Temwood Holdings Pty Ltd v Oliver - [2001] WASC 131

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: TEMWOOD HOLDINGS PTY LTD -v- OLIVER & ORS [2001] WASC 131

CORAM: McLURE J

HEARD: 27 APRIL & 18 MAY 2001

DELIVERED : 30 MAY 2001

FILE NO/S: CIV 2008 of 1997
CIV 2173 of 1997
CIV 2244 of 1997
CIV 1248 of 2000
Consolidated by Order dated 29 March 2000

BETWEEN: TEMWOOD HOLDINGS PTY LTD
Plaintiff
AND
OSCAR NEIL BLACKBURNE OLIVER
First Defendant
ASEAN AUSTRALIAN ASSETS PTY LTD
Second Defendant
SLY AND WEIGALL (A FIRM)
Third Defendant
HAMMOND KING TOUYZ
Third Party
(BY ORIGINAL ACTION)
ASEAN AUSTRALIAN ASSETS PTY LTD
First Plaintiff
OSCAR NEIL BLACKBURNE OLIVER
Second Plaintiff
AND
TEMWOOD HOLDINGS PTY LTD
Defendant
(BY COUNTERCLAIM)

Catchwords:

Injunctions - Application to discharge mandatory injunction - Test to be applied in discharge application - Turns on its own facts

Injunctions - Application for mandatory injunction to partially discharge mortgage - Mandatory injunction necessary to, inter alia, facilitate performance of earlier mandatory injunction - Application to adduce further evidence

Legislation:

Nil

Result:

Mandatory injunction orders varied
Further mandatory injunction granted
Application to adduce further evidence dismissed

Representation:

Original Action

Counsel:

Plaintiff:     Mr D H Solomon
First Defendant             :     Mr M J McPhee
Second Defendant         :     Mr M J McPhee
Third Defendant           :     No appearance
Third Party                   :     No appearance

Solicitors:

Plaintiff:     Solomon Brothers
First Defendant             :     Michell Sillar McPhee
Second Defendant         :     Michell Sillar McPhee
Third Defendant           :     No appearance
Third Party                   :     No appearance

Counterclaim

Counsel:

First Plaintiff                :     Mr M J McPhee
Second Plaintiff            :     Mr M J McPhee
Defendant:     Mr D H Solomon

Solicitors:

First Plaintiff                :     Michell Sillar McPhee
Second Plaintiff            :     Michell Sillar McPhee
Defendant:     Solomon Brothers

Case(s) referred to in judgment(s):

Christmas Island Resort Pty Ltd v Casinos Austria International (Christmas Island) Pty Ltd, unreported; FCt SCt of WA; Library No 960641; 8 November 1996
Temwood Holdings Pty Ltd v Asean Australian Assets Pty Ltd and Ors [2000] WASC 84

Case(s) also cited:

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170
Cayne v Global National Resources Inc [1984] 1 All ER 225
Evans Marshall & Co Ltd v Bertola SA (1973) 1 WLR 349
Films Rover International Ltd v Canon Film Sales Ltd [1987] 1 WLR 670
George Laurens (WA) Ltd v Laurens & Co Australia Pty Ltd (1994) ATPR 41-329
Oliver v Temwood [2000] WASCA 351
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [No 3] (1998) 195 CLR 1
Port Kennedy Resorts Pty Ltd v Huat [2000] WASCA 328

McLURE J: This is an application by the first and second defendant to discharge a mandatory injunction made by Steytler J on 31 March 2000 and an application by the plaintiff for a mandatory injunction requiring the second defendant to deliver to the plaintiff a registrable discharge of Mortgage in relation to:
(a)the whole of the land in Department of Land Administration diagram 24291 ("Public Open Space");
(b)the Foreshore Reserve, being part of Lot 1001 Singleton Beach Road, Singleton ("Foreshore Reserve Land").
By chamber summons dated 15 May 2001 the defendants applied to admit further evidence in both applications. I also deal with that application in these reasons.

Background Facts

The plaintiff is the owner of land at Singleton Beach in Western Australia known as Bayshore Gardens Estate ("land"). By a deed dated 18 September 1991, the plaintiff appointed the second defendant to act as its consultant with respect to the development of the land ("First Management Agreement"). Pursuant to the First Management Agreement the plaintiff provided to the second defendant a registered mortgage over the land in order to secure payment of all moneys payable by the plaintiff to the second defendant pursuant to the First Management Agreement ("Mortgage").
The land the subject of the Mortgage at the date of the current applications includes the Public Open Space, the Foreshore Reserve Land and what has been described as the "Retirement Village Land" and the "North‑east Sector Land".
The National Australia Bank ("Bank") also has a registered mortgage over the land securing moneys advanced by the Bank to the plaintiff. The Bank has priority, under its mortgage, up to an amount of $5,500,000 over the amount secured by the Mortgage.
Subject to the usual undertaking as to damages, Steytler J made the following orders on 31 March 2000:
"1.The second defendant be required, and an injunction is hereby granted, requiring it:-
1.1to deliver to the plaintiff's solicitors within 2 business days a registrable discharge of registered mortgage number F453301 ('the Mortgage') discharging the land comprised in diagram 99345 from the whole of the moneys secured by the Mortgage ('Secured Moneys');
1.2within 3 business days of written notification to the second defendant's solicitors of the scheduling of settlement of the sale of the land comprised in diagram 99129 ('the Retirement Village Land') for a sale price of not less than $889,000 and subject to prior satisfaction of the condition in paragraph 2 below, to deliver to the plaintiff's solicitors a registrable discharge of the Mortgage discharging the Retirement Village Land from the Secured Moneys to be used solely for the purpose of settlement of that sale; and
1.3within 3 business days of written notification to the second defendant's solicitors of the scheduling of settlement of the sale of the land the subject of a contract of sale between the plaintiff and Eastview Nominees Pty Ltd, a copy of which is annexed ('the North‑east Sector Land') and subject to the prior satisfaction of the condition in paragraph 2 below, to deliver to the plaintiff's solicitors a registrable discharge of the Mortgage discharging the North-east Sector Land from the Secured Moneys to be used solely for the purpose of settlement of that sale.
2.The plaintiff shall as soon as practicable procure the execution of a deed ('the Priority Amount Variation Deed') between the plaintiff, the second defendant and the National Australia Bank Ltd ('the Bank') by which the Bank must agree that, upon receipt by the Bank of the net proceeds of sale from each of the settlements of the sales of the Retirement Village Land and the North‑east Sector Land under the contracts referred to in paragraphs 1.2 and 1.3 above respectively, the amount of the priority ($5,500,000) of the Bank's mortgage registered number F405113 over the Mortgage pursuant to the current priority agreement between the Bank and the second defendant will be, by force of the Priority Amount Variation Deed, reduced by the net amount of those net proceeds of sale received by the Bank.
3.There be liberty to apply to both parties to settle the terms of the Priority Amount Variation Deed if agreement on its form cannot be reached.
4.The second defendant have liberty to apply to dissolve or vary this injunction on 48 hours written notice to the plaintiff's solicitors."
The Court's reasons for the grant of the mandatory injunction are contained in Temwood Holdings Pty Ltd v Asean Australian Assets Pty Ltd and Ors [2000] WASC 84.
It emerges from the materials filed in support of the plaintiff's current mandatory injunction application that the sale of the Retirement Village Land the subject of order 1.2 has not proceeded and settlement of the sale of the North‑east Sector Land to Eastview Nominees Pty Ltd the subject of order 1.3 has been delayed. I was informed by counsel for the plaintiff from the Bar table that the Priority Amount Variation Deed referred to in order 2 has been executed by the relevant parties.

The Discharge Application

It was not in dispute that in order to succeed in their application to discharge the mandatory injunction, the defendants had to satisfy the test of "changed circumstances of a sufficient gravity to affect the continuation of that injunction" approved by the Full Court in Christmas Island Resort Pty Ltd v Casinos Austria International (Christmas Island) Pty Ltd, unreported; FCt SCt of WA; Library No 960641; 8 November 1996. The Full Court said at page 5:
"... an application for the dissolution of the injunction is not the occasion merely to revisit the original grant of interlocutory relief. It remains necessary to consider whether since that grant the circumstances have changed or new facts have been discovered, sufficient to show that the situation in respect of the grant of interlocutory relief is materially different from that which applied when the order was originally made."
I see no reason why the test is not equally applicable to the variation of an injunction. The defendants' application to discharge the mandatory injunction was supported by an affidavit of the first defendant sworn on 27 April 2001. Annexed to the affidavit was a draft valuation dated 24 April 2001 from K S Johnson of K S Johnson & Associates. For the purposes of the discharge application, the defendants also relied on the affidavit of Bruce Chin sworn on 5 April 2001 filed in support of the plaintiff's application to discharge further land from the Mortgage.
There was no evidence of changed circumstances which impacted in any way upon Steytler J's conclusions at pars 24 to 28 of his reasons (with which I agree) that the parties' claims raised serious questions to be tried and the strength of the claims were not such, on the evidence as it stood, as to materially affect the balance of convenience.
The changed circumstances on which the defendants relied in support of the discharge application included:
(a)a significant reduction in the plaintiff's indebtedness to the Bank;
(b)a depreciation in value of the remaining land the subject of the Mortgage;
(c)the continued involvement by the defendants in the plaintiff's business as a result of recurrent requests for partial discharges of the Mortgage.
As to the reduction in the plaintiff's indebtedness to the Bank, the defendants' submission was to the effect that the plaintiff now has or may have access to funds from the Bank or elsewhere to provide alternative security either by payment of the moneys in dispute into Court or into an interest‑bearing account pending resolution of the claims.
The factual position is that in November 1993, the plaintiff obtained a loan facility up to $5,500,000 from the Bank of Western Australia Ltd ("Bankwest") secured by a first registered mortgage of the land to finance the development of Bayshore Gardens. The plaintiff subsequently refinanced with the Bank who provided a "come and go" facility which enabled the plaintiff to borrow up to $5,500,000 and the Bank took a transfer of Bankwest's first registered mortgage. As noted by Steytler J in his reasons in the first injunction application, the Bank has priority under its mortgage up to an amount of $5,500,000 and on 31 January 2000, the plaintiff owed the Bank an amount of $3,459,393.
The amount of the plaintiff's secured indebtedness to the Bank as at the date of the current applications is unclear. The plaintiff's indebtedness under its bill facility was $2,691,114. The most recent annual report of the plaintiff lodged with the Australian Securities and Investment Commission is for the financial year ending 31 December 1999 which shows that in addition to the bill facility, there is a secured bank overdraft. At 31 December 1999, the overdraft had a nil balance.
Mr Chin's evidence in support of the plaintiff's first injunction application and in support of the current application does not address the question of the plaintiff's ability to pay out the second defendant's claims or the prospect or ability of the plaintiff to provide alternative security for the payment of the second defendant's claims. Counsel for the defendants recognised the evidential difficulties in drawing an inference that finance facilities were available to the plaintiff to provide alternative security.
In any event, in applying the test for the discharge or variation of an injunction, the change in circumstances must be relevantly connected to the factors on which the Court relied in granting the injunction. As to the plaintiff's financial capacity to pay out the second defendant's claims or provide alternative security, Steytler J said:
"While Mr Chin doesn't address the question of Temwood's ability to proceed with the sales by paying out [the second defendant's] claims, he has placed evidence before the court, mentioned above, to the effect that [the second defendant] has only a $2 paid up share capital and that it has, to date, declined to make available to Temwood's solicitors copies of its audited accounts. Mr Chin does not address, either, the prospect of the provision of alternative security for the payment of [the second defendant's] claims, as, for example, by way of provision of a bank guarantee or payment into court. However no point was sought to be made by [the second defendant] in this respect and it seems to me that conditions of this kind are unnecessary having regard for the fact that [the second defendant] will, on the evidence as it stands, remain more than adequately secured if the interlocutory relief is granted."
Applying the approach adopted by Steytler J in granting the first mandatory injunction, any improvement in the capacity of the plaintiff to fund alternative security would not be a material change in circumstance provided the second defendant remained more than adequately secured by the Mortgage.
I turn now to the question of the valuation of the remaining land, the subject of the Mortgage. In the first injunction application, the plaintiff relied on a valuation of the land dated 11 October 1999 from licensed valuer Christie Whyte Moore. The land was valued at $9,600,000 and included the land referred to in order 1.1 of Steytler J's orders, the Retirement Village Land and the North‑east Sector Land. The North‑east Sector Land was valued as part of what is described in the valuation as the "Englobo Land". In a letter dated 21 October 1999, Christie Whyte Moore valued the North‑east Sector Land at $2,150,000.
At the time of the grant of the first injunction (as noted by Steytler J):
(a)the defendants claimed around $657,325 as the amount secured by the Mortgage;
(b)the land the subject of the Mortgage was valued at $9,600,000;
(c)the Bank had priority up to $5,500,000 over the second defendant's security;
(d)the net sale proceeds of the Retirement Village Land and the North‑east Sector Land together totalled around $3,500,000 which was to be paid to the Bank in reduction of the plaintiff's secured indebtedness to the Bank and in reduction of the Bank's priority to around $2,000,000;
(e)prior to the grant of the first injunction, the second defendant's security was worth around $4,100,000 ($9,600,000 less the priority amount of $5,500,000);
(f)after the grant of the first injunction and the sales contemplated in the orders, the value of the remaining land the subject of the mortgage was around $6,209,120 with the second defendant's security worth $4,209,120 having regard to the reduced priority of $2,000,000. Thus, not only was the second defendant adequately secured, its security position had improved because of the reduction in the priority amount.
In evidence in the first injunction application was a valuation of the land obtained by the defendants from K S Johnson and Associates. This valuation valued the unsold residue of the land as at 1 September 1999 at $9,800,000. In this valuation the author (Mr Kevin Johnson) referred to the history of the development and in particular the low rate of demand and sales.
At the hearing of the present applications, counsel for the defendants handed up an affidavit of the first defendant sworn on 27 April 2001 annexing a draft valuation dated 24 April 2001 from Mr Kevin Johnson of K S Johnson and Associates ("draft valuation"). Counsel for the plaintiff and the defendants indicated their preparedness to proceed with the applications on the basis of the draft valuation.
The land the subject of Mr Johnson's September 1999 valuation and the draft valuation is not identical. Although the draft valuation does not clearly identify the differences, the first defendant says in his affidavit that the draft valuation is of the property which would remain subject to the Mortgage after the sale of the North‑east Sector Land to Eastview Nominees and the transfer to the Crown of the Foreshore Reserve Land and the Public Open Space. Thus the draft valuation includes the value attributable to the Retirement Village Land. There is no suggestion in the draft valuation that the Public Open Space and Foreshore Reserve Land have a realisable value.
In the space of approximately 20 months, Mr Johnson's opinion as to the value of the land has dramatically altered. This is best appreciated by a comparison of the schedules to each valuation. The schedules calculate the value of the land to the owner and the value as a single site if offered for sale. In the September 1999 valuation the value of the land to the owner was, in Mr Johnson's opinion, $11,270,000 and the value of the land offered as a single site was $9,800,000. In the draft valuation the value of the land to the owner is $5,460,000 and the value of the land as a single site is $4,750,000. Of course, this is not to compare like with like because the September 1999 figures need to be adjusted to reflect the land excluded from the draft valuation. However, it appears from a comparison of the schedules to the September 1999 valuation and draft valuation that it is Mr Johnson's opinion that every variable affecting the value of the land (except interest which has not changed) has moved against the plaintiff including the sale price, discount rate, marketing costs, provision for profit and risk and rates and taxes. Further, there is an assumption that a number of completed lots have been sold and provision is now made for payment of incentives. The value of the Special Sites (which include the Retirement Village Land) has dropped from $2,625,000 in September 1999 to $970,000 in April 2001. This dramatic deterioration is because Mr Johnson has changed the basis of the valuation from commercial to residential and increased the discount factors.
The change in Mr Johnson's valuation opinion is stated in the draft valuation to result from the sales and management history causing the remaining land to be "substantially blighted" so as to warrant a changed basis of valuation. However, he admits that the matters in his report "are seriously debateable and in the eye of the beholder". He concludes:
"I [sic] reviewing matters I find the likely realisable lot values today to not be in keeping with previous market expectations and that for a number of both economic and market enforced considerations, any realisable consideration is nearing the amount of a 'Stress' value.
As at today's date, and based on the information available, it is now my reviewed considered opinion that the current open market value of the subject property as a single holding is '$4,750,000'."
That figure is discounted in the schedule by 10 per cent to $3,960,000 on the basis that the sale of the North‑east Sector requires a two‑year deferment on the sale of the balance of the land. Mr Johnson has assumed that cl 9 of the contract of sale of the North‑east Sector imposes a moratorium on the entire balance of the land the subject of the Mortgage. This is disputed by the plaintiff.
It is clear from Mr Johnson's discussion in the draft valuation that in his estimation the purchase price of $2.7 million payable pursuant to the contract of sale of the North‑east Sector Land is significantly above the market value of that land.

The plaintiff did not adduce any further valuation evidence in the present applications and did not seek an adjournment of the hearing to enable it to file current and responsive valuation evidence. All parties were content to proceed on the basis of the draft valuation. In May 2001, the defendants applied for leave to file further evidence in the applications. The further evidence was Mr Johnson's final valuation report. Save for the addition of a number of annexures, the final report is in all material respects in the same terms as the draft valuation. As a result of the stance taken by the parties on 27 April 2001 concerning the use of the draft valuation, I intend to rely on that document as representing Mr Johnson's valuation opinion. That being the case, and because of uncertainty concerning the meaning and relevance of the additional annexures, I will dismiss the defendants' application to adduce further evidence.
I am unable to make any final determination as to the value of the remaining land the subject of the Mortgage. Accordingly, I approach the matter on the basis that Mr Johnson's draft valuation represents the low end of a range of values of the relevant land. I test the second defendant's security position by reference to Mr Johnson's valuation of $4,750,000 (which excludes the value of the North-east Sector Land) and on the further basis of:
(a)the sale of the Retirement Village Land not proceeding;
(b)the plaintiff paying the proceeds of sale (or net proceeds of sale) of the North-east Sector Land to the Bank in reduction of its secured debt;
(c)the amount of the Bank's priority ($5,500,000) being reduced by the net proceeds of sale of the North-east Sector ($2,700,000 less costs and expenses of sale).
In those events, the value of the second defendant's security would be $1,950,000 less the expenses of sale of the North-east Sector land. This is a significant decrease in the second defendant's security position from that which existed prior to and after the grant of the first injunction and is a relevantly material change in circumstances which enlivens the power to discharge or vary the orders made by Steytler J on 31 March 2000. However, the existence of such changed circumstances does not mandate any particular result.
Further, the circumstances surrounding the plaintiff's current mandatory injunction application also enlivens the power to discharge or vary the orders made by Steytler J. This is so because performance of aspects of the existing orders will be frustrated without the grant of the further mandatory injunctions. As a result, there is a substantial overlap in the matters affecting the balance of convenience in each application. It is necessary to deal with the circumstances surrounding the second injunction application before dealing further with the discharge application.

The Second Injunction Application

The land over which the partial discharges of Mortgage are sought in this application are:
(a)the Public Open Space which is to be ceded to the Crown.
(b)the Foreshore Reserve Land which is reserved under the Metropolitan Region Town Planning Scheme Act 1959 ("Scheme Act") and cannot be developed without amendment to the Metropolitan Region Scheme ("MRS") or approval by the Western Australian Planning Commission ("Commission").
It was a condition of approval of the subdivision of the original land in October 1993 that the Public Open Space be a reserve for recreation and vested in the Crown under s 20A of the Town Planning and Development Act ("TPDA"), such land to be ceded free of cost and without any payment of compensation by the Crown ("POS Condition"). For reasons which the plaintiff is not able to ascertain, the Public Open Space has not yet been ceded.
The evidence is that it is a usual condition imposed on residential subdivisions that 10 per cent of land be ceded to the relevant local authority free of cost as Public Open Space. Mr Chin in his affidavit swears that the Public Open Space has at all times since the plaintiff acquired the land been of no value to the second defendant as security. There is nothing in Mr Johnson's draft valuation to contradict this proposition.
In May 2000 the Commission imposed the POS Condition on the subdivision of the North‑east Sector Land. It was also a condition of subdivision of the North‑east Sector Land that the Foreshore Reserve Land be vested in the Crown under s 20A of the TPDA, such land to be ceded free of cost and without any payment of compensation by the Crown ("Foreshore Condition"). The settlement of the sale of the North‑east Sector Land to Eastview Nominees cannot take place until the Public Open Space and Foreshore Reserve Land has been ceded to the Crown. The ceding of the Public Open Space and the Foreshore Reserve Land cannot occur until the Mortgage is discharged. Further, a condition that the Foreshore Reserve Land be ceded to the State free of cost has also been imposed on two additional subdivision applications recently lodged by the plaintiff.
The Foreshore Reserve Land was reserved for parks and recreation in September 1962 and the Foreshore Condition was also imposed as a condition of subdivision of the original land in October 1993. For reasons unknown, the ceding of the Foreshore Reserve Land has also not taken place.
The plaintiff appealed to the Town Planning Appeal Tribunal of Western Australia ("Tribunal") from, inter alia, the imposition of the Foreshore Condition. One of the grounds of the appeal was that the Foreshore Condition does not fairly and reasonably relate to the subdivisional approval of the North‑east Sector Land. The Tribunal dismissed the plaintiff's appeal in March 2001.
The plaintiff has filed an appeal from the Tribunal to a single Judge of this Court. I heard the appeal on 22 March 2001 and reserved my decision. In the event the Court upholds the appeal, the plaintiff says it would have a claim for compensation in relation to the Foreshore Reserve Land provided it was still the owner of that land and had taken relevant steps under the Scheme Act. However, the current position is that unless the Foreshore Condition is satisfied by ceding the land to the Crown, subdivision of the North‑east Sector Land cannot proceed. To address the problem the plaintiff put a proposal to the Commission that the plaintiff cede the Foreshore Reserve Land (which is dependent on the Mortgage being discharged) to allow the subdivision to proceed and in the event the appeal was successful, the Commission would reconvey the Foreshore Reserve Land to the plaintiff to enable it to proceed with its compensation claim. In the event the Foreshore Reserve Land was reconveyed to the plaintiff or it otherwise became entitled to compensation under the Scheme Act, the plaintiff offered to provide substitute.
I was informed by counsel for the plaintiff on 18 May 2001 that the Commission would not agree to the proposal. At the hearing in April 2001, counsel for the plaintiff stated in that event, the plaintiff would not cede the Foreshore Reserve Land and would apply for expedition of the appeal. The appeal has been expedited.

Principles relating to Mandatory Injunctions

I respectfully agree with and adopt the statement of legal principles relating to the grant of mandatory injunctions set out by Steytler J in pars 21 to 23 of his reasons in the first injunction application.

Serious Question

I have already dealt with the issue of serious question to be tried and its effect on the balance of convenience on the discharge application. It is equally applicable to this application.

Balance of Convenience

Factors relevant to the balance of convenience in the second injunction application overlap with the discharge application. The relief sought in the second injunction application is necessary to enable the sale of the North‑east Sector Land approved in the first injunction application to proceed in due course.
The most significant factor affecting the balance of convenience in the discharge application remains whether the second defendant is at risk of being inadequately secured for the full amount of its claim. It was accepted by the parties that the claim is now around $700,000.
When I put to counsel for the plaintiff that, by reference to the draft valuation, there was a drop in the value of the second defendant's security to $1,950,000, the plaintiff offered an undertaking to secure a reduction of the Bank's priority to $1,000,000. If the injunction in relation to the Retirement Village Land was discharged and the Bank's priority reduced to $1,000,000, the second defendant's security (based on the draft valuation) would be worth around $3,750,000. If that injunction was not discharged, the security (based on the draft valuation) would be worth around $3,486,839. On these figures, there is no question the second defendant is adequately secured at present. In addition:
(a)the sale price of the North‑east Sector Land is still above valuation (even if it is appropriately discounted following the unexpected delay in settlement). If the draft valuation is correct, the sale price is significantly in excess of current market value;
(b)until the Mortgage is discharged from the Public Open Space and the Foreshore Reserve Land, settlement of the sale of the North‑east Sector Land cannot proceed;
(c)the Public Open Space is of no realisable value to the second defendant;
(d)in the event the status quo in relation to the Foreshore Reserve Condition is valid, the Foreshore Reserve Land is of no realisable value to the second defendant.
I have considered the other discretionary factors relied on by the plaintiff said to arise from delay in the sale of the North‑east Sector Land such as the risk to the contract of sale of that land and increased holding costs. However, the cause of the delay in the past and in the short to medium term future is not the existence of the Mortgage but the plaintiff's desire to retain its claim to compensation for the Foreshore Reserve Land. The plaintiff does not intend to cede the Foreshore Reserve Land before the determination of its appeal. Without intending to reflect in any way on the merits of the plaintiff's appeal, it may wish to pursue other avenues of appeal if it is unsuccessful. In addition, I am not satisfied on the evidence that the critical path for progressing the other proposed subdivisions has been or will in the short to medium term future be materially affected if the second injunction is not granted. Those developments are also affected by the Foreshore Condition.
Further, in the present applications the second defendant is not requesting that the moneys the subject of its counterclaim which it says are secured by the Mortgage be paid to the defendants. Rather, the defendants want the moneys to be paid into court or into an interest‑bearing account pending the determination of the action.
There is no direct evidence of the plaintiff's ability to fund such a payment or to provide substitute security such as a bank guarantee. Even so, if the adequacy of the remaining security was in question, this omission could not be relied on by the plaintiff. However, there are costs associated with providing alternative security and the evidence remains as it was that the second defendant has a two‑dollar share capital and has not responded to the plaintiff's request that it provide a copy of its audited accounts so that the plaintiff's solicitors can determine whether or not the second defendant is able to meet any damages awarded against it.
A factor against the plaintiff in the balance of convenience arises in relation to the application to discharge the Mortgage from the Foreshore Reserve Land although it has wider ramifications. As stated earlier, the plaintiff does not intend to cede the Foreshore Reserve Land before the determination of its appeal to this Court. If the plaintiff is successful in its appeal, the Foreshore Condition will cease to be an impediment to the sale of the North‑east Sector Land, the Foreshore Reserve Land will remain the plaintiff's (unless purchased by the Commission pursuant to the Scheme Act) and may be of value in the event the plaintiff becomes entitled to compensation under the Scheme Act. In any event, the mandatory injunction to discharge the Mortgage from that land would not be required.
It is only if the plaintiff is unsuccessful in the appeal(s) that it will require the mandatory injunction in relation to the Foreshore Reserve Land. The length of time the appeal process will take is at this stage a matter of speculation. The delay in ceding the Foreshore Reserve Land is also delaying the sale of the North‑east Sector Land. The delay is also potentially prejudicial to the defendants. The value of its claim is increasing and the value of the land secured by the Mortgage may alter. However, subject to addressing the timing issue, the balance of convenience still clearly favours:
(a)the retention of the existing injunction subject to conditions that the proceeds of sale of the North‑east Sector Land (and the Retirement Village Land if that proceeds) be paid to the Bank and the Bank's priority be reduced to $1,000,000;
(b)the grant of a mandatory injunction for the discharge of the Mortgage from the Public Open Space and, if the plaintiff's appeal is unsuccessful, the Foreshore Reserve Land.
The Mortgage was intended to operate as security only. The second defendant remains more than adequately secured. The Public Open Space and Foreshore Reserve Land (if the Foreshore Condition is valid) are of no realisable value to the second defendant. The potential prejudice which may arise from delay can be accommodated by inserting a sunset provision in the variation orders so the obligation to provide any relevant discharge of Mortgage will expire on a date twelve months from the date of the order. In this way, the onus is on the plaintiff to persuade the Court that the delay in disposing of part of the land which is of value as security has not prejudiced the defendant rather than placing the onus on the second defendant to discharge the injunction. The second defendant will continue to have liberty to apply to discharge the injunction before that date.
Consequently, I propose to vary the terms of the orders made by Steytler J on 31 March 2000 by:
(a)inserting a sunset clause into orders 1.2 and 1.3 so that the obligations expire on the date twelve months from the date on which the orders are made;
(b)making the injunctions in orders 1.2 and 1.3 conditional on the net proceeds of sale of the land being paid to the Bank in reduction of the amount secured by the Bank's mortgage and the amount of the priority of the Bank's mortgage being reduced to $1,000,000.
As the Public Open Space is of no realisable value to the second defendant, I propose making an order in terms of par 1.1 of the plaintiff's summons for mandatory injunction dated 5 April 2001 (save that the injunction be directed to the second defendant).
As to the Foreshore Reserve Land, the need for injunctive relief will only arise if and when the land is ceded (unconditionally) to the Crown in accordance with the Foreshore Condition in which case it will be of no value to the second defendant. Accordingly I propose to order that there be a mandatory injunction in relation to the Foreshore Reserve Land in the event it is to be ceded to the Crown pursuant to the Foreshore Condition.