorama the Borrower’s obligations under the Loan Agreement and unconditionally and irrevocably indemnified Panorama with respect the Borrower’s obligations under the Loan Agreement (Native Bond Guarantee and Indemnity).
Particulars
The Native Bond Guarantee and Indemnity is in writing and was executed as a Deed by Native Bond.
(m)The Native Bond Guarantee and Indemnity included, with necessary modifications, terms to the effect referred to above in the Loan Agreement.
(n) By mortgage of land, the Bankrupt mortgaged to Panorama all of his estate and interest in Yan Yean Road as security for the payment of the Loan and all moneys due under the Loan Agreement and the Bankrupt’s Guarantee and Indemnity (Bankrupt’s Mortgage).
Particulars
The Bankrupt’s Mortgage AN141967E was registered on 29 September 2016 on the title of Yan Yean Road and incorporates memorandum of common provisions AA690 (MCP), the terms and conditions of the Loan Agreement and the Bankrupt Guarantee and Indemnity.
(o) By mortgage of land, Native Bond mortgaged to Panorama all of its estate and interest in Bridge Inn Road as security for the payment of the Loan and all moneys due under the Loan Agreement and the Native Bond Guarantee and Indemnity (Native Bond Mortgage).
Particulars
The Native Bond Mortgage AN141996W was registered on 24 September 2016 on the title of Bridge Inn Road and incorporates the MCP, the terms and conditions of the Loan Agreement and the Native Bond Guarantee and Indemnity.
(p) The Bankrupt’s Mortgage and the Native Bond Mortgage included provisions to the following effect:
(i) as the owner of the property, you mortgage the property as security for payment of the secured money [clause 1.1 MCP];
(ii) as security for repayment of the secured money, you also mortgage any proceeds from a sale of the property [clause 1.2 MCP];
(iii) if a caveat is placed on the title to the property, you must notify Panorama immediately [clause 17.1 MCP];
(iv)the mortgage is a continuing security [clause 25 MCP];
(v) it is a default under the mortgage if any of the following occur without Panorama’s prior consent in writing [clause 37 MCP]:
(i) any part of the secured money is not paid when that part falls due and payable;
(ii) you do not perform or comply with any of your obligations under the mortgage;
(iii) you subdivide or agree to subdivide all or any part of the property;
(iv) you transfer or sell, or agree to transfer or sell or give an option to purchase, all or any part of the property;
(v) an insolvency event occurs meaning being or being taken to be unable to pay debts.
(vi)If a default occurs, and after we comply with any notice or other requirements under legislation, then:
(i) Panorama may require you to pay all or any part of the secured money immediately and Panorama or a receiver or an attorney may exercise any of its rights [clause 38.1 MCP];
(ii) Panorama may exercise any right of a receiver in addition to any of its rights—whether or not a receiver is appointed—including entering into possession of or assuming control of the property and selling the property to any person [clause 41 MCP].
(q) In breach of the terms of the Loan Agreement:
(i) the Borrower failed to fully repay the loan amount to Panorama on 25 July 2013;
(ii) the Borrower failed to make repayments of all moneys owed under the Loan Agreement.
(r) On 2 March 2017, Panorama obtained:
(i) judgment against Summit and Native Bond in the sum of $3,027,431.80 for moneys owed under the Loan Agreement and the Native Bond Guarantee and Indemnity;
(ii) an order that Summit and Native Bond pay its costs of an incidental to the Proceedings including reserved costs, to be taxed by the Costs Court on an indemnity basis in default of agreement.
Particulars
Order made by the Honourable Justice Digby on 2 March 2917 in the Supreme Court of Victoria at Melbourne Commercial Court, case number SCI 2015 4426 in proceedings between Panorama, the Borrower, the Bankrupt, Native Bond and Others. Judgment was not obtained against the Bankrupt on account of the fact that he had been declared bankrupt prior to the order and therefore Panorama was prevented taking any further step against him by reason of section 58 of the Bankruptcy Act.
(s) In default of the provisions of the Bankrupt’s Mortgage, the following occurred without Panorama’s prior consent in writing:
(i) the secured moneys were not paid when due and payable;
(ii) the titles of the Doreen Property form part of a proposed plan of subdivision being PS803824A.
(iii) by a purported contract for sale of real estate dated 21 November 2016 the Bankrupt and Native Bond agreed to sell the Doreen Property to Champion;
(iv)the Bankrupt became a bankrupt and is taken to be unable to pay his debts;
(v) Champion placed a Caveat on the title of Yan Yean Road, which was recorded as AN323779S on 29 November 2016 and the Bankrupt did not notify Panorama immediately of the recording of the caveat;
(vi)Shane Wilson placed a Caveat on the title of Yan Yean Road, which was recorded as AN758372X on 20 April 2017 and the Bankrupt did not notify Panorama immediately of the recording of the caveat.
(t) In the premise, Panorama claims it is entitled to an order for possession of Yan Yean Road.
(u) In default of the provisions of the Native Bond Mortgage the following occurred without Panorama’s prior consent in writing:
(i) the secured moneys were not paid when due and payable;
(ii) the titles of the Doreen Property form part of a proposed plan of subdivision being PS803824A;
(iii) by purported contract for sale of real estate dated 21 November 2-16 the Bankrupt and Native Bond agreed to sell the Doreen Property to Champion;
(iv)Native Bond was ordered to be wound up and is taken to be unable to pay its debts;
(v) Downtown Visuals Pty Ltd placed a Caveat on the title of Bridge Inn Road, which was recorded as AM721977C on 21 April 2016 and Native Bond did not notify Panorama immediately of the recording of the caveat;
(vi)Champion placed a Caveat on the title of Bridge Inn Road, which was recorded as AN323779S on 29 November 2016 and Native Bond did not notify Panorama immediately of the recording of the caveat;
(vii) Nicola Mazzeo and Patrick Lennon placed a Caveat on the title of Bridge Inn Road, which was recorded as AN336737M on 2 December 2016 and Native Bond did not Panorama immediately of the recording of the caveat;
(viii) Anthony Robert Cant and Simon Patrick Nelson placed a Caveat on the title of Bridge Inn Road, which was recorded as AN542156J on 9 February 2017 and Native Bond did not notify Panorama immediately of the recording of the caveat;
(ix) Shane Wilson placed a Caveat on the title of Bridge Inn Road, which was recorded as AN758372X on 20 April 2017 and Native Bond did not notify Panorama immediately of the recording of the caveat.
(v) In the premise, Panorama is entitled to an order for possession of Bridge Inn Road.
The Evidence
Panorama has in its applications including for possession of the Bridge Inn Road and Yan Yean Road properties, relied upon affidavit material, including the affidavits of Mr Salim Nahoum sworn 9 August 2017 and 10 August 2017, and an affidavit of Kenneth Stanton of 21 August 2017 and exhibits. Mr Nahoum is the sole Director and Secretary of Panorama and Mr Stanton is Panorama’s solicitor.
The evidence of Mr Nahoum was largely uncontradicted and in summary established the following –
(a)On or about 17 January 2013, Panorama and Summit Tower Pty Ltd ACN 074 817 799 (Summit Tower) entered into the said Loan Agreement for a loan in the sum of $2,454,700.51.
Each of Dr Nicholas Sevdalis (Dr Sevdalis) and Native Bond entered into the said Deeds of Guarantee and Indemnity with respect to Summit’s liability pursuant to the Loan Agreement.
(b)On or around 18 January 2013 Panorama advanced the sum of $2,454,700.51 (the Loan) under the Loan Agreement. The Loan is secured by a second registered mortgage over a property owned by Dr Sevdalis known as 895 Yan Yean Road, Doreen in the state of Victoria being the property comprised in Certificate of Title Volume 10300 Folio 2013 and a property owned by Native Bond known as 880 Bridge Inn Road, Doreen and/or 895 Yan Yean Road, Doreen in the state of Victoria being the property comprised in Certificate of Title Volume 08580 Folio 808. Those properties are adjoining properties, and referred to collectively as the “Doreen Property”.
(c)Panorama at no stage consented to the sale of any of the said properties comprising the Doreen Property.
(d)Further the only payments received by Panorama in connection with the Loan Agreement and the Loan were:
(i)on 30 January 2013 in the amount of $360,000.00;
(ii)on 14 March 2013 in the amount of $17,455.84; and
(iii)on 25 November 2014 in the amount of $1,655,763.19 which was a sum paid out of funds held in Court as a result of the sale by the First Mortgagee in possession of a property known as 443 Upper Heidelberg Road, Heidelberg Heights in Victoria.
(e)In March 2015 proceedings in which Panorama claimed judgment for the debt under the Loan Agreement were commenced by Panorama against Summit, the Bankrupt and Native Bond in the County Court of Victoria. Those proceedings were in due course transferred to the Supreme Court of Victoria.
(f)In June 2015 Summit, Dr Sevdalis and Native Bond brought a Counterclaim against Panorama and a number of other parties.
(g)On 24 December 2016, Dr Sevdalis was declared bankrupt. Nick Mellos and Stephen Robert Dixon, the first defendants, were appointed as trustees in bankruptcy (the Trustees). Mr Nahoum notes that his solicitors have unsuccessfully sought copies of the Contract of Sale of Land for the Doreen Property.
Judgment Debt owing under the Loan Agreement
(h)On 2 March 2017, orders were made in the Supreme Court that Summit and Native Bond to pay to Panorama the sum of $3,027,431.80. it was further ordered that Summit and Native Bond pay Panorama’s costs of and incidental to the proceeding on an indemnity basis (the Orders).
Sale or purported sale of the Doreen Property
(i)A notice to creditors was issued by the Trustees dated 23 June 2017 sets out properties owned by Dr Sevdalis and details the sale process for each property, including the sale price. That Notice records that “Property 1” is “110 Riversdale Road, Hawthorn VIC 3122” and that that property “sold at auction on 28 March 2017” for a price of $4,350,000.00. The plaintiff, Panorama, was the Second Registered Mortgagee of that property.
Furthermore on 8 May 2017 that property was transferred from Dr Sevdalis to Stewart Anthony Cox and Ann Maree Cox and the plaintiff’s second registered mortgage dealing number AN141967E was removed.
(j)Panorama had not consented to the sale of the 110 Riversdale Road Hawthorn property or the removal of Panorama’s second registered mortgage over that property.
(k)The said Notice also records “Property 4” as the property at “880 Bridge Inn road, Doreen in the state of Victoria and further that notice states that “Property 4” has been sold to an associated entity and the Trustee is investigating whether the Bridge Inn Road Property was sold at market value.
(l)The plaintiff, Panorama, had not consented to the sale of the property at 880 Bridge Inn Road, Doreen.
(m)Exhibit “SN-19” to the Nahoum affidavit of 9 August 2017 is a marketing contract which lists the fifth defendant (Champion) as the Vendor of an unregistered parcel of land in a proposed subdivision of the Doreen Property. The marketing contract also contains the first 2 pages of the Contract for the Sale of Land between Dr Sevdalis and Native Bond as Vendor to Champion as purchaser. The Champion contact of sale purported to have been signed by the purchaser on 21 November 2016.
(n)The sole Director and sole Secretary of Champion is Nicholas Bochrinis (Mr Bochrinis) and Mr Nahoum notes that N.B. Services owns 8 fully paid ordinary shares in Champion and N.B. Services has as its sole Director, Secretary and Shareholder, Mr Bochrinis. Dr Sevdalis was a previous director, secretary and is a current shareholder and in which Nicholas Bochrinis was also a former director and secretary.
(o)The fourth and fifth defendants do not correct these aspects of Mr Nahoum’s evidence but rather, Mr Bochrinis in his affidavit on behalf of the fifth defendant, sworn 21 August 2017 at [13] and [14] attempts to put his relationship with Dr Sevdalis as one at arms-length.
(p)Mr Nahoum also refers to an affidavit filed by the Trustee, Mr Mellos in which the Trustee deposed:
The Trustees made an application to the Federal Circuit Court of Australia seeking an extension of time in which to make their election. I am instructed by Kenneth Stanton and verily believe that in support of that application, Nick Mellos swore an affidavit which was read in Court. I have read the affidavit and paragraph 35 states:
“On Thursday 2 February 2017 I had a meeting with the Bankrupt’s representative, Nicholas Bochrinis, and his lawyer James Podaridis. Mr Podaridis informed me that his client is in the process of arranging finance to fund the Counterclaim against Panorama and that his client wishes to make an offer to take an assignment of all rights of the bankrupt estate in such a claim”.
(q)Exhibit “SN-20” to the Nahoum affidavit is a true copy of a current and historical organisation extract for 22 Park Street Pty Ltd in which Dr Sevdalis was a previous director, secretary and shareholder and in which Nicholas Bochrinis was also a former director, secretary and shareholder.
(r)Exhibit “SN-21” of the Nahoum affidavit is a true copy of a current and historical organisation extract for Summit in which Dr Sevdalis was a previous director, secretary and is a current shareholder and in which Nicholas Bochrinis was also a former director and secretary.
(s)On 25 and 26 July 2017, documents were lodged with the Department of Environment, Land, Water & Planning (DELWP) which reflect a transfer of the first registered mortgage in respect of the properties from Bendigo & Adelaide Bank to N.B. Services.
(t)Mr Nahoum deposes that he is concerned that the purported sale or assignment of rights from Adelaide and Bendigo Bank is an attempt by Mr Bochrinis and by Dr Sevdalis to effectively sell the Doreen Property and defeat Panorama’s rights as second mortgagee and as judgment creditor pursuant to the Orders.
(u)Mr Nahoum further deposes that he is concerned that Champion appears to be seeking to sell the Doreen Property as part of a Doreen Property proposed subdivision without the consent of the plaintiff, Panorama.
Panorama’s Claim for Possession
Considerations and Conclusions
The third defendant, fourth defendant and fifth defendant filed and relied on affidavit material[1], however the defendants’ affidavit material does not put in issue or contradict the substance of the matters deposed to by Mr Nahoum referred to above, including Panorama’s evidence of agreements and events resulting in Panorama’s claimed entitlements under the said second mortgages nor the matters leading to Panorama’s concerns and the urgency associated with its current applications.[2]
[1]Affidavit of Ian Michael Johns, 18 August 2017; Affidavit of Tracey Rothwell, 11 August 2017; First Affidavit of Nicholas Bochrinis, 21 August 2017 and Second Affidavit of Nicholas Bochrinis, 21 August 2017.
[2]Nahoum Affidavit, 9 August 2017 [21]-[22] and [27]-[38]; Nahoum Affidavit, 10 August 2017 [2], [3]; refer paragraph 4(o) above.
Accordingly, I am satisfied that the affidavit material put forward by Panorama establishes that Panorama is entitled to, amongst other rights, possession of the Doreen Property pursuant to its registered second mortgage.
Mr Nahoum’s affidavit of 9 August 2017 establishes that he had never been approached to consent to the sale of either of the Doreen Properties, and that Panorama had not at any point consented to the sale of either property.
Mr Nahoum’s evidence is that he is concerned that the purported sale or assignment of rights from the Bendigo and Adelaide Bank is an attempt by Mr Bochrinis and the Bankrupt to effectively sell the Doreen Property and defeat Panorama’s rights as second mortgagee and as a judgment creditor pursuant to the Orders made 2 March 2017. Mr Nahoum also swears that he is further concerned that Champion appears to be seeking to sell the Yan Yean Road property as part of a proposed subdivision without Panorama’s consent.
In his second affidavit of 10 August 2017, Mr Nahoum swears that[3] –
[3]Nahoum Affidavit, 10 August 2017 [2].
Based upon the following matters, I believe that urgent action is necessary in order to protect the Doreen property, which is mortgaged to the Plaintiff:
(a)the relationship between Dr Sevdalis, Native Bond, N.B Services and Champion, as set out in paragraphs 31-36 of my First Affidavit;
(b)the dealings recorded in the registers of land for the Doreen Property, as set out in Paragraph 37 and Exhibit “SN-22” of my First Affidavit;
(c)the defaults of the Plaintiff’s Mortgages as alleged in paragraphs 25 and 27 of the Statement of Claim including the purported contract for sale of real estate dated 21 November 2016 between Dr Sevdalis and Native Bond (as Vendor) and Champion (as Purchaser) which I did not consent to; and
(d)the contract of sale of real estate referred to at Paragraphs 29 and 30 and contained in Exhibit “SN-19” of my First Affidavit which lists Champion as the Vendor of “Lot … on proposed Plan of Subdivision PS803824A (‘Plan’) and being part of the land in Certificates of Title Part Volume 8580 Folio 808 and Part Volume 10300 Folio 203”. That contract also states:
“SETTLEMENT (general condition 10)
Is due on .…31../…01…/2018…”
Mr Nahoum states also in that same affidavit of 10 August 2017 that “In the event that urgent action is not taken, I believe that the Bankrupt, N.B. Services and/or Champion will take steps to transfer, sell or further encumber the Doreen property.”
Mr Nahoum deposes that he believes on the grounds he has referred to that urgent action is necessary to protect the Yan Yean Road (the Doreen Property) property mortgaged to Panorama.
I accept on the submissions that have been made to me by Panorama and on the exhibits and evidence provided by Mr Nahoum in his affidavits of 9 and 10 August 2017, that Panorama is entitled to immediate possession of both the Yan Yean Road property and the Bridge Inn Road property, on the basis of substantially uncontested breaches of Panorama’s second mortgage security and on the basis also of the undisputed operation of the terms of that mortgage.
Panorama’s Claim for Injunctive Relief
In this matter, quite apart from Panorama’s application for an order for possession, which is pressed only in respect of the N.B. Services and Champion, there is an issue as to whether or not the injunctive relief sought by Panorama is justified and ought be ordered. On issues related to these questions N.B. Services and Champion have relied on affidavits by Mr Nicholas Bochrinis, both sworn on 21 August 2017 together with their exhibits and the largely formal Affidavit of Tracey Rothwell sworn 11 August 2017.
On behalf of N.B. Services, Mr Bochrinis deposed that on 21 July 2017 N.B. Services was assigned the first registered mortgages to Bendigo and Adelaide Bank. He states that the transfer of the mortgages have not yet been registered and as such N.B. Services does not yet have a registered interest in the land pursuant to s 74(2) of the Transfer of Land Act 1958 (the Act).
He further deposes that the mortgages assigned to N.B. Services are in default, and that he has instructed N.B. Services to give notices pursuant to s 76(1) of the Act to the parties affected and to the registered proprietors.
His affidavit also clarifies that N.B. Services, when it can, intends to take possession of the relevant properties and sell those properties. Mr Bochrinis also deposes that in that context he is aware of Panorama’s second registered mortgages to the properties, and the obligations of the fourth defendant as a first mortgagee undertaking such a sale to account as required at law, and in accordance with its proper exercise of a power of sale under s 77(3) of the Act, in respect of Panorama and its registered second mortgages.
In his second affidavit of 21 August 2017 in respect of Champion’s position, Mr Bochrinis deposes that by a Contract of Sale dated 21 November 2016 between the Bankrupt and Native Bond to the purchaser Champion, under which the Bankrupt and Native Bond purported to sell the Yan Yean Road properties and the Bridge Inn Road Property (the Doreen Property), all properties the subject of the first mortgage to Bendigo and Adelaide Bank, and which are also subject to Panorama’s registered second mortgage. That contract of sale, Mr Bochrinis deposes, was for a sale price of $4m. This transaction is due to settle on 31 October 2017.
Mr Bochrinis deposes that the contract of sale to which I have referred was entered into at a point in time after the receivers and managers of Native Bond had received offers to sell the said properties in 2015 for sums between $2.5m and $3m and shortly before November 2016 a third party purchaser had also entered into a Contract of Sale to purchase the properties for $4m. This sum was accepted by the Registered Proprietors, the Official Receiver and the third defendant, however this sale fell through shortly thereafter.
Mr Bochrinis also deposes to Champion expending considerable efforts and monetary outlay (in the order of $3m to $5m) in relation to seeking planning permission for the properties. Mr Bochrinis deposes that Champion is now in possession of planning permission for a subdivision of the properties into 61 lots.
Mr Bochrinis, deposes that 59 of the potential 61 lots, which have been subdivided out of the relevant properties have been sold and deposits of nearly $1m have been received; completion of those contracts of sale is planned for January 2018.
I note, however, that it is contended by Panorama, that neither N.B. Services, nor Champion, is at present in a position to complete these sale transactions with the vendors because:
(a) at this time the Bankrupt’s property is still vested in the first defendant as trustees of Dr Sevdalis’ estate, pursuant to s 58(1) of the Bankruptcy Act 1966; and
(b) Native Bond is in liquidation; and
(c) Champion cannot complete the contracts it has entered into for the sale of the 59 lots because it is not the registered proprietor of the relevant land at this point, and furthermore the Plan of Subdivision has not been registered.
Mr Bochrinis also addresses a number of issues relevant to what he says would be the effect on the fifth defendant, in particular, of the injunctive relief sought by Panorama being granted, including in connection with third parties.
Mr Bochrinis states in his affidavit of 21 August 2017, on behalf of Champion, that should Champion not complete the 59, or potentially 61, contracts of sale he refers to, damages sought by the purchasers and associated costs could be extremely high and he estimates in the order of $12m.
Mr Bochrinis’ second affidavit of 21 August 2017 also deposes to a loss of profits that is potentially faced by Champion in the sum of approximately $6m if it was to transpire that the contracts for the sale of the 59 lots were to go off. Mr Bochrinis deposes[4] –
The Fifth Defendant now holds planning permission for a subdivision of the Properties into 61 Lots. 59 of 61 lots have been sold with a reasonable expectation that the remaining 2 properties will also shortly be sold. Contract of Sale have been prepared and executed by 59 third parties and deposits of nearly $1 million have been received and are being held against such Contracts of Sale by the appointed Real Estate Agent, Clairmont Banks of Templestowe. Completion of these contracts of Sale is expected in January of 2018. Now produced and shown to me is the exhibit marked with the letters “NB-5” which is list of Lots sold, price sold and deposit held. The consideration for these contracts of sale is anticipated to be approximately $16.1 million with some $15.59 million already achieved.
The Fifth Defendant’s expenditure in obtaining permission for planning and subdivision with attendant expert costs is approximately $3-$5 million. Loss of profit should these contracts not proceed is in the vicinity of $6 million. Should the Fifth Defendant not complete these contracts of sale, damages sought by the purchasers could be extremely high and I estimate in the order of millions of dollars. Were each purchaser to seek damages of $100,000 together with costs and interest of a similar amount then the claim would exceed $12 million dollars including real estate commission.
[4]Second Affidavit of Nicholas Bochrinis, 21 August 2017 [10]-[11].
In paragraph [16] of his affidavit Mr Bochrinis deposes that if the prospective purchasers were to be acquainted with the position that would arise if Panorama obtained the orders which it seeks, and if those prospective purchasers were, to use Mr Bochrinis’ words, “scared or intimidated” about the legality of the contracts of sale that they entered into, there could be significant costs incurred, loss of profits and potentially damages flowing (to the extent that he defines in paragraph [11] of his affidavit), as a result of Lot purchasers not completing.
Mr Bochrinis, particularly in paragraphs [11] and [12] of his affidavit, also seeks to cast doubt on Panorama’s ability to provide an adequate undertaking as to damages sufficient to satisfy the level of potential damage that Champion may incur in the circumstances that I have outlined, were Panorama to obtain the injunctive relief which it seeks and the fifth defendant’s developments were prejudicially effected thereby and ultimately Panorama was shown not be entitled to the urgent relief it seeks.
N.B. Services and Champion, by their submissions, also resist both the injunctive relief and the order for possession sought by Panorama. Although, as I have noted there was no submission from those parties impugning the second mortgage relied upon by Panorama, or its entitlements established by the breaches referred to in Mr Nahoum’s affidavits.
Further, at the outset of his submissions on behalf of N.B. Services and Champion, Mr Connors’ initial position, which altered during the course of these applications, was that his clients, the fourth and fifth defendants, did not oppose the injunctive relief sought by Panorama.
Mr Connors, in his submissions on behalf of N.B. Services and Champion also conceded that N.B. Services is not yet the registered first mortgagee of the relevant land, and he obliquely suggested that it was placed at a disadvantage because of this urgent application for relief by Panorama which came on to be heard on Friday of last week. I note that the hearing of the Panorama applications which concluded today, were adjourned over to today substantially so as to enable Mr Connor to clarify his clients’ instructions.
In the intermission and prior to the resumption of this hearing I also note that N.B. Services filed its security interest for registration on 21 August 2017. That is yesterday, 21 August 2017, from which I infer that the fourth defendant attempted to strengthen its position in these applications by achieving registration of its first mortgage. At this time however no registration has occurred.
In argument I observed that yesterday’s filing by N.B. Services of its application for registration of the assignment from the Bendigo and Adelaide Bank to N.B. Services in respect of the first mortgage interests in the relevant land, was inappropriate and high handed while these applications were being argued and it was anticipated judgment on the plaintiff’s application would be given today. In particular, I took this view in the context of these applications being part heard, including in relation to the urgent relief sought by Panorama to preserve the relevant status quo and to ensure that its interests were not injured by steps taken by any party or person in respect of Panorama’s second mortgage security.
At all events, N.B. Services has not attained the status of a registered first mortgagee at this point. N.B. Services may not, I observe, in fact achieve the registration its first mortgagee security today, or tomorrow or indeed at any specific time in the future. There is no certainty that, in the circumstances, it will become the first registered mortgagee at any particular time.
In my view the determination of Panorama’s applications should not abide the result of the filing by N.B. Services of materials so as to attain registration as the first mortgagee of the properties at the office of the Registrar of Titles.
Panorama’s applications are urgent and should be determined if possible today.
Further N.B. Services has not acted, it would appear, up to now in a reasonably timely manner so as to achieve prompt registration of its assignment of mortgage and so as to ensure that it became the first registered mortgagee of the properties at the earliest practical time.
Furthermore, N.B. Services did not seek an adjournment of these applications on that basis, and at no point argued that the determination of Panorama’s relief should be deferred to be completed at a future date after N.B. Services had become registered first mortgagee.
N.B. Services also submits that it should not be criticised by Panorama for the non-service of s 76(1) Notices under the Act.
N.B. Services submits that it would only be required to serve such notices once the registrations of its mortgage interests are perfected. I accept this point.
N.B. Services and Champion also submit that they have not communicated, in terms, that they will not disperse to Panorama in respect of its second mortgage interest, moneys as required at law and in accordance with s 77 of the Act at the time of settlement of the Lots. They submit that it should not be assumed that they will not act lawfully, indeed to the contrary, it should be assumed that the defendants, including Champion and N.B. Services will act lawfully.
N.B. Services and Champion also refute Panorama’s submissions that any disruption, delay or damage which may flow from Panorama obtaining the orders which it presently seeks, and in particular in relation to the 59 Lots sold, has been caused by the way the fourth and the fifth defendants have conducted themselves in relation to their failure to provide information to Panorama and their failure to undertake to comply with s 77 of the Act.
N.B. Services and Champion also submit, as outlined above, that the Court should take into account in evaluating the appropriateness of the injunctive relief being sought by Panorama, the possible effect on the third party purchasers, and if affected in the way Mr Bochrinis postulates, the financial ramifications to the fifth defendant, as explained by Mr Bochrinis in his affidavit on behalf of Champion of 21 August 2017, particularly paragraphs [10], [15] and [16] of that affidavit.
However as I have emphasised, N.B. Services and Champion do not impugn Panorama’s rights as a judgment creditor and registered second mortgagee. Neither N.B. Services and Champion, or the first and the third defendants, seek to argue directly against Panorama’s immediate entitlement to possession of the Bridge Inn Road property and the Yan Yean Road property.
Serious Issues to be Tried
I observe that there was no seriously pressed argument refuting that there is here a serious issue to be tried in relation to whether the conduct of N.B. Services and Champion is lawful and permissible in the circumstances in light of Panorama’s long registered second mortgage securities, and the associated serious question to be tried as to whether the real estate at the Doreen Property presently being developed by Champion could be sold to third parties in a way which either diminishes or defrays entirely Panorama’s recovery pursuant to the judgment against the bankrupt, and Native Bond (the Orders) and Panorama’s potential recovery thereof as secured by Panorama’s registered second mortgages.
Balance of Convenience
Further, I accept Panorama’s assertion that there is here at least a danger that N.B. Services and/or Champion might not observe the requirements of s 77 of the Act, or that those defendant parties will not ensure the proper discharge of their obligation to the registered second mortgagee pursuant to the requirements of the law including the Act.
A particular risk in this regard is in my view the potential effect of Special Condition 32 of the Contract of Sale[5] employed by Champion, which may allow the diversion of settlement moneys from the 59 purchasers of Lots in a way which assigns Champion’s rights under the Contracts of Sale to N.B. Services allowing the first mortgagee in possession (N.B. Services) to arguably thereby ignore Panorama’s registered second mortgage security and in effect defeat that security. The effect in substance may also be that Panorama is deprived of the fruits of its existing judgment and the judgment for possession to which I consider it is entitled.
[5]Nahoum Affidavit, 9 August 2017, Exhibit “SN-19”, Clause 32,Assignment by Vendor.
I accept also that this risk and resultant prejudice to Panorama outweighs any likely prejudice to the fourth and fifth defendants which in any event are in a position to provide the undertakings requested by Panorama and thereby very largely obviates adverse impacts on their development project and its sales.[6]
[6]Bradto v State of Victoria (2006) 15 VR 65 at [35].
Furthermore, I accept Panorama’s submission that the concerns expressed by Mr Bochrinis in relation to the third parties and as to Panorama’s undertaking as to damages, are outweighed by the special considerations that can be identified in this case, including, that Panorama is the registered second mortgagee with an accrued right to possession and that its second mortgage security secures a debt of approximately $3m plus interest and costs.
On the other hand N.B. Services has not yet achieved the status of registered first mortgagee.
Furthermore, N.B. Services asserts that it is its intention to take possession of the properties and effect to sale. However, it is not presently in a position to do so for the reasons I have touched on in relation to its unregistered first mortgage security. Similarly it cannot, in any event, complete the relevant contracts of sale for the 59 lots which form part of the subdivision being developed by Champion because it is not the registered proprietor of the relevant land.
Champion’s rights under the contracts in respect of the 59 lots are also rights in respect of which Champion has not established, in relation to the vendors of the Doreen Property, that it has obtained the consent of either the trustees in bankruptcy, or the liquidator of the second defendant, to complete those sales. Furthermore, both the purchase by Champion of the Doreen Property and its purported sale of Lots of that land have been undertaken in likely awareness of Panorama’s registered second mortgage and yet Panorama has not been contacted nor has its agreement been sought by Champion or N.B. Services in relation to these transactions.
Additionally, the plan of subdivision itself is not registered which gives rise to a further likely impediment to Champion’s ability to finalise its development and N.B. Services ability to settle the sales of Lots.
Finally on the factors which favour the balance of convenience for Panorama, the fourth and the fifth defendants have not provided the abovementioned assurance to Panorama about its registered second mortgage security being satisfied at the settlement of the Lots. To do so would be a simple matter for those defendants and would be consistent, in any event, with their approaching obligations to Panorama when those settlements arise.
In relation to the undertaking as to damages, Panorama submits, and I accept that that undertaking is not given in relation to Panorama’s accrued right to possession of the properties, but is in relation to the injunctive relief which is sought, and that injunctive relief here in turn relates principally to N.B. Services and Champion being required to give seven days’ written notice of any intention to complete or enter into any agreement to sell, transfer, or further encumber the Doreen properties.
Given the terms of the injunctive relief sought, I consider that relief as proportionate, limited and reasonable. It does not prejudice N.B. Services’ or Champion’s rights, if any, to complete the contracts in relation to the 59 Lots said to be sold. In any event N.B. Services, as I have stressed, does not have an existing right to complete such contracts, and neither it nor Champion can complete the 59 contracts of sale because it is not the registered proprietor of those properties.
The purchase contract has not been, and at present cannot be, completed, and even though the contract has not been completed Champion appears to have taken on itself the risk, in the circumstances, of entering into 59 sales of Lots to be transferred out of the land mortgaged to Panorama.
Further, on the evidence the Bankrupt and Native Bond have made no attempt to meet their obligations to Panorama, and in breach of those obligations they have entered into the contract to sell the relevant properties to Champion and do so without any notice to Panorama.
Champion has, in turn, obtained a plan of subdivision and purported to sell 59 of the 61 lots in that subdivision, and N.B. Services, on notice of Panorama’s entitlement and its claims, nevertheless asserts that it will enter into possession as first mortgagee and exercise its power of sale. Yet neither N.B. Services nor Champion have provided, notwithstanding the above issues and a request in that regard by Panorama, any acknowledgement, assurance, or undertaking that Panorama’s second mortgage interests will be protected or that it will receive any sum in satisfaction of the second mortgage on the sale of the property or the Lots by N.B. Services, or the sales by Champion.
The registered proprietors of the properties are insolvent. I consider that N.B. Services and Champion, on the evidence referred to above, are related corporations. This has not been eschewed by the fourth or the fifth defendants, save that Mr Bochrinis in his affidavit on behalf of the fifth defendant of 21 August 2017 at [14] and [14] states that, in effect, he was, and is, at arms-length with the Bankrupt.
Decision
For the above reasons I find that there are serious issues to be tried in this matter and I also find that the balance of convenience here decisively favours the ordering of the limited injunctive relief sought by Panorama against N.B. Services and Champion.
I have also, for the reasons that I have outlined, found that Panorama has an immediate entitlement to the orders for possession it seeks in respect of the two subject properties to which I have made reference.
Orders
Accordingly I order that:
1.Each of the fourth and fifth defendants are hereby restrained from selling, transferring, further encumbering or entering into any agreement to sell, transfer or further encumber the property comprised in Certificate of Title Volume 10300 Folio 2013 being the property more commonly known as 895 Yan Yean Road, Doreen in the state of Victoria (‘the Yan Yean Road property’) without first providing the plaintiff’s solicitors with at least 7 business days’ written notice of any such existing or proposed transaction (such notice to provide full particulars of the names and addresses of the parties to the transaction, the nature of the transaction, the amount, if any, to be paid under the transaction, the completion date of the transaction and a copy of the document(s) recording the transaction).
2.The plaintiff has possession of the Yan Yean Road property.
3.A writ of possession to the plaintiff in relation to the Yan Yean Road property be issued forthwith.
4.Each of the fourth and fifth defendants are hereby restrained from selling, transferring, further encumbering or entering into any agreement to sell, transfer or further encumber the property comprised in Certificate of Title Volume 08580 Folio 808 being the property more commonly known as 880 Bridge Inn Road, Doreen in the state Victoria and/or 895 Yan Yean Road, Doreen in the state of Victoria (‘the Bridge Inn Road property’) without first providing the plaintiff’s solicitors with 7 business days’ written notice of any such existing or proposed transaction (such notice to provide full particulars of the names and addresses of the parties to the transaction, the nature of the transaction, the amount, if any, to be paid under the transaction, the completion date of the transaction and a copy of the document(s) recording the transaction),
5.The plaintiff has possession of the Bridge Inn Road property.
6.A writ of possession to the plaintiff in relation to the Bridge Inn Road property be issued forthwith.
7.The fourth and fifth defendants pay the plaintiff’s cost of and incidental to the proceeding, to be taxed on a standard basis by the Costs Court in default of agreement, and payable immediately on taxation or agreement.
8.The plaintiff pay the third defendant’s costs of and incidental to the proceeding (including reserved costs), to be taxed on an indemnity basis by the Costs Court in default of agreement, and which costs may be taxed forthwith and are payable immediately on taxation or agreement.
9.The parties have liberty to apply.
SCHEDULE OF PARTIES
| S CI 2017 3283 |
BETWEEN
| PANORAMA INVESTMENTS PTY LTD (ACN 148 905 864) | Plaintiff |
| - and - | |
| NICK MELLOS AND STEPHEN ROBERT DIXON AS JOINT AND SEVERAL TRUSTEES OF THE BANKRUPT ESTATE OF DR NICHOLAS WILLIAM SEVDALIS (A BANKRUPT) | First Defendant |
| NATIVE BOND PTY LTD (ACN 006 589 055) (IN LIQUIDATION) | Second Defendant |
| BENDIGO ADELAIDE BANK LTD (ACN 068 049 178) | Third Defendant |
| N.B. SERVICES (AUST) PTY LTD (ACN 070 024 985) | Fourth Defendant |
| CHAMPION INVESTMENT GROUP PTY LTD (ACN 607 958 592) | Fifth Defendant |
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