Bayblu Holdings Pty Ltd v Capital Finance Australia Limited

Judgment 1TOBIAS JA: The judgment of Campbell JA reflects my reasons for the joining in the orders made by the Court in this matter on 25 February 2011. 2CAMPBELL JA:

Nature of the Case 3The First Applicant ("Bayblu") constructed eight beach houses at Blue Bay. It remains the registered proprietor of six of those properties ("the Properties"). They are six lots in a single strata plan. They were mortgaged to the Respondent. The Second Applicant ("JNW Investments") was a guarantor of that mortgage debt. 4The principal was due for repayment by 30 November 2008 but was not repaid. Interest payments ceased in about November 2009. On 5 November 2010 the Respondent commenced proceedings against the Applicants, and others ("the Debt Proceedings"), claiming $8,716,971 plus interest that would accrue after 28 October 2010. This was the amount secured by the mortgage over the Properties. 5On 16 September 2010 the Respondent appointed two men, at least one of whom is an official liquidator, as its agent to exercise all the powers of the Respondent under the mortgage. Those two men conducted the sale process concerning the Properties. 6On 18 November 2010 the Respondent, in exercise of its power of sale, entered contracts to sell the Properties. Each was in the form of the 2005 standard form contract, with some special conditions. 7Completion of each of those contracts was due to occur on 21 December 2010. On that day Bayblu and its director, Mr Nathaniel Whitehall, lodged a caveat against each of the Properties. That caveat lapsed on 17 January 2011, following the service of a lapsing notice, but its existence prevented completion of the contracts from going ahead on 21 December 2010. Settlement of the sales of the Properties was rescheduled to take place on 19 January 2011. 8On 14 January 2011 Bayblu commenced proceedings in the Equity Division against the Respondent ("the Bayblu Equity Proceedings"), seeking leave (under s 74O(2) Real Property Act 1900 ("RPA")) to lodge a further caveat against the title to the Properties, and an order that the Respondent be restrained from selling or otherwise dealing with the Properties. 9Before the return date of those proceedings Bayblu and JNW Investments each lodged a caveat against the title to each of the Properties. The caveat lodged by Bayblu was registered on each of the titles, while the caveat lodged by JNW Investments was noted on the folio of each of the Properties as an unregistered dealing. As a result of the lodgement of those caveats, the settlements scheduled for 19 January 2011 did not take place. 10On 20 January 2011 the Respondent began new proceedings in the Equity Division against the Applicants seeking, in substance, orders that those companies withdraw the caveats that they had lodged, and not lodge another caveat. The Applicants raised no issue in those proceedings challenging the satisfaction of the preconditions to exercise of the power of sale, such as service of appropriate notices. 11On 2 February 2011 Pembroke J made orders in those proceedings requiring the caveats to be withdrawn: Capital Finance Australia Ltd v Bayblu Holdings Pty Ltd [2011] NSWSC 24. 12The Applicants have sought leave to appeal against the orders of the primary judge. A sufficient reason why leave to appeal is required is that s 101(2)(m) of the Supreme Court Act 1970 enables an appeal only by leave from: "...a judgment or order of the Court on an application under section 74K, 74MA, or 74O of the Real Property Act 1900 ." 13An urgent hearing of that application was ordered. A stay of the orders has been in place since those orders were pronounced. The application for leave to appeal was set down on the basis that it is a concurrent hearing of the application for leave to appeal and, if leave is granted, of the appeal itself. 14At a hearing on 25 February 2011 the Court ordered: "The summons for leave to appeal filed 8 February 2011 is dismissed with costs." This document sets out my reasons for joining in that order.

Basis for Caveats 15The Respondent sold the Properties for prices that would yield total gross proceeds of $2.520 million plus GST. The Applicants contended that the sale was unduly rushed, the time of sale was not the most favourable for that type of property, the steps that the Respondent had taken to secure a proper price for the Properties were inadequate, and that the prices for which the Respondent had sold were well below the prices that could and should have been obtained. Bayblu had obtained professional valuations of the Properties in May 2010, which valued them in total at $5.225 million. A "kerbside assessment" in January 2011 valued them at $4.2 million. 16The interest that Bayblu claimed in its caveat was: "The interest claimed is as registered proprietor: (a) which has granted a mortgage to Capital Finance Australia Limited ("the Mortgagee") and; (b) where the Mortgagee has entered into contracts of sale of the property in bad faith in the purported exercise of the power of sale; and (c) where it has an equitable right to set aside the voidable contracts for sale." 17The interest that JNW Investments claimed in its caveat was in identical terms to that claimed by Bayblu, save only that the first line of the claim read: "The interest claimed is as Guarantor of the obligations of registered proprietor:" 18Consistently with the judgment of Needham J in Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870 at 875, the only action prohibited by the caveats was "any dealing with the property pursuant to, or as a consequence of, the contracts for sale dated on or about 18 [sic] November 2010, entered into by the mortgagee in possession."

The Judgment Below 19Section 74MA RPA enables any person who is or claims to be entitled to an estate or interest in the land described in a caveat to apply to the Supreme Court for an order that the caveat be withdrawn. 20The primary judge correctly proceeded on the basis that on an application for an order to remove a caveat it is not necessary for the court to make a final determination as to the interest claimed by the caveator, or a final determination as to the priority that the caveator may or may not have over competing interests. Rather, the court should enquire whether the caveator would have been granted an interlocutory injunction to protect the interest that the caveator claimed in the caveat. If no such interlocutory injunction would have been granted, the caveat should be ordered to be withdrawn: Martyn v Glennan [1979] 2 NSWLR 234 at 239; Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222; Gay v Gooden (1989) NSW ConvR ¶55-445. Under currently applied principles, an interlocutory injunction is granted if the court is satisfied that there is a serious question to be tried, and that the balance of convenience favours the granting of an interlocutory injunction: Murphy v Lush (1986) 65 ALR 651 at 652; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1 at 24. Those principles have not been challenged on the present application. 21The primary judge assumed that the Applicants "could establish an arguable factual basis for the alleged equitable interest claimed in the caveats" (at [9]) and proceeded on this basis. His Honour held that, even making that assumption, the balance of convenience did not favour the caveats being permitted to remain. Thus, the Applicants would not have obtained an interlocutory injunction to protect their claimed interest and so the Applicants should be ordered to remove the caveats. 22The primary judge referred to several matters as showing that the balance of convenience did not favour the grant of an interlocutory injunction to protect the interests claimed in the caveats. "Foremost" of them was that, even if the Applicants could ultimately establish that the Properties should have been sold for the values that the Applicants contended the Properties had, there would still be a shortfall of millions of dollars. The judge observed that in the Debt Proceedings the Applicants raised no substantive defence, save an allegation of entitlement to "a set-off for damages by reason of the entry by the Plaintiff into contracts of sale of the secured properties for a significant undervalue, thereby materially prejudicing the prospective Mortgagors' and Guarantors' interests" . The judge observed that the Applicants would still be entitled to litigate that set-off defence and the legal and factual basis that underpins it. 23The judge relied upon the uncontested evidence before him that the mortgages were in default, and a statement in Mr Whitehall's affidavit that if the sales proceeded at the contract prices, "neither my company nor I personally would be in a financial position to meet the shortfall with the consequence that I would be forced into bankruptcy" . Though Mr Whitehall was not a party to the proceedings, he was a guarantor of the debt. The judge adverted to the fact that Bayblu was a one-dollar company to which a controller had been appointed, and that JNW Investments was the subject of winding up proceedings by the Deputy Commissioner of Taxation. He noted that the "defendants were in no position to, and have not brought into court, the amount outstanding ( Inglis v Commonwealth Trading Bank of Australia (1971) 126 CLR 161)." 24The judge also observed that the Applicants were not "in a position to offer, and they have not offered, the usual undertaking as to damages". 25The case was heard below in an expedited fashion during the court vacation. The judge gave directions for the parties to exchange written submissions. In written submissions in chief, counsel for the Respondent submitted that the Applicants were "not in a position to support" an undertaking as to damages. The written submissions of the Applicants did not squarely contest that submission, but questioned whether the court would require an undertaking as to damages as (it was submitted) it was unlikely the Respondent would suffer loss, particularly if an expedited final hearing was granted. The Applicants' submissions went on to say that "... counsel for the defendants are instructed that, if the Court requires the undertaking, the defendants are in a position to offer security for the undertaking in the amount of approximately $1 million." The judge observed that that statement : "... is unsupported by any evidence, let alone any evidence that is satisfactory and convincing .... Even if such security is made available, it will count for little against the substantial shortfall that will inevitably result." 26Next, the judge took into account that the only practical monetary consequence of the breach of duty that the Respondent was claimed to have committed was that, if proved, it would reduce the shortfall that the Applicants owed. 27Further, his Honour took into account that if the caveats were maintained and the contracts terminated, the losses suffered by the Respondent would be exacerbated and the purchasers would be put to inconvenience and expense. The judge referred to condition 38 of each of the contracts for sale. It provided: 38.1 If any proceedings to set aside this contract or restrain completion of it are commenced in any court of competent jurisdiction or if any order is made setting aside this contract or restraining completion of it, the vendor may by written notice to the purchaser rescind this contract and the provisions of clause 19 will apply. The vendor's decision will be final and binding on the purchaser. 38.2 If the vendor as mortgagee exercising power of sale decides it is prevented from completing this contract by the completion date for any reason (and the vendor's decision will be final and binding on the purchaser provided the vendor in making its decision acts reasonably and in good faith), the vendor may by written notice to the purchaser rescind this contract and the provisions of clause 19 will apply. 38.3 Despite anything else contained in this contract, the purchaser agrees that if the vendor is restricted or prohibited through any means in giving title in accordance with this contract by the completion date, then the completion date may be extended (by the vendor giving written notice) to such period of time as the vendor may reasonably require in all of the circumstances to give title to the purchaser. However, if the vendor is not able to deliver title and effect completion within 4 months of the date of this contract, then either party may rescind this contract by notice in writing to the other and clause 19 will apply." 28Clause 19 included: "19.2 Normally , if a party exercises a right to rescind expressly given by this contract or any legislation - 19.2.1 the deposit and any other money paid by the purchaser under this contract must be refunded; 19.2.2 a party can claim for a reasonable adjustment if the purchaser has been in possession; 19.2.3 a party can claim for damages, costs or expenses arising out of a breach of this contract; and 19.2.4 a party will not otherwise be liable to pay the other party any damages, costs or expenses." 29The judge said that even if condition 38 gave a Respondent an entitlement to rescind, "it seems to me to be commercially desirable to avoid that consequence." In that connection, he mentioned again the defendant's complaint that the maximum amount of the proceeds of sale had not been achieved would be protected in an action for equitable compensation against the plaintiff. 30Finally, the judge said he did not regard it as important that the incidental effect of removal of the caveats would be to render nugatory the Bayblu Equity Proceedings. He took that view because: "... [t]hose proceedings only have a life to the extent that [Bayblu] is entitled to an interlocutory injunction to restrain the sale of the properties. I have concluded that the sales should be permitted to proceed."

Principles Applicable to this Application 31This is an application for leave to appeal from an interlocutory judgment which turned upon the exercise of the trial judge's discretion. In Klewer v Attorney-General in and for the State of New South Wales [2010] NSWCA 219 at [68] this Court (McColl JA, Campbell JA, Sackville AJA) said: "The High Court has cautioned that it is unwise to lay down rigid and exhaustive criteria for determining whether leave to appeal from an interlocutory order should be granted: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; 148 CLR 170, at 175, per Gibbs CJ, Murphy, Aickin, Wilson and Brennan JJ. Nonetheless, it is rarely appropriate to grant leave unless the decision at first instance is attended with sufficient doubt to warrant its reconsideration or substantial injustice would result if leave were refused: Niemann v Electronic Industries Ltd [1978] VR 431, at 438, per Murphy J." 32An appeal that challenges an exercise of discretion by the judge below can succeed only if one of the grounds identified in House v The King (1936) 55 CLR 499 is made out.

The Alleged Assumption 33The grounds of appeal proceed on the basis that the judge made a particular assumption, and made a particular finding. These were stated as: "A. The Trial Judge assumed that the appellant had an interest in the property: 1 As registered proprietor; 2 Which had granted a mortgage to the respondent; 3. Where the respondent had entered into contracts of sale of the property in bad faith in the purported exercise of the power of sale; and 4 Where the appellant had an equitable right to set aside the voidable contracts for sale. B. The Trial Judge found that the interest in the property claimed by the appellant was a caveatable interest." 34All grounds of appeal commence with the words "in the circumstances in paragraphs A and B ..." . 35The judgment does not support the contention that the judge made the assumption identified in paragraph A of the Notice of Appeal. Rather, the assumption his Honour made was more specific. At [4] the judge said that the Applicants: "... rely on the following alleged equitable interest to set aside what they describe as voidable contracts for sale. This interest is said to arise by reason of the following facts and circumstances: (1) By contracts dated on or about 19 November 2010, the Mortgagee purported to sell the entirety of the property for approximately $2,510,000.00 ("the sale price"). (2) The market value of the property at the date of the purported sale was substantially in excess of the sale price. (3) The Mortgagee failed; (a) to submit the property to auction; (b) to complete the proposed auction campaign; (c) to properly advertise and market the sale of the property; (d) to accord due and proper consideration to offers to purchase the property; (e) to accord due and proper consideration to refinancing proposals which would have achieved prices substantial in excess of the sale price." 36The list of facts and circumstances was a verbatim reproduction of the facts and circumstances identified in the caveats as giving rise to the claimed interest. 37At [9], the judge said that he was proceeding on the basis that the Applicants "could establish an arguable factual basis for the alleged equitable interest claimed in the caveats." His Honour announced the making of that assumption in the course of refusing, shortly before he delivered judgment, an application by the counsel for the Applicants to cross-examine witnesses, and to issue late subpoenas "designed to bolster the defendants' factual case" (at [9]). The correctness of his Honour proceeding on the basis of that assumption was not challenged in the court below. His Honour further clarified the assumption he was making at [21]: "I should observe that the facts and circumstances on the basis of which the defendants' interest is said to arise are limited to those set out in the caveats. I have set them out at paragraph [4] above. I have made no factual finding as to those particular matters. I have assumed for the purposes of the argument that they can be sufficiently proved and that they give rise to a serious issue." 38The fact that the judge did not make the assumption identified in para A of the Notice of Appeal is a sufficient reason why those grounds of appeal would not succeed. However, as the grounds of appeal could be reformulated so as not to be dependent on the judge having made the assumption in paragraph A, I should also address some other arguments that were put, by reference to the topics in specific grounds of appeal.

Grounds 1-5 39Mr Angyal SC, counsel for the Applicants, submits that the judge took into account that the proceeds of sale of the Properties would be insufficient to repay the mortgage in full, on any view of the evidence. Mr Angyal further submits that in doing so, the judge was taking into account a consideration that was "wholly irrelevant" . 40I do not agree. When a power of sale has become exercisable, and the sale of the mortgaged property will not yield sufficient funds to enable the mortgagee to be repaid in full, and (as is the case here) there is no suggestion that the mortgagee has other security or the benefit of a personal covenant that will enable payment in full, delay in exercising the power of sale will prejudice the mortgagee by preventing the mortgagee from regaining promptly such of its capital as it can. Delay in regaining its capital will inevitably mean that it loses the opportunity to have the capital available for its own purposes, or to obtain a return through investing the capital elsewhere. That factor is not present if the mortgagee has a practical assurance of being able, in time, to be paid its money in full. Thus, the inevitability of a shortfall on sale of the Properties is a relevant factor in assessing the balance of convenience. 41The importance of there being an inevitable shortfall must be assessed in light of the particular facts proved. One relevant factor is the commercial importance of the institution of lending money on mortgage, and of the courts maintaining confidence in that institution through mortgagees being in general able to enforce their legal rights. Another is that, because there has been a default, the mortgagor has breached its contract. These factors are not necessarily decisive. Even when there is an undoubted default, and a certain shortfall if a particular sale (or even a sale that achieved market value) goes ahead, there might be situations where the court could decide that the balance of convenience favoured the granting of an injunction. To give an extreme example, an injunction might sometimes be granted if a mortgagee was about to sell the property by private treaty to his wife for a price that was quite clearly a fraction of its true value. 42There are occasions where land which is subject to a mortgage has been sold for a price which it is clear will be completely payable to a first mortgagee. On some such occasions, the court has held that someone with an interest in the land to which that mortgage has priority is usually not entitled to maintain a caveat which will prevent completion of that sale: Wildschut v Borg Warner Acceptance Corporation (Aust) Limited (1984) 4 BPR 9453 at 9455 (Needham J); Dunecar Pty Ltd (in liq) v Colbron [2001] NSWSC 1181; (2001) 40 ACSR 342 at [18]-[19] (Young CJ in Eq). In Wildschut Needham J evidently regarded such a situation as one in which the caveator " seeks to maintain his caveat solely for the purpose of placing pressure upon the registered proprietor to give him something to which [he] is not entitled " . This usual result is a consequence of the test for whether a caveat should be ordered to be removed being whether, at the time the court comes to consider whether the caveat should be removed, an interlocutory injunction would be granted to protect the interest claimed in the caveat ([20] above). In the situation where the caveator would receive no money from maintaining of the caveat and establishing that he had the interest claimed in it, it is usually not possible for the caveator to show that the balance of convenience favours the maintenance of the caveat. That is a matter of evaluation of the facts of the instant case, not that there is a principle of law whereby a caveat can never be maintained in such a situation. My remarks in 70 Pitt Street Sydney v McGurk [2004] NSWSC 413 at [15] and Marinkovic v Pat McGrath Engineering Pty Ltd [2004] NSWSC 571; (2004) 12 BPR 22,161 at [55] should not be read as stating propositions of law, rather than the usual result of the application of principles for the granting of interlocutory injunctions to applications to restrain an exercise of a power of sale. In some situations a non-monetary interest of a subsequent interest-holder in a property, such as if the property is his or her home, could enter into assessment of the balance of convenience, but that is not the situation in this case (cf Rofiza v Gangley [2002] NSWSC 986 at [35]-[36]). 43Grounds 1-5 assert that the judge misdirected himself by taking various factors into account, namely:

• that the amount owed to the Respondent exceeded the amount that could be obtained from the sale of the Properties;
• the financial position of the Applicants;
• that the Applicants had not brought into court the amount owed to the Respondent;
• that the Applicants had not offered the usual undertaking as to damages and were not in a position to do so;
• that there was no possibility that there would be surplus monies from the sale of the Properties that should be paid to the Applicants. 44Each of these factors is a matter that can bear upon the balance of convenience. I have already dealt with the relevance of it not being possible to recover the mortgage debt by sale of the mortgaged property. Collectively, the factors show a situation where the Respondent would be faced with a significant loss after taking into account all possible sources from which the Respondent might obtain repayment of the mortgage debt, even if the Applicants' contention that the Respondent had misconducted the sale were correct. The fact that money is not brought into court means that there is no item of property other than the Properties from which the Respondent could be confident of recovering the shortfall. The financial position of the Applicants means that a judgment for debt, for the amount of the shortfall, would not yield the face value of that judgment. That the Applicants did not even offer an undertaking that they would make good any losses that the Respondent sustained in consequence of the caveats remaining on foot would show a lack of preparedness of the Applicants to do equity. It would further demonstrate an unwillingness to place at risk such assets as they had (or more relevantly in the present case in light of the " perilous financial position " of the Applicants, could obtain access to from other people), as the price of keeping the caveats on foot. The fact there was no possibility that there would be surplus moneys from the sale of the Properties that should be paid to the Applicants meant that the effective value of the legal title to the Properties was zero. Thus maintaining the caveats would not protect a proprietary right of any value. 45Since these were all matters capable of bearing on the balance of convenience, the judge was justified in taking them into account. 46The Applicants submit that their caveatable interest, if made out, would produce a substantial benefit for them, namely a reduction of their debt by a very large amount of money. Even if it were true that it would be beneficial to the Applicants to have it established that their debt was smaller than the Respondent claimed, the task of the judge was still to balance the detriment that the Applicants would suffer if:
  • the caveats were ordered to be removed; and
  • at a final hearing the Applicants were able to make good their claims, against the detriments that the Respondent and any relevant third parties would suffer if:
  • the caveats remained; and
  • at a final hearing it were to eventuate that the Applicants did not make out their case. 47In carrying out the balancing exercise, the fact that, on any view, the proceeds of sale of the Properties would not be enough to repay the mortgage in full is relevant. There seems to be no realistic prospect that the Applicants would be able to obtain any benefit from their claim that the Respondent has misused the powers of sale without resorting to litigation, and it will be possible for that question to be litigated even if the Applicants are no longer the registered proprietors of the Properties. Indeed, the ground for such litigation has already been laid, by the Applicants asserting their entitlement to a set-off in the Debt Proceedings. Even if it were correct that Mr Whitehall would become bankrupt even if he succeeds in establishing the set-off in the Debt Proceedings (and the evidence in the present case does not address Mr Whitehall's assets and liabilities in enough detail to know whether that is a realistic possibility), there is no basis in the evidence for believing he might become bankrupt other than through service of a bankruptcy notice. Mr Whitehall could become bankrupt at the suit of the Respondent only once the Respondent had a judgment debt against him, which on the present evidence would not happen until after the set-off had been litigated in the Debt Proceedings.

No Opportunity to Offer Undertakings as to Damages? 48Separately to their submission that failure to offer an undertaking as to damages was irrelevant, the Applicants submit that the judge was mistaken in taking that factor into account because as a matter of fact they had no opportunity to offer the undertaking as to damages. I do not accept that that submission adequately captures the way the judge dealt with the availability of an undertaking as to damages. 49At a hearing on 28 January 2011 the Applicants did not offer an undertaking as to damages, and the judge made no specific enquiry whether the Applicants were prepared to offer such an undertaking. However, on that occasion, the judge directed written submissions. Both parties addressed the question of an undertaking as to damages in their respective written submissions. After the written submissions that I have mentioned at [25] above the Respondent provided written submissions in reply. In these submissions, the Respondent said that the offer of the defendants to provide security was unsatisfactory because: "(i) the amount is stated in vague terms; (ii) there is no evidence to demonstrate that the Defendants (or either of them) are in a position to provide any security for that sum which ought be required in the circumstances of this case: (iii) The Defendants are indebted to the Plaintiff for amounts exceeding $8.868 million. Even if the sale of the Properties proceeded at the sale prices, there will be a shortfall exceeding $6.348 million." 50When the matter came back before the primary judge for judgment, the applicants sought to tender some additional evidence, but that evidence did not include evidence that met the point in (ii) just quoted. 51While it is true that the judge had never specifically said to counsel for the Applicants "do you offer the usual undertaking as to damages?" , the question of what sort of an undertaking as to damages could be offered was well and truly canvassed in the written submissions. A fair reading of the submissions is that the Applicants were ready to give an undertaking as to damages, concerning which they were willing to offer security of the type identified in the Applicants' written submissions. 52The judge dealt specifically with the Applicants' offer relating to the undertaking. In these circumstances it was strictly accurate, but not apt to convey the full situation, for the judge to say that the Applicants " have not offered " the usual undertaking as to damages. However the totality of the judge's discussion of the undertaking as to damages leaves one in no doubt that he understood the Applicants' indication of preparedness to offer an undertaking, and that his real concern related to its adequacy. 53The judge was well justified in regarding the failure to identify any specific property over which security was offered, and the imprecise monetary limit placed on that offer of security, as matters that made the offer inadequate. An undertaking as to damages, like any undertaking to the court, needs to be expressed with sufficient certainty to be enforceable if the undertaking is not complied with. The offer that was made did not meet that standard. Apart from that, the limit of the security offered was "approximately $1 million". The judge was justified in observing that that amount would not be sufficient to make good the shortfall that the Respondent would sustain. Of course, the undertaking as to damages is designed to protect the person injuncted from the consequences of the granting the injunction (not to provide a source for recovery of his entire debt). Even so, it was still within the judge's discretion to regard the large shortfall, and the unlikelihood of the Respondent stemming its losses from any source other than sale of the Properties, as outweighing the significance of the offer of security of the order of $1 million.

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.

Ground 6 72Ground 6 contends that the judge misdirected himself in taking into account that the losses of the Respondent would be exacerbated and that the purchasers would be put to inconvenience and expense if the injunction were granted. 73In support of this ground the Applicants contend that there was no evidence that maintenance of the caveats would lead to termination of the contracts. 74The judge did not decide that maintenance of the caveats would lead to termination of the contracts. Indeed, it would have been inappropriate, in the notional interlocutory injunction hearing he was conducting, to make any such finding. Rather, the judge recognised that there was a risk that the contracts might be terminated, and that in that event the losses of the Respondent would be exacerbated and the purchasers put to inconvenience and expense. 75The judge was right to recognise that risk. The Appellants had a right to rescind under cl 38.1 by reason of the commencement of the Bayblu Equity Proceedings, and might also have a right to rescind under cl 38.2. The purchasers would not have a right to rescind by reason of settlement being delayed by the presence of the caveats on the title until four months after the date of the contract, namely 18 March 2011. It was open to the judge to take the view that the purchasers may well prefer to terminate the contracts, and recover their deposits, rather than have their deposits outstanding indefinitely while litigation was conducted, possibly for years, by parties over whom they had no control. If the contracts were terminated, the purchasers would have at the least wasted the time and effort involved in entering the contracts and readying themselves (through two aborted settlements) to perform them, and wasted the legal expenses involved in so doing. 76It is quite clear that in an application for an interlocutory injunction, the effect on third parties of granting, or refusing, the injunction can be taken into account: Patrick Stevedores Operations No 2 Pty Limited v Maritime Union of Australia (No 3) at 41-43; Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404 at 419 (Qld Full Court) . The judge made no error in taking into account the risk that the purchasers would be put to inconvenience and expense. 77It was well within the judge's discretion to take into account the possibility that, if the contracts were terminated, the losses of the Respondent would be exacerbated by interest continuing to accrue on the mortgage debt. Though there was some discussion in argument of the appeal of whether cl 19 enabled the purchasers to sue the Respondent for damages for loss of bargain if the contract was rescinded pursuant to an express contractual right to do so, that matter did not enter into the judge's exercise of discretion.

Ground 7 78Ground 7 contends that the judge misdirected himself in taking into account "that removal of caveats would render nugatory the appellants proceeding to restrain completion of the contracts of sale of the properties." 79This ground of appeal, as framed, must fail - the judge at [16] held that "it matters not that the incidental effect of the removal of the caveats will be to render nugatory" the Bayblu proceedings. In other words, his Honour held that rendering those proceedings nugatory was not a relevant matter. 80However, the argument put concerning this ground was different. It was to the effect that the reasoning of the judge was circular - that he assumed that completion of the contracts should not be restrained, and then treated that as a factor on the balance of convenience. 81I do not agree that this is the way in which the judge proceeded. Rather, he recognised that the practical value of the claim for a final injunction in the Bayblu Equity Proceedings was dependent on whether an interlocutory injunction to restrain the sales could be obtained. That was the precise question on which removal of the caveats depended. Thus, rendering the Bayblu Equity proceedings of no use was not a separate consideration that required to be taken into account. There is no error in that reasoning. 82MACFARLAN JA: The judgment of Campbell JA reflects my reasons for joining in the dismissal of the summons for leave to appeal in this matter.

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