Scarel Pty Ltd v City Loan & Credit Corporation Pty Ltd
[1987] FCA 234
•23 FEBRUARY 1987
Re: SCAREL PTY. LIMITED
And: CITY LOAN AND CREDIT CORPORATION PTY. LIMITED
No. G513 of 1986
Practice and Procedure
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sheppard J.(1)
CATCHWORDS
Practice and Procedure - interlocutory relief - previous application for interlocutory relief dismissed - change of circumstances relating to balance of convenience but not in relation to prima facie case - exercise of discretion.
HEARING
SYDNEY
#DATE 23:2:1987
Counsel for the applicant: J.P. Hamilton, Q.C. with R.K. Eassie
Solicitors for the applicant: Messrs. Nelgrove Mucsnik & O'Brien
Counsel for the respondent: R. Anderson
Solicitors for the respondent: Messrs. Lane & Lane
ORDER
The application for an interlocutory injunction be dismissed.
The applicant pay the respondent's costs of the application.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
This is an application for interlocutory relief. The motion seeks an order restraining the respondent from submitting for auction sale on Thursday next, 26 February, a property at Normanhurst over which the respondent holds an equitable charge. The matter was previously the subject of proceedings for interlocutory relief. These came on late in November last year before Fox J. After a hearing which occupied more than two days, his Honour dismissed the application. It is submitted on behalf of the applicant that nevertheless this application can succeed because of changes in the circumstances of the parties which have come about since Fox J. decided the matter.
I should say at this point that there has not been time this morning for there to be an analysis of what authorities there may be in relation to the question of whether, once interlocutory relief has been refused after a full hearing, a further application will be entertained by another judge. No question, of course, of issue estoppel or res judicata can arise if the proceedings are not final in character, but it seems to me that there must be discretionary considerations which would militate against an applicant who has failed in obtaining interlocutory relief going on similar facts to another judge and seeking the same relief from him. The position is different, in my opinion, from that which exists when an applicant seeks ex parte relief and may, if he wishes, seek relief from another judge if he is refused relief by the first judge whom he approaches. I think the better view is that the matter must lie within the discretion of the second judge to whom the application comes and that in ordinary circumstances a proper exercise of that discretion requires refusal of the application unless there are changed circumstances. I make it clear that in saying what I have, I have not had the benefit of argument on the point and I have not had time myself, because of the need to deal with the application expenditiously, to investigate any authorities which there may be on the question.
It is submitted on behalf of the applicant that there have been changes in circumstances, but - so it seems to me - these go to the question, not of whether there is or is not an arguable case for the relief claimed in the principal application, but to the balance of convenience and matters associated therewith. In a reasoned judgment Fox J. found that there was no arguable case for relief. Counsel for the applicant has conceded - and on the face of the evidence the concession is rightly made - that there is no evidence of any changed circumstance in relation to the question of whether the applicant has made out a prima facie case or, to use his Honour's expression, an arguable case.
In order that the position as found by his Honour may be understood, I propose to refer to the relevant parts of his judgment. His Honour said:-
"The critical conversation is said to have taken place in August 1984. No document was executed and no document has come into existence evidencing it. What did happen was that the Darling Harbour mortgage was thereafter granted. For an understanding of what was said and its meaning and effect it is necessary to set the conversation in its context.
The context as relied upon by the applicant is simply stated. The Normanhurst land was worth a fraction of the amount secured on it, the respondent was pressing for payment and Mr. Yates had control over or a controlling interest in Yates Property Corporation which owned the Darling Harbour land. It was expected that the land would soon be transferred to the Government and this would realise more than enough to pay out the respondent in full. Mr. Yates was offered, or was asked to give, security over the Darling Harbour land and Mr. Adelstein said that if his company, the respondent, had that security it would not bother itself (or words to that effect) concerning the Normanhurst land. I do not know whether Mr. Adelstein was then aware of the amount secured by the existing mortgages".
His Honour then set out the relevant parts of the conversation and continued:-
"There had just before this been discussions about the Crows Nest property.
Perhaps the strongest statement supporting the intended arrangement is to be found in the evidence of Mr. Miles, a solicitor then acting for the applicant, who was present at a conference in September 1984 attended by Mr. Yates, Mr. Adelstein and Mr. Cornforth, legal representative of the respondent. He says Mr. Adelstein said:
'Our security over Scarel's Normanhurst property is virtually of no practical value. If we are granted a collateral mortgage over Darling Harbour we'll not bother ourselves any more with the Normanhurst security'.
The arrangement relied upon would mean that the respondent would be paid its debt out of the eventual sale of Darling Harbour. The date of repayment, as I have said, was fixed at 21 September 1985. In many cases such a date is not of great significance, but it was purposively fixed in this case.
The context as relied upon by the respondent brings into account as additional factors the Crows Nest caveat, the Supreme Court proceedings, and the documents executed on 24 September 1984, and discussions between Mr. Yates and Mr. Adelstein about substituting Darling Harbour for Crows Nest. It is submitted that the intention was that security be given over Darling Harbour to compensate for the loss of recourse to Crows Nest, and not to replace the Normanhurst security.
This wider conspectus seems to me to be much more realistic, and correct. I do not accept that the conversation in August, which was one of several, represented a final bargain, and it was not in any event such that it could bind the respondent. It was but one of a series of matters dealt with in discussion.
It seems obvious that it was not intended that the Darling Harbour mortgage supplant the Normanhurst mortgage. Mr. Adelstein denies that there ever was an agreement, or even understanding to that effect. If it had been intended that the power of sale should go, it is reasonable to expect that mention would have been made of that aspect in the documents executed in September. The fact is, as I think Mr. Yates conceded, that the intention, or the effect of what is alleged, would not simply have been to remove the power of sale, but to totally overcome the efficacy of the Normanhurst mortgage. Yet it was confirmed and continued, by the variation which was formally executed. What Mr. Yates, and the applicant, sought to have happen was that the Crows Nest property be free to be sold and the Supreme Court proceedings discontinued.
It is also clear that Mr. Adelstein did not purport to bind his company. So far as appears he had no actual or ostensible authority to do so, but, beyond that, he several times referred to the need to get his Board's approval, or the need to persuade his Board. The need for formal documentation was apparent, and was mentioned".
His Honour referred to proceedings in the Supreme Court and I should fill out what he said about those by reference to a judgment which was entered in the Supreme Court of New South Wales on 24 September 1984. The judgment was a consent one and followed the terms of settlement which the parties had agreed upon. Paragraph 1 provided for judgment for the plaintiff, that being the present respondent, against a number of defendants, which included the present applicant, in the sum of $1,092,525.15. Paragraph 2 provided that:-
"Execution upon the judgment referred to in paragraph 1 hereof stayed until 21st September 1985 conditional upon:-
The second defendant executing a mortgage in registerable form over all those pieces or parcels of land owned by it and situated in the City of Sydney Parish of St. Andrew and County of Cumberland and being the whole of the lands comprised in Certificates of Title Volume 15231 Folio 105 and Volume 5011 Folio 170 and known as 1-23 Harbour Street, Darling Harbour".
The mortgage was to contain a number of terms which specified the principal at the figure for which judgment had been entered, a date for repayment on 21st September 1985, interest at 17 1/2 per cent reducible to 14 1/2 per cent per annum and other terms and conditions which need not be referred to.
It was in the context of that having occurred that his Honour said what he did in the passage already quoted from his judgment about the context relied upon by the respondent bringing into account as additional factors, amongst other things, the Supreme Court proceedings and the documents executed on 24 September, 1984, one of which was apparently the charge over the land at Darling Harbour.
As I have said, there was no evidence of any change in the circumstances of the parties or the evidence in relation to the question whether or not the applicant had demonstrated the existence of a prima facie case. His Honour, as I have mentioned, spent more than two days considering the evidence of the parties, their cross-examination and submissions. He has given a considered judgment. I have not read by any means the entirety of the evidence which was before his Honour and I have not been able myself to give it the close consideration which is so obviously the case when one reads his judgment. All those circumstances would disincline me from taking a course which would really be to ride rough shod over the decision which he reached.
In fairness to counsel for the applicant it should be said that that was not really the course he asked me to take. What he submitted, as I understood it, was that because of changes that had come about in relation to the Normanhurst land itself and certain associated matters I should view the matter again. As I understood his submission it was that, if the case on balance of convenience was strong, the court would be less inclined to find difficulty in determining whether or not there was a prima facie case. In other words, something that it might have regarded in some circumstances as not amounting to a prima facie case would become one if the argument on balance of convenience was strong.
I think that sort of approach is, upon analysis, one which is sometimes taken, although I do not think many judges, in determining whether or not to grant intelocutory relief, weigh up a particular case with this consideration to the forefront of their minds. Be that as it may, my difficulty in giving effect to counsel's argument stems from the fact that the case which the applicant has for relief is undoubtedly weak and was found to be so by Fox J. That to my mind really concludes the matter, but I mention the principal matters upon which counsel for the applicant relied.
He said that before his Honour there was no evidence or submission which would have suggested to him that there was any difficulty about selling the land; in other words, it was an ordinary marketable parcel of land which could be expected to bring an appropriate price if auctioned. Further, he said that, although his Honour was told that a development consent which, if granted, would entitle the applicant to subdivide the land had been applied for, his Honour had not been told about a complication which made the selling of the land more difficult than His Honour had been led to believe. That complication arises because the development consent which has now been granted by the Hornsby Council is a consent to develop, not just the land which is owned by the applicant, but land which is owned by other people who are bound contractually to the applicant to sell land to it. The reason for the other two lots of land being included in the proposed subdivision is that they are a necessary part of it in order to provide appropriate access to the subdivision which it is desired to make.
It is suggested that if his Honour had known these difficulties his decision may have been different and, furthermore, that those circumstances so changed the nature of the case that I would now be warranted in taking a different view from the one which his Honour took in November last.
Having heard evidence from a Mr. Edmonds and considered an annexure to one of the affidavits which is an estimation by Richard Stanton and Sons, it does seem to me that there are substantial difficulties about subdivision. There is a question of what it will really cost to develop the land and it may be it would be appropriate to take the view that a better use of the land would be one which would not involve its subdivision. I do not express any conclusion on that matter because I am unable to do so upon the basis of the evidence which I have heard. It is enough to say that, in the light of Mr. Edmonds' evidence, I am not persuaded that there is any sufficient change of circumstances to warrant my taking a different view from his Honour, even if I thought the door was open enough to enable me to do so.
Of course a mortgagee owes his mortgagor a duty not to act negligently in relation to the sale of the mortgaged property. Other duties are owed also. This is not the time or the place to discuss the law on that vexed question because I have not had a sufficient argument about it. But if the mortgagor has evidence - and I would not suggest that the case it has made here would be sufficient to warrant a conclusion that there was a prima facie case of a threatened breach of duty by the mortgagee - it would seem to me that the applicant's remedy is not to come to this court to seek relief as an adjunct to relief under the Trade Practices Act 1974, but to go the Supreme Court of New South Wales relying on a cause of action based on the alleged threatened breach of duty which it has said there is. It would seem to me to be difficult for this court to say it had jurisdiction to decide such a matter under its accrued jurisdiction because it would be difficult to find the common substratum of fact which there must be before that jurisdiction will exist. That is not a matter I decide finally but that is how this matter, dealing with it on the interlocutory basis upon which I am dealing with it, seems to me.
If there is a prima facie case, of course, the position may be quite different, but I have already indicated that I do not think that I should take it upon myself to investigate that question, it having been investigated thoroughly by Fox J. some three months ago or a little less.
The respondent in this case has been owed over $1 million since September 1984. No moneys have been paid to it during that time. It seeks to enforce its remedies. The applicant has not, in my opinion, made out any case as to why the ordinary course should not follow, namely, that a mortgagee in that position should not be permitted to exercise its power of sale. In all those circumstances I have reached the conclusion that this application must be dismissed, and that is the order I make. I order the applicant to pay the respondent's costs of the application. I direct the respondent to file a defence on or before 9 March next. The matter will be listed for directions in the ordinary directions list on 13 March at 9.30 a.m.
1
0
0