Perpetual Trustee Ltd v Baranov [No 2] - [2010] VSC 172

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 4208 of 2009

PERPETUAL TRUSTEE LIMITED (ACN 000 001 007) AND CHALLENGER MANAGED INVESTMENTS LIMITED (ACN 002 835 592)	Plaintiffs
v
MARK BARANOV	Defendant

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JUDGE:	VICKERY J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	15 April 2010
DATE OF JUDGMENT:	30 April 2010
CASE MAY BE CITED AS:	PERPETUAL TRUSTEE LTD & ANOR v BARANOV [No 2]
MEDIUM NEUTRAL CITATION:	[2010] VSC 172

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MORTGAGES − Default by mortgagee ― Deed of cross collateralisation ― Multiple securities available to mortgagee to satisfy debt ― Claim for possession of mortgagee’s family home ― Precursor to mortgagee’s sale ― Statutory obligation to exercise power of sale in good faith with regard to mortgagor’s interests ― Protection of “interests” in family home ― Whether mortgagee obliged to have primary recourse to other securities ― Applicability of Nolan v MBF Investments [2009] VSC 244.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr B Carew	Norton Rose Australia
For the Defendant	Mr R Cook	Efron & Associates

HIS HONOUR:

This is an appeal from the judgment of Mukhtar AsJ dated 8 February 2010[1] pursuant to rule 77.05 of the Supreme Court (General CivilProcedure) Rules 2005.
[1] Perpetual Trustee Ltd and another v Baranov [2010] VSC 18.

Pursuant to rule 77.07, the appeal is a re-hearing de novo, but each party may, subject to any proper objections to admissibility, rely upon any affidavit used before the Associate Justice and upon any evidence given orally before the Associate Justice, and, by special leave of the Judge, rely upon an affidavit or oral evidence not used or given before the Associate Justice. In this matter the affidavit material and the exhibits are extensive. Nevertheless, I granted special leave to admit further affidavit material on the appeal, confined to events and matters which occurred since the hearing before the Associate Judge.[2]
[2]Affidavit of Allan Farrell-Kowalski affirmed 15 April 2010; affidavit of Mark Baranov sworn 15 April 2010.

By the judgment of Mukhtar AsJ, the plaintiffs were granted summary judgment for moneys secured under a mortgage of land, namely $3,569,649.00 and costs, and possession of the mortgaged property at 85 Lumeah Road (also known as 105 Balaclava Road) in Caulfield North (the “Lumeah Road property”).

The defendant (“Mr Baranov”) is the registered proprietor of that land. It is his family home. He is a property developer operating businesses in Sydney and Melbourne. As part of some dealings with the plaintiffs, he mortgaged his home to the first plaintiff (“Perpetual Trustee”) as security for his obligations under a guarantee to the second plaintiff (“Challenger”) for the liabilities of his company Beluga Developments Pty Ltd (“Beluga”). The plaintiffs allege there has been default under the mortgage and guarantee.

The plaintiffs say that as at 29 October 2009 the defendant owes $9,706,782 and interest has been accruing on this sum since that time.

There being no issue that there has been default under…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2010] VSC 172
Decision Date: 30 April 2010

CaseChat Overview and Summary

The appeal in Perpetual Trustee Ltd v Baranov [No 2] involved the respondent, Baranov, who was in default under a mortgage. The mortgage was secured by a family home and other properties. The mortgagee, Perpetual Trustee Ltd, sought possession of the family home in order to sell it. The dispute centred around whether the mortgagee had to first exhaust other available securities before selling the family home. The Court of Appeal examined this issue in the context of the statutory obligation to exercise the power of sale in good faith, considering the mortgagor’s interests.

The legal issues before the court were whether the mortgagee was required to pursue other securities before selling the family home and whether the principles set out in Nolan v MBF Investments applied to this case. The court needed to determine the scope of the statutory obligation to act in good faith and how this obligation interacts with the protections afforded to a mortgagor’s family home.

The court found that the statutory obligation to act in good faith does not impose a mandatory requirement for the mortgagee to first seek out and exhaust other securities before selling the family home. The court distinguished this case from Nolan v MBF Investments, finding that the obligation to act in good faith was not intended to mandate a specific course of action regarding the order in which securities are pursued. Instead, the court held that the obligation is flexible and must be considered in light of all relevant circumstances, including the protection of the mortgagor's interests in the family home. The court concluded that the mortgagee was not required to have primary recourse to the other securities before exercising its power of sale over the family home.

The court ordered that the appeal be dismissed, affirming the earlier decision that the mortgagee was not obliged to pursue other securities before selling the family home. The court’s decision clarified the scope of the statutory obligation to act in good faith and reinforced the protection of the mortgagor's interests in their family home.

Orders