Varangian Pty Ltd v OFM Capital Limited

Varangian Pty Ltd sued OFM Capital Limited, primarily concerning the validity of notices to pay under section 76 of the Transfer of Land Act and notices for possession. The dispute arose from whether the moneys secured by the mortgages were payable on demand, whether the declaration served prior to the event of default was effective, and the calculation of the period of failure to pay under the loan contract. The court also had to determine if the mortgagee was precluded from exercising rights under the loan contract by a fiduciary duty owed under a joint venture agreement between the mortgagor and the mortgagee’s related company, whether the corporate veil should be lifted, and if the exercise of the mortgagee’s rights on default was precluded by a duty of good faith implied into the loan contract.

The court examined whether the notices to pay under section 76 of the Transfer of Land Act were valid and if the moneys secured by the mortgages were indeed payable on demand. The court found that the declaration served prior to the event of default was effective, as it complied with the requisites of the loan contract. It also determined the correct calculation of the period of failure to pay under the loan contract, rejecting arguments that the mortgagee was precluded from exercising its rights due to a fiduciary duty under the joint venture agreement. The court further held that there was no basis to lift the corporate veil and concluded that the mortgagee’s rights on default were not precluded by an implied duty of good faith.

The court's reasoning led to the conclusion that the notices to pay were valid, the moneys were payable on demand, and the mortgagee was not precluded from exercising its rights by any fiduciary duty or implied duty of good faith. The court upheld the mortgagee's right to enforce the loan contract and notices to pay under the Transfer of Land Act. The final orders were made in favour of Varangian Pty Ltd, affirming the validity of the notices and the mortgagee's right to proceed with the enforcement actions.