Failure to Bring Money Into Court
54A large part of the Applicants' written submissions on the present application concerned for exactly what proposition Inglis v Commonwealth Trading Bank of Australia was authority. In Inglis, Walsh J at first instance referred, at 164, to a "general rule" :
"... in relation to applications to restrain the exercise by a mortgagee of powers given by a mortgage and in particular the exercise of a power of sale, that such an injunction will not be granted unless the amount of the mortgage debt, if this be not in dispute, be paid or unless, if the amount be disputed, the amount claimed by the mortgagee be paid into court."
55Walsh J explained the rationale at 164-165:
"If the debt has not been actually paid, the Court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due."
56On appeal in Inglis, Barwick CJ (with whom Menzies and Gibbs JJ agreed) referred at 169 to:
"... the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument. Failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed upon the exercise of the respondent mortgagee's rights under the mortgage."
57It is not altogether clear what is meant by saying that there is a " general rule" of the type adverted to in Inglis . Does it mean that, as a matter of law, it is impossible to obtain an injunction to restrain exercise of a power of sale without bringing the money into court - that the rule is " general" in the sense of universally applicable? Or does " general" have the force of " applying usually, but not always" ? Is the structure of the law in this area that a positive rule of law creates a prohibition on obtaining an injunction without bringing the money into court, but that that positive rule of law is itself subject, as a matter of law, to a number of exceptions? Or does " general rule" simply mean that, as an empirical generalisation, one can say that usually a court will not grant an injunction to restrain a power of sale without bringing the money into court. If "general rule" is meant as an empirical generalisation, that conclusion would arise because the court takes into account the balance of convenience in deciding whether to grant such an injunction, and in the vast majority of cases failure to bring the money into court will be a very powerful factor, maybe often an overwhelming factor, in deciding where the balance of convenience lies. The remark of Walsh J at 164-165, quoted at [ 55 ] above, seems to provide some support for the latter view, but it is not necessary to reach a concluded opinion about that.
58An exception to this "general rule" has long been recognised when there is an issue about whether the power of sale has arisen at all: Harvey v McWatters (1949) 49 SR (NSW) 173; Allfox Building Pty Ltd v Bank of Melbourne Ltd (1992) NSW Conv R ¶55-634. In Allfox Powell J at 59,627 recognised, obiter , another exception when the validity of the mortgage was in issue. Clarke v Japan Machines (Australia) Pty Ltd (No.2) [1984] 1 Qd R 421 ("Clarke First Instance") at 422-423 recognised another exception where the amount claimed by the mortgagee is obviously wrong. First instance decisions have also recognised some other exceptions where the plaintiff claims that he can redeem the mortgage within a fairly short time by carrying out a refinancing proposal that is reasonable on its face, or where the plaintiff has a demonstrable capacity to secure or at the least refinance the mortgage debt: Grose v St George Commercial Credit Union Ltd (1991) NSW Conv R ¶55-586 at 59,300-59,301 per Bryson J; Parist Holdings Pty Ltd v Perpetual Nominees Ltd [2006] NSWSC 599 at [16]-[21] per Hamilton J. I express no view about the correctness of those two last-mentioned decisions, beyond saying that I do not regard the decision of this Court in Notaras v Sly and Weigall [2005] NSWCA 275 at [133] as necessarily providing support for the last-mentioned exception. In Notaras at [133], Mason P identified four difficulties that stood in the way of a mortgagor succeeding in an action for negligence against its solicitors on the basis that the solicitors had not sought an interlocutory injunction to restrain exercise of a power of sale. Mason P noted that one of these difficulties was "the futility of approaching the court without a demonstrable capacity to tender or secure or at least re-finance the $4m undoubtedly due under the Mortgage" . That is not saying that the injunction would definitely have been obtained if the mortgagor had such a demonstrable capacity.
59However, in the present case there is no dispute about the validity of the mortgage; there has been an undoubted default; there is no dispute that the power of sale has become exercisable; there is no suggestion that the amount the Respondent claims is wrong; and the sole dispute is about the manner in which the Respondent has exercised the power of sale. It is not contended that the facts fall within any of the exceptions that previous first instance decisions have recognised.
60Mr Angyal referred us to cases where payment into court of the mortgage debt has not been required as a condition of an interlocutory injunction to restrain a mortgagee's exercise of a power of sale: Clarke First Instance per Williams AJ; Ellison v Alliance Acceptance Limited (1984) NSW Conv R ¶55-217 per McLelland J. Clarke First Instance concerned a mortgage of land, securing a guarantee of any loss the mortgagee might suffer under a lease of goods to a related company of the mortgagor. Payment in of the entire amount claimed by the mortgagee was not required in circumstances where the mortgagee had repossessed the goods, and thereby obtained an " equivalent safeguard" (at 423). Ellison was a case where an amply secured mortgagee of a rural property was restrained from proceeding with an auction when there was a " strong prospect" that the mortgagor would succeed in showing the advertising had been inadequate and therefore that the sale would be a breach of the mortgagee's duty. The mortgagee did not seek payment in of the entire mortgage debt, but McLelland J declined to order even payment in of arrears of interest, as any losses sustained by aborting the auction would be recoverable on eventual sale of the properties at a properly advertised auction. Both those cases are far removed from the present facts.
61Mr Angyal also referred to judicial remarks that the "general rule" should be reconsidered by an appellate court in Patterson v Mortgage Finance Australia [1990] NSWCA 144 per Kirby P (dissenting) and Handley JA, Australia and New Zealand Banking Group Ltd v Comer (Supreme Court of NSW, Young J, 8 March 1993, unreported) at p 4, and in extrajudicial writing by Bryson J, "Restraining Sales by Mortgagees and a Curial Myth" (1993-4) 11 Australian Bar Review 1, and Young J "A Mortgagor's Right to Approach the Court" (1993) Australian Property Law Journal 61 esp at 69.
62It well may be that it would be desirable for appellate re-examination of the "general rule" to determine its precise limits . However, this is not an appropriate case in which to do it. All that the primary judge said on this topic was:
"Third, the defendants are in no position to, and have not brought into court, the amount outstanding (Inglis v Commonwealth Trading Bank of Australia (1971) 126 CLR 161)."
63The primary judge's mention of inability to bring the money into court was as part of a list of factors that he regarded as going to the balance of convenience. His judgment does not show that he regarded the bringing of the money into court as a necessary precondition for the granting of an injunction restraining completion of the contracts. Indeed, he did not regard it as the most important of the factors that he took into account - at [11] he said:
"Foremost among the factors which I have taken into account is the enormous disparity between the amount owing to the plaintiff (exceeding $8 million) and the amount which, on any view, could be obtained from the sale of the properties."
There is no doubt that the failure of a mortgagor to bring at least some money into court in such an application is a matter that is relevant to the balance of convenience. Any argument about the precise status of the "general rule" concerns whether inability to bring any money into court is more than a relevant factor.
64Mr Angyal points out that Inglis was a case in which mortgagors sought to restrain the exercise of a power of sale until they had litigated some claims for breach of contract, defamation, fraud and conspiracy that they made against the mortgagee. The mortgagors contended that when they succeeded in that action they would be entitled to set off the amount of damages they recovered against the mortgage debt. The force of "actually paid" , in the passage I have quoted at [55] above from Walsh J's judgment at 164-165, is to contrast the situation where a mortgage debt is discharged by payment from the situation where it is discharged by set-off.
65Mr Angyal draws our attention to a passage in Walsh J's judgment at 167-168, where the judge says:
"Of course, any mortgagee is subject to the requirements of the law, including various equitable principles, in respect of the manner in which he or it exercises powers given by a mortgage deed. But at present I am not concerned with any such question as that. The problem before me is whether, in the circumstances and having regard to the nature of the action that has been brought and the claims made in it, the defendant should be prevented, in aid of the plaintiffs' claims, from exercising any rights at all under the mortgage instrument, until those claims have all been finally determined. In my opinion the principles on which the Court has always acted do not permit the Court to intervene because of the existence of those claims, and I am of the opinion that I should not grant the application."
The "plaintiffs' claims" in this passage refer to the claims for damages that they wished to set off.
66Mr Angyal submits that this passage shows that a case like the present, in which it was contended that a mortgagee had exercised a power of sale other than in good faith, was not within the ratio of Inglis. However, the remarks about the "general rule" would nonetheless have the status of seriously considered dicta (Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [134] and [158]). Nevertheless, even on the basis that the present case is not covered by the ratio decidendi of Inglis, this particular argument of Mr Angyal provides no reason to grant leave to appeal. As I have already said, the judge did no more than treat the failure to bring money into court as a relevant factor, and, regardless of Inglis, failure to bring money into court is a relevant factor on the balance of convenience.
67Mr Angyal also submitted that the cases that have recognised a requirement for a mortgagor to bring into court the whole of the money due or claimed have not been ones where the security is deficient. He submits that if the mortgagor of a deficient security is required to bring into court the whole sum claimed, as the price of preventing the sale of the mortgaged property, the mortgagee is being provided with access to more money than he would obtain by exercising the power of sale. Mr Angyal submits that requiring payment in of the whole amount secured by a deficient security is requiring that the mortgagee be provided with more (and on the facts of this case much more) than an " equivalent safeguard" .
68While this argument has some attraction, it does not provide a reason for granting leave to appeal in the present case. There was no contention in the court below that any lesser sum than the whole mortgage debt should be paid in. Mr Angyal correctly points out that the first mention of Inglis, or of a requirement to pay the mortgage debt into court, came in the written submissions in reply in the court below. However, there is no reason to believe that the Applicants could have paid in any lesser sum that would provide an " equivalent safeguard" , such as the purchase price obtained under the contracts for sale of the Properties plus an estimate of the interest likely to accrue during the time, assessed on a conservative basis, that determination of the litigation might take.
69Mr Angyal further submits that whatever the present status of the "general rule" might be in relation to exercise of a power of sale arising by contract or under the RPA, s 420A Corporations Act 2001 (Cth) imposes a higher standard of duty on a controller who exercises a power of sale than does the general law. He submits that breach of s 420A gives rise to a right of action under s 423 of the Corporations Act , that under s 423 the court "may take such action as it thinks fit" , and that s 1324 Corporations Act confers on the court a power to grant injunctions against a person who contravenes the Corporations Act . Section 1324(4) expressly confers a power to grant an interim injunction " where in the opinion of the court it is desirable to do so" . Mr Angyal submits that an injunction granted under such a statutory power is not subject to any requirement that might arise from Inglis for a payment into court. This argument was not relied on in the court below, but I will assume without deciding that that does not present an insuperable obstacle to it being raised on appeal.
70I would infer from the fact that the Applicants do not have any addition to their names such as "(Receivers and Managers Appointed)" that the agents who the Respondent appointed on 10 September 2010 were appointed under the powers in a RPA mortgage not under a charge over all the property of the Applicants. No consideration was given in argument to whether a receiver and manager appointed by the mortgagee of the land in a single development project is a " controller" within the meaning of s 420A (cf Prioris Pty Ltd v Inscorp Holdings Ltd (NSWSC, Young J, 4 February 1994, unreported); Artistic B uilders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd [2002] NSWSC 16; (2002) 10 BPR 19,565 at [124] (Campbell J); Lanepoint Enterprises Pty Ltd (recs and mgrs apptd), Re; Fraser v Australian Securities and Investments Commission (ASIC) [2007] FCAFC 85; (2007) 159 FCR 424 at [57] (Finkelstein J) . However I will also assume without deciding that the sale was effected by a " controller" .
71This is not the occasion for examining whether discretionary factors relevant to the grant of an injunction under s 1324 operate in precisely the same way as does the balance of convenience in the general law concerning interlocutory injunctions (cf ASIC v Mauer-Swisse Securities Ltd [2002] NSWSC 741 (2002) 42 ACSR 605 (Palmer J); ASIC v Triton Underwriting Insurance Agency Pty Ltd [2003] NSWSC 1145; (2003) 48 ACSR 249 (Barrett J) ; Tekinvest Pty Ltd v Lazarom [2004] NSWSC 940; (2004) 12 BPR 23,439 (Palmer J); ASIC v Mapstone [2006] NSWSC 993; (2006) 59 ACSR 214 (White J) ). In my view the possibility of a statutory basis for the injunction does not lead to the grant of leave to appeal. This is because whether money is paid into court will be a relevant consideration in deciding whether, in the exercise of discretion, it is appropriate to grant an interim injunction to restrain an alleged breach of s 420A. There is no inconsistency between recognising the rights of a mortgagee and the statutory purposes of the Corporations Act , so the reasons that I have given above as to why failure to pay into court is relevant under the general law to the balance of convenience will also apply to the exercise of discretion under s 1324(4). I am not persuaded that the judge treated the failure to make a payment in as being anything more than a relevant consideration.