ALS598 Pty Ltd v Kremetis

Legislation Cited: Conveyancing Act 1919 (NSW)
Real Property Act 1900 (NSW)

Cases Cited: Hanson Construction Materials Pty Ltd v Roberts (2016) 93 NSWLR 1; [2016] NSWCA 240
Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 24 VR 617; [2009] VSCA 97
Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; [1912] HCA 9
Stone v Farrow Mortgage Services Pty Ltd (in liq) [1999] NSWCA 435; 12 BPR 22,175
Webster Investments Pty Ltd v Anderson; Webster Investments Pty Ltd v North Star Developments Pty Ltd (2016) 52 VR 610; [2016] VSC 620
Wright v Insert Pty Ltd [2022] VSC 1

Texts Cited: N.A.

Category: Principal judgment

Parties: ALS598 Pty Ltd (first plaintiff)
Nulend Investments 157 Pty Ltd (second plaintiff)
Efi Kremetis (defendant)

Representation: Counsel:
M Young SC (plaintiffs)
N Kulkarni (defendant)
Solicitors:
Summer Lawyers (plaintiffs)
Ronayne Owens Lawyers (defendant)

File Number(s): 2025/388521

Publication restriction: N.A.

JUDGMENT – Ex Tempore (Revised from the Transcript)

1. The defendant (Ms Kremetis) is the registered proprietor of two parcels comprising the land at 276 - 278 Prince Charles Parade, Kurnell (the Property). The plaintiffs are the mortgagees in possession of the property.

2. On 27 June 2025, the plaintiffs, pursuant to the power of sale, entered into a contract for the sale of the property. The defendant subsequently lodged caveats claiming an interest in the nature of a mortgagor’s equitable right to prevent completion of a voidable sale arising from an improper exercise of the power of sale.

3. By their summons, the plaintiffs seek orders pursuant to s 74MA of the Real Property Act 1900 (NSW) that the caveats be withdrawn as well as associated relief.

4. The defendant opposes the orders. She wishes that the caveats be maintained pending determination of her claim to set aside the contract.

5. There was no dispute about the principles that apply on this application and they are set out in Hanson Construction Materials Pty Ltd v Roberts (2016) 93 NSWLR 1; [2016] NSWCA 240 at [77]. In short, the defendant bore an onus of showing that there is a serious issue to be tried as to the existence of the interest claimed in the caveats. If she discharges that onus, the continuation or removal of the caveats depends on the Court’s assessment of the balance of convenience.

6. In this case, it was common ground that the defendant’s onus was to show that there was a serious question to be tried that the mortgagee breached its duty of good faith in exercising the power of sale.

7. The duty of good faith was stated by Barton J in Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 at 694-695; [1912] HCA 9 as follows:

… a mortgagee’s “right is to look after himself first. But he is not at liberty to look after his own interests alone”; … If he confines his attention to his own interests, and sacrifices the mortgagor’s property by doing so, he certainly acts unfairly, that is, in bad faith. Can it not be said truly that this unfairness, this disregard of the mortgagee’s obvious duty, is fraudulent, or wilful, or merely reckless, according as the surrounding facts show—in addition to a sale at a gross undervalue—deceit or collusion, or deliberate exclusion of the interest of the mortgagor, or utter lack of care for that interest—another way of saying that the only interests he considers are his own? And he considers nothing else if he cares no jot whether a fair price be obtained, so only that the price pays his debt.

Apart then from the question of collusion, of which I have spoken, I think we have to consider in this case whether the mortgagees so used their power as to sacrifice the mortgagor’s property by conducting the sale in complete disregard of the mortgagor’s interest.

There is no suggestion of collusion in this case. The issue is whether there is a serious question to be tried that the mortgagees so used their power as to sacrifice the defendant’s property by conducting the sale in complete disregard of the defendant’s interests.

8. I do not consider that the evidence rises that highly.

9. The plaintiffs have sold the property for $2.5 million and the defendant contends that this is below its true value. The defendant accepts that sale at an undervalue is not, of itself, sufficient to establish a breach of the duty of good faith, but she submits that a price obtained substantially below the true value may be some evidence that proper steps were not taken: see Stone v Farrow Mortgage Services Pty Ltd (in liq*)* [1999] NSWCA 435; 12 BPR 22,175 at [4].

10. The defendant relies on an evaluation prepared by Property Logic that was finalised on 24 June 2025 for a proposed incoming lender. It assessed the market value to be $3.5 million as at 24 June 2025. This valuation stated:

The highest and best use of the subject land is considered to be for redevelopment for ‘private recreation.’ (hotel or motel accommodation.) services.

11. By way of contrast, the plaintiffs had obtained, as part of the sale process, a valuation report from JPM that stated the value of the property, as at 24 April 2025, to be $2 million. That valuation stated:

We have been instructed to undertake our assessment on a standard residential basis only. Under this scenario, our assessment assumes the highest and best use of the subject property is a standard residential dwelling with no consideration for any higher density use or development applications/approvals.

This statement is not entirely consistent with the written instructions provided to the valuer. Those instructions required the valuer to assess the property “as is”, including but not limited to its present state and condition, development approval/permits, existing tenancies and present zoning and planning regulations.

12. The evidence is that the plaintiffs approached three different real estate agents in November 2024 with a view to undertaking the sale arrangements of the property. The three agents recommended varying sales strategies. They also provided estimates of the sales price that might be achieved. One agent provided a recommended price guide of $2.5 million to $2.75 million. A second agent (who was the agent subsequently retained to sell the property) provided an estimate of a current sale value between $2 million and $2.5 million. The third agent gave a “conservative” range of $2 million and $2.05 million and a premium range of $2.1 million and $2.15 million.

13. The sales campaign took place in the first half of 2025. There is evidence about the character of the campaign. By 20 June 2025, the agent retained to undertake the sales campaign reported that the property had been on the market for 70 days and there had been 146 enquiries, 26 inspections, 27 contracts issued, and 6 offers received. Those offers ranged from an initial offer of $1.6 million up to $2.35 million, which was made on 17 June 2025. As I have indicated, the contract for sale of the property was entered into on 27 June 2025 at a price of $2.5 million. It appears, although it is not certain, that the purchaser was the same person who made an offer for $2.35 million on 17 June 2025.

14. The defendant submits that the sale process evidently involved advertising the property as a standard residential property, not as a commercial development site. She submits that the property has a land area of 3,326 square metres and neighbouring properties had been developed or approved to be developed for multiple dwellings for short term or tourist accommodation. She submits that it appears that only a local real estate agent was engaged and not a commercial property agent. She submits that the failure to engage the right agent goes to the heart of the sale process, citing Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 24 VR 617; [2009] VSCA 97 at [83] and Webster Investments Pty Ltd v Anderson; Webster Investments Pty Ltd v North Star Developments Pty Ltd (2016) 52 VR 610; [2016] VSC 620 at [83]. I accept that if the sale process could be shown to be flawed then the plaintiffs could not rely on the sale price as the best evidence of the value of the property.

15. However, I do not accept that there is any sound evidentiary foundation to support the proposition that the sale process in this case was flawed. There was evidence of the sales campaign undertaken in respect of the property and that included advertising on www.realestate.com.au and www.domain.com.au. The evidence is that the advertising on those websites included the following remarks:

A rare offering in a prime coastal setting and with this substantial 3,326 square metre site positioned directly opposite the sandy shoreline of Silver Beach with an RE2 zone to private recreation zoning. This land presents a unique opportunity for a range of potential development outcomes (STCA [Subject to council approval]), subject to zoning allowances and council approvals.

…

The existing single level dwelling includes six bedrooms, two kitchens, and two separate living areas providing a flexible foundation for future use or development.

...

A rare chance to secure a landmark parcel in one of the Sutherland Shire’s most tightly held beachfront precincts with zoning that opens the door to a wide variety of development opportunities (STCA) or to secure a block of land in a highly sought after area.

Having regards to this, it is not correct in my view that the property was advertised simply as a standard residential property and not as a potential development site.

16. I am not prepared to accept that there is any basis for a conclusion that the plaintiffs acted with mala fides because it failed to engage a “commercial property agent”. There was no evidence about some alternative campaign that should or could have been undertaken that would or might have yielded a different result. I am satisfied that the property was widely advertised, including on the basis that it was a potential development site.

17. I am not satisfied that there is a serious question to be tried that the plaintiffs have acted in bad faith, in the required sense, in the conduct of the sale process. That being so, the plaintiffs are entitled to have orders that require the caveats to be removed.

18. It follows that the question of the balance of convenience does not arise. Nevertheless, I will deal with the matter briefly.

19. Had I considered that the defendant established that there was a serious question to be tried, I would nevertheless have concluded that the balance of convenience lies in favour of removal of the caveats.

20. The defendant’s position in broad terms is that she has secured funding to enable her to pay to the plaintiffs all that is owed. She contends that under the terms of the contract for sale, the existence of the caveats in these proceedings means that the plaintiffs are entitled to either or both delay settlement for a period of up to 6 months or terminate the contract. She has offered to provide security of up to $500,000 in the event that there is some disadvantage to the plaintiffs arising from the loss of the current contract for sale. There is evidence that she has the means to post that security. She has given some evidence that the property has special value to her, including because she runs an animal rescue organisation and the property is suitable for that purpose (as it requires a specific type of zoning permission).

21. The plaintiffs contend that they have entered into a contract for the sale of the property to a purchaser which, if completed, will result in repayment of the monies owed to them. They submit that if the contract is terminated, they run the risk of delay and uncertainty as to if and when they will recover the money that is owed. While there is evidence that a lender is prepared to lend the defendant the funds required, the defendant does not yet have those funds at her immediate disposal and the offer of those funds is not unconditional. The plaintiffs further submit that it is at risk of a claim by the purchaser that any termination of the contract was a breach. These matters all weigh in the plaintiffs’ favour in the balance of convenience.

22. The plaintiffs also submit that possession of the property was taken in November 2024, and at that time, the property had been vacant for at least a month and that there were no signs that the property had been used for the housing of rescue animals. The plaintiffs submit that there is no evidence that there is no other property that is suitable for the same purpose.

23. Given that the defendant had not had possession of the property for about 12 months, and it has not been used as an animal rescue shelter for any of that time, I am not prepared to give much weight to the defendant’s assertion that the property has peculiar value to her.

24. Moreover, if it is correct that the property has been sold at undervalue in breach of obligations owed by the plaintiffs, then the defendant can prosecute that cause of action against the plaintiffs, and, if successful, recover damages or compensation. That action could also potentially include an action under s 111A of the Conveyancing Act 1919 (NSW), on the basis that the plaintiffs failed to take reasonable care in the exercise of the power of sale. This section was not, and could not, be relied upon by the defendant, to support the caveats but affords the defendant an avenue for redress if there has been a failure of reasonable care on the part of the plaintiffs. There is no suggestion that the plaintiffs would not be in a position to meet any judgment. It follows that the defendant has rights that she can vindicate, irrespective of any financial loss arising from any wrongdoing by the plaintiffs.

25. I also accept the plaintiffs’ contention that a matter I can take into account in weighing the balance of convenience is the impact upon the purchaser. There is no reason to suppose that the purchase is anything other than a person who entered into the contract in good faith. The effect of not removing the caveats is equivalent to the grant of an injunction restraining the plaintiffs from settling the contract with the purchaser. If I deny the relief sought by the plaintiffs, it could have an impact on an innocent third party. This points in favour of removal of the caveats: see Wright v Insert Pty Ltd [2022] VSC 1 at [100].

26. The defendant submits that it appears that the purchaser is not presently ready to complete the contract. The plaintiffs issued a notice to complete to the purchaser on 3 October 2025. That notice is ambiguous because it purports to appoint 4.30pm on “Tuesday 17 October 2025” as the final time for settlement. Today is 17 October 2025 and it is a Friday. I was informed from the bar table that the purchaser is ready to complete, and that completion had been scheduled to occur on 16 October 2025. It is, of course, possible that the purchaser is not ready, willing and able to complete the contract. If that were the case, it is unlikely to be prejudiced by the maintenance of the caveats. Nevertheless, in weighing the balance of convenience, I take into account the possibility that maintenance of the caveats will have an adverse impact on an innocent third party.

27. Further, if the caveats are removed, and the purchaser fails to complete the contract, then the plaintiffs are likely to have a right to terminate the contract. They would then have an opportunity to take whatever steps they wished, consistent with their rights and obligations as a mortgagee in possession. That could include dealing with the defendant. The defendant would be placed in the position she would be in if the caveats were not removed. This means that if it is true that the purchaser is not ready to complete the purchase of the property, then the defendant will be likely to achieve the outcome she sought by lodging the caveats.

28. For all these reasons, the plaintiffs must succeed, and I propose to make orders in accordance with orders 4, 5 and 7 of the summons. The defendant did not oppose the proposed order for indemnity costs (which arose as a contractual right).

29. I make the following orders:

30. An order pursuant to s 74MA of the Real Property Act 1900 (NSW) that the Defendant forthwith withdraws its caveats:

(a) AV336598 registered on title of the land comprised in folio identifier 86/7632; and (b) AV336687 registered on title of the land comprised in folio identifier 87/7632, noting that both lands make up the property known and located at 276 – 278 Prince Charles Parade, Kurnell NSW 2231 (the Property).

2. An order pursuant to s 74MA(2)(b) of the Real Property Act 1900 (NSW) that the Defendant be restrained from:

(a) lodging any further caveat(s) or encumbrances on either titles of the Property; and (b) taking any further steps to interfere with, or attempt to delay, the sale of the Property by the First Plaintiff and the Second Plaintiff.

3. An order that the Defendant pays the Plaintiffs’ costs of the Proceedings on an indemnity basis.

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