AT Air Group Pty Limited v Dieter Siewert

Judgment (ex tempore) 1HIS HONOUR: In the substantive proceedings, the third plaintiff Aquatic Air Pty Ltd claims relief in the nature of orders setting aside a security agreement and associated documentation entered into between it, the first defendant Dieter Siewert, the second defendant Lieselotte Siewert, the third defendant Heron Airlines Travel Pty Ltd, the fourth defendant Wingaway Air Pty Ltd and the fifth defendant AT Air Group Pty Ltd on or about 25 November 2011, securing the balance purchase price due to the Siewerts as vendors by AT Air group as purchaser under a share sale agreement dated 22 July 2011. In those proceedings, which were commenced in or about May 2012, Aquatic contents that the security documentation was procured by alleged misrepresentations said to have been made by or on behalf of the defendants. 2The security documentation includes a call option, which the Siewerts purported to exercise in February 2012, pursuant to which they were entitled to acquire a property (which was also the subject of the security agreement) at 2/13B Pearl Bay Avenue, Mosman. 3On 25 June 2012, following interlocutory proceedings between the parties, a consensual interlocutory regime was established by orders of that date, relevantly as follows: Upon the undertakings to the Court by the plaintiffs set out below and given by their counsel, the Court orders that: 1. Caveat number AG 914346 is extended until further order. 2. The defendants are restrained from transferring the property known as 2/13B Pearl Bay Avenue, Mosman, being Lot 2 in Strata Plan 55795 ("the property"), where 'transfer' means the act set out in order 1(a) and (b) made on 30 May 2012. UNDERTAKINGS BY THE PLAINTIFFS 3. The usual undertaking as to damages. 4. The plaintiffs undertake to pay all outgoings and not default on any liability which would cause a breach of any agreement in relation to the property, including, but not limited to, the National Australia Bank mortgage, payment of council rates, water rates, strata fees, any such payments made being without prejudice to any rights the plaintiffs may have against the first and second defendants and as an interim measure only. 5. The plaintiffs by their solicitors will, upon request from the defendant's solicitor, provide any and all information relating to the liabilities in order 4 above, including confirmation that payment has been made. 6. The plaintiffs undertake not to transfer or deal with the property, including entry in any residential tenancy agreement or use it or allow the property to be used as security and will not encumber or draw on any present encumbrance or security in relation to the property in any way. 7. Aquatic Air undertake to remain in possession of the property and keep it in good maintenance and repair. 4There were other undertakings and provisions, but they are not relevant for present purposes. 5Orders 1A and 1B of 30 May 2012 referred to in paragraph 2 of the above order were in the following terms: (A) Exercising any rights consequent upon the service upon the third defendant of notice of exercise of option signed by the first and second defendants and dated 21 February 2012. (B) Transferring, encumbering or creating an interest in the land known as 2/13B Pearl Bay Avenue Mosman being all that land in folio identifier 2/S55795. 6The reference to the notice of exercise of option dated 21 February 2012 was to the exercise of the call option to which I have referred. 7Since June 2012, the proceedings have been case managed and proceeded, if slowly, towards a final hearing. From time to time both parties have been in default of directions to file their evidence. The position has now been reached that, subject to one or two relatively minor matters, the evidence is now practically complete and it may be anticipated that the matter would be allocated a hearing date either late this year or early next year. Having been engaged in the case management of the proceedings up to this point, I do not think it is either necessary or possible to attribute blame for the time that has been taken exclusively or even predominantly to one party rather than the other. 8Until December 2013, the plaintiffs, in conformity with the undertaking contained in paragraph 4 of the order of 25 June 2012, appear to have paid all outgoings and not defaulted on any liability of the type described in that undertaking. However, on 14 April 2014, the National Australia Bank which is the first mortgagee of the property, issued and served on the plaintiff a notice of default pursuant to the (NSW) Real Property Act 1900, s 57(2)(b) identifying a default in respect of $55,157 said to be due and owing to it under its mortgage, and requiring that default to be remedied within 31 days. It appears that that default was not remedied, as a result of which the total of moneys secured, said to amount to about $1,855,157, are now claimed by the National Australia Bank to be immediately due and payable. 9It is not entirely clear, from Mr Sellers' evidence, whether he says that he did not receive the first notice because of a change of address; but in any event, by the end of June, he was aware of the alleged default and then took some steps to contact the bank to endeavour to make arrangements in respect of it. 10Although the evidence is, to say the least, very slight on the matter, it seems that the default arose from the debiting to the loan account on 9 December 2013 of $44,605.42 which Mr Seller seems to say was moneys paid by the National Australia Bank to the Office of State Revenue in respect of land tax, although it is shown on the extract of the bank account statement as "refer document V", whatever that may mean. Mr Seller was, it seems, unaware of this until the service of the notices, and the default was in that way inadvertent on his part. 11In any event, on 25 July 2014 the National Australia Bank instituted proceedings in the Common Law Division for possession of the property, naming Aquatic as first defendant and Mr Seller as second defendant. The material presently before the Court, which includes only the first page of the statement of claim, does not indicate beyond that what relief is claimed, but it is clear from the notice to occupier that at least possession of the property is claimed. So far as the evidence goes, it appears reasonably clear that the National Australia Bank has a firm intention of proceeding to recover possession of and sell the subject property. 12By notice of motion filed on 18 July 2014, Mr and Mrs Siewert seek to have the injunction restraining them from transferring the property discharged, so that they are at liberty to exercise their rights under the security documentation. The balance of their motion seeks consequential orders in respect of the costs of the original motion for interlocutory relief that resulted in the consensual arrangements to which I have referred, and of the present motion. 13By notice of motion filed on 28 July 2014, the Siewerts seek that the orders of 25 June 2012 be vacated, save for order 2 and undertaking 3, and directions that they list the property for sale with an agent with a view to an auction sale by the end of October, and the payment of the net proceeds (after discharge of the mortgage to the National Australia Bank) into an interest bearing deposit to be held in trust by their solicitor, pending the outcome of the proceedings. 14There was controversy between the parties as to the correct approach to the present application, and in particular as to whether it was one in which the injunction ought to be set aside - effectively, ex debito justitiae - having regard to the failure of a condition upon which it was originally granted; or whether the proper approach was to vary the injunction only if a change of circumstances were established, in the sense described in Adam P Brown Male Fashion Pty Ltd v Philip Morris Inc (1981) 148 CLR 570. 15As Mr Dean for the plaintiff submitted, this is not a case in which a material matter was not disclosed at the time when the injunction was sought, or some basis upon which the injunction was granted was shown not to exist or to be falsified as at the time when it was granted. On the other hand, where a condition on which an injunction has been granted subsequently fails, that of itself is a sufficient change of circumstances to warrant reopening the matter. 16Thus while this is not a case in which the injunction must be set aside ex debito justitiae, it is one in which the subsequent failure of a condition on which it was granted is plainly a sufficient change of circumstance to warrant reconsideration of the matter. 17I think it is inherent in the consent orders of 25 June 2012 that it was accepted then that the plaintiffs had a sufficiently arguable case for final relief to surmount the hurdle necessary to obtain an interlocutory injunction, and nothing has been raised on the present application to suggest that that aspect requires reconsideration. The question then really boils down to what is the balance of convenience now. This is affected by the intervention of the bank and the threat of a mortgagee sale by it. 18As it seems to me, the reality of the situation is that both parties are faced with a situation in which, unless one of them is able to bring about a sale before the bank does, the property will be sold at a mortgagee sale by the bank. It must be in the interests of both parties that the equity in the property be optimised and preserved. The defendant/applicants offer no real proposal as to how this might be done, save that they wish to be in a position to consider what they will do and whether they will exercise their rights. They say that they have no present intention of selling the property. But if the injunction is dissolved, and the defendants do not sell the property, then the bank will simply proceed, as it seems to me, to a mortgagee sale, to the detriment of all parties. 19As presently advised, it does not seem to me that permitting the defendants to exercise their rights by dissolving the injunction, would achieve any superior result to a sale by the mortgagee bank, because the defendants have not advanced any proposal for sale, and have no present intention of doing so. On the other hand, the plaintiff wishes in the interim to endeavour to sell the property, other than pursuant to a mortgagee sale, and there is some prospect that this would enhance the return, for both parties' benefit, and avoid incurring the costs that would otherwise be payable to the mortgagee. Any such sale would have to be upon terms that the net proceeds after discharge of the mortgage and costs of sale, advertising expenses and agent's commission be paid into Court or into a trust account operated by the solicitors for both parties pending the outcome of the proceedings. 20The balance of convenience therefore seems to me to favour establishing a regime under which the third plaintiff is able to sell the property upon the terms I have indicated. 21For those reasons, I am not minded to discharge the injunctions of 25 June 2012. I do not see on the other hand why the third plaintiff should be relieved of their undertaking to pay outgoings etc, pending any sale of the property, so long as they wish to maintain that restraint on the defendants. 22Accordingly, I do not see why the orders should be discharged as sought by the plaintiffs, any more than they should as by the defendants. 23The third plaintiff's ability to sell the property, is impeded by the effect of the defendants' caveat. In that respect, the appropriate course is to order removal of the caveat upon the completion of any sale by the bank or by the plaintiff, upon condition that the net proceeds be dealt with in the manner that I have indicated. 24The court therefore orders that: (1)The defendants withdraw caveat AG571747 in respect of folio identifier 2/SP55795 upon completion of the sale of that property by the National Australia Bank, or by the third plaintiff, provided that upon handing over the withdrawal of caveat the net proceeds of sale after payment of the amounts required to discharge the mortgage to the National Australia Bank, pay the agent's commission and selling expenses and costs of sale and any necessary usual conveyancing adjustments, be paid into Court to the credit of these proceedings, or into a controlled moneys account in the name of the solicitor for the plaintiffs and the solicitor for the defendants jointly, to abide the outcome of these proceedings. (2)The defendants' notice of motion filed on 18 July 2014 be dismissed. (3)The third plaintiff's motion filed on 28 July 2014 be otherwise dismissed. (4)There be no order as to costs, to the intent that each party bear its own costs of those motions. (5)The plaintiffs be relieved from the undertaking contained in paragraph 6 of the orders of 25 June 2012, but only to the extent that they are at liberty to list the property for sale and sell it by public auction. (6)The plaintiffs are released from undertakings contained in paragraphs 7 and 8 of the orders of 25 June 2012, to the extent that those undertakings would prevent them from surrendering possession to a party entitled to possession under a judgment or order for possession. (7)With effect from the completion of the sale of the property, order 2 of 25 June 2012 be discharged, and the third plaintiff be released from the undertakings contained in paragraphs 4, 5, 6, 7 and 8 of the orders of 25 June 2012.