Piesse Investments Pty Ltd v WR Mortgage Services Pty Ltd
[1997] QSC 184
•2 May 1997
IN THE SUPREME COURT
OF QUEENSLAND
Writ No. 4031 of 1996
Brisbane
Before Mr Justice Ambrose
[Piesse Investments Pty Ltd v WR Mortgage Services Pty Ltd]
BETWEEN: PIESSE INVESTMENTS PTY LTD
ACN 070 985 581
Plaintiff
AND: WR MORTGAGE SERVICES PTY LTD
(ACN 069 059 267)
Defendant
AND: WILLIAM HANRAN REDMOND
Second Defendant
REASONS FOR JUDGMENT - B.W. AMBROSE J.
Judgment delivered : 2/5/97
This is an application by Court appointed receivers of the first defendant for directions concerning their exercise of the first defendant's power of sale of property in respect of which certain funds advanced to the first defendant were invested. Repayment of those funds was secured by mortgage taken over the investment property by the first defendant and it is in respect of the sale of that mortgage property that this application relates.
The receivers have negotiated a sale of that property upon a mortgagee sale on the most favourable terms presently available and on the material likely to be available or procurable in the immediate future. The mortgagor of the property in issue is Pan Pacific BT Nominees Pty Ltd. That company as mortgagor was given notice of the receiver's application.
The mortgagor objects to the proposed sale on a number of bases.
First it contends that the mortgage taken by the first defendant over the property which it owns to secure sums advanced and to be advanced with respect to the acquisition and development of that property was invalid. It is said that the mortgage under which the receivers seek to sell the property did not properly reflect the agreement pursuant to which it was prepared because that agreement was varied without the assent of the mortgagor prior to the preparation of the mortgage. I will not embark upon a detailed examination of the material upon which this contention is based; in my view it is flawed. There is no doubt that the alteration made by the solicitor who at the time acted for both mortgagor and mortgagee did not alter the rights or obligations of either party to the agreement. In my view the terms of the mortgage in registrable form executed by the parties and pursuant to which the receivers seek to sell the property neither increase nor diminish the rights and obligations of either party to the mortgage which can be spelt out of the agreement to which the solicitor for both parties made amendment after its execution by them. In fact the alteration was made merely to reflect the precise amount of money to be advanced initially upon security of the mortgage and distinguish it from the overall contemplated loan limitation of "future advances". This is plain on the face of the balance terms of the agreement.
In any event no effort was made by the mortgagor to raise the question of invalidity until long after $1.48 million had been advanced by the mortgagee to the mortgagor and the mortgagor was in default under its terms.
The second point raised by the mortgagor is that arguably it was not in fact in breach of the terms of the mortgage at relevant times.
It appears from the material that notice of default and intended exercise power of sale under Section 57 (2)(b) of the Conveyancing Act (NSW) (see section 84 of the Queensland Law of Property Act) was given on 29 January, 1997. By that time it is clear on the material the mortgagor was in default under the terms of the mortgage. The debt secured by the mortgage was to be repaid within a period of 12 months which expired in October 1996. On the best case for the mortgagor no more than 2 of about 8 monthly payments of interest that had fallen due by then which were secured under the mortgage had been made.
In my view the evidence is overwhelming that the mortgagor was in default at the time the notice was given and pursuant to which the receivers now seek to sell the property.
The third matter of "defence" raised by the mortgagor is that the mortgagee breached its obligations under the term of the mortgage when it gave to the mortgagor notice requiring payment of interest because interest was not then payable. It is contended that acting upon that purported breach by the mortgagor, the mortgagee appointed a receiver; that appointment was invalid and resulted in great loss to the mortgagor because it impeded development of the property.
The problem in sustaining this contention in my view, flows from the fact that under the terms of the mortgage, upon appointment the receiver was deemed and treated for all purposes as the agent of the mortgagor. It is contended that in spite of this never the less if the acts of that mortgagee appointed receiver caused damage to the mortgagor, the mortgagee would still be legally liable for these acts. No action has been instituted to date on behalf of the mortgagor to seek relief on this basis. This is unsurprising because on the very day that the mortgagee purported to appoint a receiver under the terms of the mortgage, the plaintiff in this action succeeded in having the applicant receivers appointed and as far as emerges from the material the receiver appointed by the mortgagee had no opportunity to do anything pursuant to his appointment. It is contended on behalf of the mortgagor it has a potential claim for damages in the sum of $900,000 resulting from the purported appointment by the mortgagee of that receiver.
It would be unprofitable to embark upon a detailed analysis of the vast amount of affidavit material relied upon to support these contentions.
In my view, the matters raised on their face do not suggest that the mortgagor has any significant prospect of success in establishing any of the three matters raised. Perhaps that explains why no effort has been made to date on behalf of the mortgagor to take proceedings against the first defendant to seek the relief for which the mortgagor contends it is or may be entitled.
The object of the mortgagor contending that it has an arguable claim for damages against the mortgagee is to support its contention that it may be able to effect a sale of its interest in the mortgaged property to another party for a sum which although substantially lower than that which the receivers have negotiated in the contract which they seek to complete will involve it relinquishing any claims that it might have for damages against the mortgagee. In essence it seeks to negotiate with the receivers the sale of the mortgaged property at a reduced figure and to make this proposal more attractive than it would otherwise be, agree to relinquish any claims that it might have against the mortgagee for breach by the mortgagee of its obligations.
Even if it would be proper for the receivers to negotiate with the mortgagor to transfer to its nominee the mortgaged property for a reduced price upon its undertaking to relinquish any claims it might have against the mortgagee, in my view upon the material, those claims are so unlikely to succeed that the receivers might, in their discretion, regard them as of insufficient value to justify selling for a lesser price than that which they have already negotiated.
Various orders have been made already in this action including orders by both Williams J and Moynihan J.
The last of the orders made by Williams J on 11 February, 1997 required that the receivers treat the loan made to the mortgagor in this case as giving rise to a separate trust for the benefit of those persons whose monies advanced to the first defendant were in fact advanced by it to the mortgagor and secured by the mortgage in question in this case.
It was contended inter alia on behalf of the mortgagor that if its succeeds in any action for damages against the mortgagee then the beneficiaries of the trust referred to by Williams J will be at risk. It is contended that this is a significant matter for the receivers to consider.
It is clear that the receivers have indeed considered the likelihood of the mortgagor's success in any action which it brings against the mortgagee. Unsurprisingly it is of the view that the prospects are so slender as to justify it ignoring them. Moreover all the beneficiaries of the trust support the sale of the mortgagors property for the sum negotiated by the receivers. The plaintiff is one of those beneficiaries.
In my view the receivers may properly regard any benefit that might be achieved for the beneficiaries of the trust - the investors whose monies have been advanced to the mortgagor upon security of the mortgage - by reason of any relinquishment by the mortgagor of its rights of action against the mortgagee as being so insubstantial and illusory as to be valueless.
The question then to be determined is whether having regard to the stage reached in negotiations between the mortgagor and the potential purchaser with whom it has been negotiating in New South Wales, Ventry Properties Pty Ltd the receivers should not sell the property as proposed.
The first thing to say is that there has been no firm agreement reached between the mortgagor and Ventry concerning the terms of the Contract of Sale or indeed it would seem even the purchase price to be paid under it. Assuming that the sum under discussion - $1.3m - were ultimately agreed to be paid, that sum would be $180,000 less than the negotiated purchase price under the contract which the receivers seek to complete.
More importantly however, there is no persuasive evidence to support the inference that Ventry would have the financial capacity to pay $1.3m if a Contract of Sale were entered into with it for that price. Counsel for the mortgagor had no instructions to offer or seek any form of commercial security to support Ventry's completion of the proposed contract even if it were to eventuate.
The financial position of the proposed purchaser has been investigated and the Contract of Sale which has been negotiated by the receivers must be settled within a short period of time. There is no suggestion that it will be unable to complete. Should the contract not be completed it seems to me that a significant detriment might be suffered by the beneficiaries. The proposed sale price exceeds the hoped for sale price to Ventry and indeed substantially exceeds a valuation figure obtained by the receivers as to the market value of the property.
On the whole of the material, I have come to the conclusion that the receivers would be acting quite properly in settling the contract which they have negotiated. Indeed in my view to decline to complete it on the basis only of the negotiations so far conducted by the mortgagor with Ventry in the hope that a contract might ultimately be negotiated for a lesser sum than that under the contract in question with a person not shown to have the financial capacity to complete it would be foolish.
In my view, therefore, the application should succeed and the direction sought given.
I make an order therefore in terms of the amended draft which I make a schedule to these reasons.
IN THE SUPREME COURT
OF QUEENSLAND
Writ No. 4031 of 1996
Brisbane
Before Mr Justice Ambrose
[Piesse Investments Pty Ltd v WR Mortgage Services Pty Ltd]
BETWEEN: PIESSE INVESTMENTS PTY LTD
ACN 070 985 581
Plaintiff
AND: WR MORTGAGE SERVICES PTY LTD
(ACN 069 059 267)
Defendant
AND: WILLIAM HANRAN REDMOND
Second Defendant
REASONS FOR JUDGMENT - B.W. AMBROSE J.
Judgment delivered : 2 May 1997
CATCHWORDS: DIRECTIONS CONCERNING POWER OF SALE - whether terms of mortgage had in fact been breached - receiver seeks direction to effect contract for sale - mortgagor opposes that direction on the basis that it has negotiated a contract, even though $180,000 less, on the basis that it will relinquish any claims in damages against the mortgagees.
Counsel:Mr J. Sheahan for the applicant/plaintiff
Mr M. Martin for the respondent's/defendant's
Solicitors:Allen Allen & Hensley for the applicant/plaintiff
Baker Johnson for the respondent's/defendants'
Hearing Date: 30 April 1997
SCHEDULE
ORDER
JUDGE:AMBROSE J
DATE OF ORDER: 2 MAY 1997
DOCUMENT INITIATING THIS HEARING: Summons filed 19 March 1997
IT IS ORDERED THAT:
The receivers be directed to cause WR Mortgage Services Pty Ltd (ACN 069 059 267) (Receivers Appointed) to effect completion of the contract of sale annexed to the affidavit of Peter James Hedge (2) filed 23 April 1997;
The receivers' costs of and incidental to this application be costs in the receivership.
Registrar
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