Westpac Banking Corporation & Ors v Eltran Pty Limited

[1988] HCATrans 301

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No B51 of 1988

B e t w e e n -

WESTPAC BANKING CORPORATION,

JOHN GEOFFREY ALLPASS and

ALAN RAPHAEL TUTTLE

Applicants

and

ELTRAN PTY LIMITED

PREMAYDENA PTY LTD

CRESWELL PLACE PTY LTD
ADAM'S ROW PTY LTD

CARTER LANE PTY LTD

BERNARD STREET PTY LTD

ORACA PTY LTD

BINON PTY LTD

TREVOR RONALD KING

Respondents

Application for special leave

to appeal

WILSON J

Westpac

DEANE J

DAWSON J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA ON FRIDAY, 25 NOVEMBER 1988, AT 2. 22 PM

Copyright in the High Court of Australia

C2T 61/1/SR 1 25/11/88

MR D.F. JACKSON, QC:  May it please the Court, I appear with

my learned fri~nd, MR P.A. KEANE, for the applicant.

(instructed by Feez Ruthning)

MR M.L.D. EINFELD, QC:  May it please the Court, I appear with

my learned friend, MR P.R. DUTNEY, for the respondent.

(instructed by A Kootsookos & Co)

MASON CJ: Yes, Mr Jackson?

MR JACKSON:  Your Honours, may I say one thing before moving

to the substance of the application, and it is this.

The jud~t the subject of this application is a judgment which

is interlocutory, but that is really the whole point
of the case. It concerns the approach to be taken to

the grant or refusal of interlocutory injunctions in

circumstances now frequently occurring. Your Honours,

and may I say, in relation to the interlocutory aspect
of it one more thing, it is this, that the only way
in which an issue of this nature could get to the
Court, of course, would be either by the grant of
special leave from a decision of this general nature
or on appeal from the grant or refusal of an interlocutory

injunction in the Court's original jurisdiction.

Your Honours, the case, in our submission, merits

the grant of special leave for two reasons: first,

because it does, in our submission, raise an issue of
principle, which I will identify in just a moment, which

is of general importance. Secondly, if on the other

hand it is thought the case does not raise an issue

of general principle, then the position which is

obtained is simply this: that we have been put in the

position where a discretionary judgment below has been

set aside simply because the Full Court on the facts took

a different view of the facts and in such a case, in

our submission, the injustice to us, in those circumstances,

would merit the grant of special leave.

(Continued on page 3)

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1:1R JACKSON (continuing):  Your Honours, I said I would come

to what the issue of principle was. It is, in

our submission, whether in considering whether to

restrain a mortgagee's sale where the mortgaged

property is commercial land, the ordinary test of

damages being an adequate remedy is to be applied.

Your Honours, may I go for just a moment to

indicate the way in which the issue was dealt with

in the courts below. At first instance

Mr Justice Pincus in the Federal Court had refused

an application to restrain the exercise by the
first applicant, Westpac, and receivers appointed

by i4 the second applicants, of Westpac's power of

sale under mortages granted to secure substantial

borrowings in foreign currencies.

The Full Court of the Federal Court took a

different view and restrained the applicants from

exercising the power of sale. The proceedings were

in the Federal Court because, as commonly occurs,

claims were made by the respondent for damages and

relief based on misleading or deceptive conduct under

section 52 of the TRADE PRACTICES ACT 1974, and
the claims made were that the respondents were
entitled to damages under section 82 and were
entitled, pursuant to section 87, to have the

mortgages varied to set off those damages against

the indebtedness. There were other claims in

the accrued jurisdiction.

Your Honours, it was accepted below on both

sides that there was a serious question to be tried

as to the respondent's entitlement to relie~

including relief against the exercise of the power
of sale conferred by the mortgages, but there were
several other factors of importance. One was that

it was undisputed that there was a present shortfall

as between debt and security of between $1 million

and $1,500,000. That appears at Mr Allpass'

affidavit, paragraph 5, page 127.

The second factor, Your Honours, was that there

was a real risk that the properties might not

sell as well at a later time, meaning by that a time

later than the time for which the sale had been

fixed. That appears in Mr Allpass' affidavit at

page 132, paragraph 18, and Mr Clarke's affidavit.
page 135, paragraph 5. Substantial liabilities,

some $90,000 in amount, had been incurred in

arranging the sale which the respondents sought to

restrain -	page 131, Mr Allpass' affidavit,
paragraph 17.	The mortgaged properties were not,

for example, the respondents' houses. They consisted,
rather, of commercial property, namely shopping

centres and a block of units whose value to the

respondents was as an investment - Mr Kriewaldt's

affidavit, page 112, paragraph 9.

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There were no assets against which the

respondent's undertaking as to damages might be

enforced; by that I mean no assets other than the

mortgaged properties - Mr Kriewaldt's affidavit, page 112, paragraph 9, and finally, the second

applicants, the receivers, were in possession of

the mortgaged properties and two features followed

from that. One was that it was not as if someone

was being ejected from a home, and the second

thing was that the properties were not, in fact,

providing any income to the respondents because the

money was being used to pay off the interest falling

due - Mr Kriewaldt's affidavit, page 112,

paragraph 9.

(Continued on page 5)

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MR JACKSON (continuing):  Now, Your Honours, in those

circumstances, the issue before the judge

at first instance, the serious question of

law issue being accepted,was one of the

balance of convenience, and His Honour dealt

with it on that basis at page 70, to which

I would like to take Your Honours. At the

bottom of page 70, in the third last line,

His Honour said:

The essential point is the balance of

convenience. That is an issue within

a fairly narrow compass and the opposing

contentions are not complex.

Your Honours, I shall not read out, but

I would ask Your Honours to read the whole of

that paragraph on page 71. From there, Your Honours,

one goes to the critical passages which are in

the paragraph connnencing two-thirds of the

way down the page on page 71:

The matter seems to me to come close to being one of principle, although it is

capable of being described as one

depending simply on the exercise of

discretion.

I regard the two cases as evenly

balanced in strength because I know very

little about their detailed facts and no

attempt has been made to, in effect, have

a preliminary run of the merits of the

principal litigation. The mortgagee and

its representative say: "My judgment·is

that I should sell now; I do not want to
take the risk of waiting." The mortgagor

says:  "You may have no right to sell.

The Court has not determined the question as to whether you have got a right to sell

or not, and if the allegations I make are

correct, then your sale will be unlawful; it is unfair to deprive me of the	opportunity of more tax-free capital
profits, if the application is
ultimately successful."

Then His Honour went on to say, after reciting

those arguments:

I do not see the matter as being any

more complex than that, in essence, and

I have come to the conclusion that the

argument advanced by Westpac should be

accepted. The principal reason I have

decided to accept it is that, as counsel

for Westpac urged, it is or may be

assumed to be a substantial financial

institution. If the sale is ultimately

held to be unlawful, and that causes

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the applicant's loss, then there can be

little doubt that the loss can be met

from Westpac's resources. If, on the

other hand, I stop the sale and there is,
contrary to the prognostications of the
pundits, a slight fall in values and the

deficiency goes up by half a million or so,

that money is simply lost to Westpac.

And he indicated that he proposed to refuse the

application.

Now, Your Honours, the approach taken by the

primary judge, in our submission, was entirely

orthodox.	May I refer Your Honours, in that
regard to	AMERICAN CYANAMID V ETHICOM LTD,

(1975) AC 396 and in particular at page 406
per Lord Diplock, where His Lordship said,
between letters D and E:

The object of the interlocutory injunction is to protect the plaintiff against injury

by violation of his right for which he could

not be adequately compensated in damages
recoverable in the action if the uncertainty
were resolved in his favour at the trial;

but the plaintiff's need for such protection

must be weighed against the corresponding

need of the defendant to be protected

against injury resulting from his having been

prevented from exercising his own legal

rights for which he could not be adequately

compensated under the plaintiff's undertaking
in damages if the uncertainty were resolved

in the defendant's favour at the trial.

(Continued on page 7)

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MR JACKSON (continuing):  Now, Your Honours, the difference

between the Full Court and the primary judge on

this point appears in the judgment of

Mr Justice Spender in the Full Court and
Mr Justice Gallop agreed with His Honour's reasons

for judgment, at page 92. His Honour says in

the paragraph innnediately after the quotation:

Whether Westpac has the right to sell is a central question to the principal

litigation.

Your Honours, may I pause there to indicate this:

it is right in one sense to say that but the question

really was, the question in the litigation, whether

the amount due under the mortgages was to be reduced

by the amount of any damages that might be awarded

under section 52 or under the general law and which

might then be treated as being set off and, on the

other hand, whether the court would vary the
instruments of mortgage under the powers to vary

given by section 87 of the TRADE PRACTICES ACT.

So, His Honour's observation in that regard

should be treated as subject to that and the

counter-claim or the cross claim in the Federal Court

was a claim which was to recover the moneys under

the mortgages. His Honour goes on:

What Westpac proposed to do - - -

DEANE J:	Mr Jackson, if the claim to an equitable set-off
were sustained, would there have been a right of
sale?
MR JACKSON:	No, Your Honour.
DEANE J:	I see.
MR JACKSON:	Your Honour, I accept for the purposes of the
DEANE J: Yes.

proceedings, that is the case.

MR JACKSON:  Your Honours, His Honour goes on, then, to say -

or, Your Honours, perhaps I should say one thing

in relation to that: what that does, of course, is

to raise - was a matter of which the primary

j'l.lClF-e ,;ms conscious, it was a factor.· But 1-...e applied· what

I have described, with respect,earlier as the

orthodox test and took the view that his discretion

would be exercised in a particular way on the balance

of convenience.

His Honour then went on to say:

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What Westpac proposed to do was to

exercise the power of sale and, if at the

trial it turned out that it did not have

such a power, to pay what the court assessed

as the money equivalent of the loss occasioned

by the sale of the assets by Westpac, a sale

which ex hypothesi was unjustified. His Honour

felt that the balance of convenience favoured
this course, essentially because the assets
of the applicants to meet the undertaking as
to damages might prove inadequate should

Westpac be successful in the principal

litigation, whereas, should the applicants

be successful against Westpac, there was no

doubt that a claim for damages by them

against Westpac would be able to be met by

the bank.

In my view this approach has the effect

of overtaking the principal proceedings and

pays insufficient regard to the interlocutory aspect of the injunction being sought. The·

function of the court on an application for
interlocutory injunction is to make such
orders as the circumstances call for pending

the resolution of the issues in the primary

proceeding. The orders a court makes on

such application are ancillary to the

resolution in the principal proceeding -

"Of the principal proceeding", I think that should

be -

and, generally speaking, should not involve

a predetermination of those issues.

His Honour went on to say:

It seems to me that what occurred in

the present matter is that on a comparison

of the possible financial detriments to

each party, Westpac was, by the refusal to

grant an interlocutory injunction, to be

given, in substance, the benefit of a

judgment in its favour before the day of

judgment.

Your Honours, with respect, that overstates the

situation a little.

On the other hand, a granting of the interlocutory injunction would not have had the effect of giving judgment to the applicants before the day of judgment was at hand: the right of Westpac to sell

would merely have been postponed, the

postponement being accompanied by some slight

possibility of financial detriment to it.

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MR JACKSON (continuing):  Your Honours, may I go then, a little

more quickly, to the remaining passages in His Honour's

judgment where His Honour elaborates on that proposition,

as it were. The first is at page 95, innnediately

after the quotation, and His Honour goes on to qualify

what he said earlier, just a little. He acknowledges:

that the absence of an injunction ..... will

not deliver to the applicants only Dead

Sea fruit.

That is a reference to the passage innnediately above

the interlocutory decision is not, in that

sense, final.

His Honour goes on to say that:

the exercise of discretion ..... goes a

considerable way to determining substantive

rights.

Then His Honour comes on to speak about the quality

of it being land. He says:

The mortgaged properties and their

money's worth are not the same.	The investment
market is not homogenous.	Some investments,

such as shares and bonds, are more capable than

others of having their monetary equivalent,

as at any particular time, assessed. With

realty, the difficulties are greater.

And he goes on to express a view on that topic in

the first paragraph on page 96. And then, Your Honours,

importantly, at the bottom of page 96 says:

In short, the effect of a sale is to

defeat the choice of the mortgagor that it

prefers its assets in this form to having it in

cash or in any other form of investment.

Your Honours, His Honour's test appears to involve a
number of elements.	One is that the sale has an effect

akin to a final judgment in favour of the appellant. And the second is that where land is mortgaged, and perhaps there is a qualification to it in the sense of

saying, where land which is for a connnercial purpose

is mortgaged, the mortgagor, in apparent default, has

a choice whether to keep the property before resolution

of the litigation about it. Now. Your Honours, that

may or may not be stating .-it a little too highly or not

perhaps exactly enough, but the effect of the decision,

of course being a decision of the Full Court of the

Federal Court in a situation which is not atypical by

any means, is that as a matter of practicality the

status quo, the prima facie situation I mean by that, in

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mortgage cases, will be that the mortgagee prima facie

is not entitled to sell prior to trial even though

upon the terms of the mortgage which it has it is and

even though the mortgagees right to reduce or seek to

have reduced the amount which the mortgagor is owed

by it, yet remains to be established and, Your Honours,

even though the mortgagor cannot satisfy any losses

which the mortgagee may sustain by the grant of the injtmction.

DAWSON J: It is a matter of discretion, still. You do not

suggest there is not any discretion involved in the

case, do you?

MR JACKSON:  No, I do not, Your Honour, but what I do suggest

is this:  that the way in which the Full Court has

dealt with the case is a way which leaves very little

discretion and is a case that will become a precedent

or will be a precedent for the way in which discretion

should be exercised in what is the normal and typical

case of cases in the Federal Court where claims are made

to restrain amounts being claimed under .· mortgages and

restrain sales under mortgages.

DAWSON J:	Of course, there has to be a cross claim?
MR JACKSON:	In the end, Your Honour, it has to be a

cros~ claim for the money, yes. Perhaps, I misunderstood

Your Honour, but that is what I - - -

DAWSON J: There is a claim by the mortgagors, of course.

MR JACKSON:  There is a claim by the mortgagors, that is how

the case gets to the Federal Court, of course, under

section 52.

(Continued on page 11)

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MR JACKSON (continuing): Inevitably one would expect there to be then a cross claim by the mortgagee, but it is a claim by the mortgagee for, in the present case, for

example, for money. Ordinarily speaking, the mortgagee's

case - if the mortgagee were claiming money under, say,

the personal covenant, it would simply be started in

a court of estate. So I do not suggest that the way

in which the judgment is framed is such that it purports

to leave no discretion, but what I do submit is this:

that the way in which the judgment is framed means

that, as a practical matter, the exercise of the

discretion must necessarily be circumscribed in this

class of case in the Federal Court.

Your Honours, the position, of course, if I can

just say one other thing about that, is that the status

quo in cases like this is not really that the

properties are unencumbered properties which a person

is entitled to deal with at will. The status quo is

really that they are properties subject to a mortgage

mich carries with it various rights. I say that in

passing; the more important point, of course, is that
the effect of the judgment, in our submission, is that
it,!gives a quite different approach to the balance
of convenience, and I have-·referred Your Honours already

to page 406 of AMERICAN CYANAMID, but may I refer also

to a passage at page 408, at letter B, where

Lord Diplock said:

As to that -

and he is speaking of the balance. of convenience -

the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right

to a permanent injunction, he would be adequately
compensated by an award of damages for the loss
he would have sustained as a result of the
defendant's continuing to do what was sought to be

enjoined between the time of the application and

the time of the trial.

Your Honours,I have put the case so far as being a

matter of principle but we would also put it in a

different way, and it is this: if the Court is of the

view that what there was was really no error of principle

involved in the case, no question of principle but

really a question of the exercise of a discretion,

it is difficult to see any reason why the Full Court

intervened because the judge did not, in any way,

misapprehend the facts, nor was the result at which

he arrived sufficiently remote from the nature of the

decision which he~was required to make, to merit the intervention of the Full Court. What the Full Court did was really simply to take a different view of the

facts from that taken by the primary judge on this

assumption and, having done so, then overrule his

decision. Your Honours, the importance of the case, in

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our submission, overall, is that if the judgment of

the Full Court stands, it will effectively prevent
mortgagee sales before trial in many cases where

section 52 is relied on, as here. If, on the other

hand, the case is one seen as turning on its own

facts, the result of it is such that we should have

special leave. Why, we would ask hypothetically,

if there be no issue, no error of principle - - -

WILSON J:	Not only you, but us also.
MR JACKSON:	I am sorry, Your Honour, I did not catch what

Your Honour said.

WILSON J:	It would not be only you that asked why should you
have special leave in that case.

MR JACKSON: Well, may I say this? Why we would say it, is that,

first of all, we were deprived of the benefit of the
judgment of the primary judge for no good reason.

It is an error occurring first in the Full Court on

this assumption. It can only be.corrected, if at all,

in the Court, and we would submit it is of such a

nature that we should be permitted to do it. We

were not even, Your Honour - no amount of security -

was given; the undertaking as to damages was expressed

to be worthless, yet we were restrained. We would

submit it is appropriate, in such a case, for us to

have special leave.

(Uontinued on page 13)

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MR JACKSON (continuing):  Your Honours, if it comes to

a question of prospects of success in the

proceedings, we would submit, if it was a

case which clearly satisfied the first

limb, if I can put it that way, of

AMERICAN CYANAMID, the properties were	commercial
and the approach of the primary judge,	to which
I have referred, in our submission,	was entirely
correct.

DEANE J: It did have one.unusual aspect, and that was that

the income from the properties covered the interest.

MR JACKSON:  Yes, well, it was going to cover interest,

Your Honour, yes.

DEANE J: Which is unusual in this class of case?

MR JACKSON:  Not in the case of commercial properties,

Your Honour, because if the receiver goes into possession then he was certainly doing his best

to do that. Commercial properties should result

in that.

DEANE J:	It is unusual where it is said the value of the
property does not equal the total amount of the debt to find that the irlcOIIE from the property covers the full interest on the debt.
MR JACKSON:	Your Honour, that is at the present time,

of course, like all these things bu4 Your Honour,

sometimes it is, sometimes it is not.

DEANE J:	I should not have said it is unusual, Mr Jackson.
It struck me as a relevant factor when I read the material.
MR JACKSON:	Your Honou~, it reduces the possible loss

somewhat.

DEANE J: Yes.

MR JACKSON:  It really does not do any more than that,

with respect. Those things, of course, depend

on a number of factors which are not entirely

governed by the conduct of the parties. I mean,

by that, fluctuating interest rates and things

of that nature.	Your Honours, those are our
submissions.

WILSON J:  Thank you, Mr Jackson. The Court need not

trouble you, Mr Einfeld.

MR EINFELD:  May it please, Your Honour.

WILSON J: In a contest where the mortgagor seeks to

impeach the mortgagee's claim by equitable

set-off and to vary the actual mortgage pursuant

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to section 87 of the TRADE PRACTICES ACT 1974,

we do not think that the Federal Court was

precluded from granting relief except on

terms requiring payment into court of the

full amount claimed under the mortgage.

That being so, the application for

special leave to appeal to this Court is

from an overruling of a decision to refuse

interlocutory relief and a grant of interlocutory

relief in the exercise of the Full Federal Court's

discretion. The circumstances in which this

Court will intervene in such a case must be

wholly exceptional.	We are not persuaded that
those circumstances exist in this case.	We

should perhaps add that we are not persuaded

that the decision of the Full Court in this

case will be seen as providing a general

precedent for other applications for interlocutory

relief. The decision of the Full Court seems

to us to rest firmly on the particular facts of
the case. Special leave to appeal will be

refused.

MR EINFELD:  May it please the Court, the respondent

would ask for its costs of the application.

WILSON J:	You cannot oppose that, Mr Jackson, can you?
MR JACKSON:	No, Your Honour.

WILSON J: Special leave will be refused with costs.

MR EINFELD:  May it please the Court.

AT 2.49 PM THE MATTER WAS ADJOURNED SINE DIE

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