4 The application came before me at about 3pm yesterday, 7 September 2005, when the evidence was read and submissions heard until about 5.30pm, when I reserved judgment overnight.
5 Mr Cox, who presented his client's case with commendable succinctness and clarity, advanced three reasons why it was suggested the mortgagee should be restrained from proceeding with the sale. In short, they were, first, that the power of sale had not become exercisable due to non-service of a s 57(2)(b) notice; secondly, that the mortgagee was estopped - by its conduct and/or by representations said to have been made to a director of E&P, from exercising its power of sale, in circumstances where E&P had procured, albeit at the very last minute, an offer of refinance; and thirdly, that it was unconscionable, within the meaning of Trade Practices Act 1974 (Cth), s 51AB, for the mortgagee to exercise its power of sale, or it would be misleading and deceptive conduct within the meaning of Trade Practices Act, s 52 for it to do so.
6 Each of those three grounds was said to raise a serious question to be tried for the purposes of granting interlocutory relief.
7 On an application such as the present for an interim injunction, the question is whether the plaintiff has established a sufficiently seriously arguable case for final relief to justify the grant of interlocutory relief having regard to the balance of convenience.
8 I so state the test to emphasise three matters: first, that the plaintiff bears the onus of making out a case for interlocutory relief; secondly, that before one comes to the balance of convenience, there must be a serious question to be tried; and thirdly, that the strength of the serious question to be tried may be relevant to what is required to tip the balance of convenience one way or the other.
9 I turn, then, to the three grounds advanced for suggesting that there was a seriously arguable case for final relief. It is convenient to deal first with the second of those grounds, namely, estoppel. For this purpose, I proceed generally on the basis that it may well be that Mr Freeman's evidence (for E&P) as to what transpired between him and Mr Pepper (of the mortgagee) in the period of weeks preceding today would be accepted, and thus that it may well be accepted at trial that Mr Pepper said things to the effect to which Mr Freeman deposes - although, in doing so, I must bear in mind the terms of the email from Mr Pepper to Mr Freeman of 16 June 2005, which makes reasonably clear that Mr Pepper was proposing to proceed to market and sell the property in the absence of documentary proof that a refinance was imminent.
10 Nonetheless, proceeding on the basis that Mr Freeman's version might well be accepted, I do not find in his evidence any sufficiently distinct representation [as to which, see Legione v Hateley (1983) 152 CLR 406, 436-437 (Mason and Deane JJ); Woodhouse A C Israel Cocoa Limited SA v Nigerian Produce Manufacturing Co Limited [1971] 2 QB 23, 60 (Lord Denning MR); Australian Crime Commission v Gray [2003] NSWCA 318, [184] (Ipp JA; Mason P and Tobias JA agreeing on this point); Low v Bouverie [1891] 3 Ch 82, 106 (Bowen LJ), 113 (Kay LJ); Flinn v Flinn [1999] 3 VR 712, 738 (Booking JA)] to found an equitable estoppel. The conversations to which Mr Freeman deposes do not include any clear representation by Mr Pepper that he would definitely not proceed with a sale in the event of an unconditional offer of refinance being produced.
11 Moreover, even if there were such a representation, the last minute offer of refinance which was produced at 16.09 on 7 September, is an offer to refinance with an advance of only $3 million, when the amount due to the mortgagee currently is $3.165 million, and the evidence does not explain how such a refinance could proceed when the title to Charmhaven remains encumbered by a second mortgage to Holilon Pty Ltd, a third mortgage to Credit Corp Finance Pty Ltd, and then by a caveat by Business Acquisitions Australia Pty Ltd.
12 I do not overlook that Mr Cox has informed the Court that at least some of those subsequent mortgagees are associated with E&P and are owed relatively small amounts, but even allowing for that, the evidence of an approved advance of $3 million is insufficient, against a debt of $3.165 million and those additional encumbrances, to persuade me that the offer of refinance would enable the discharge of the first mortgage in the short term nor, accordingly, that it is an "unconditional" offer of refinance sufficient to meet the terms of any such representation as Mr Pepper is alleged, at the highest, to have made.
13 Accordingly, I am not satisfied that there is a seriously arguable case for final relief based on estoppel arising from conduct or representations. For substantially the same reasons, I am not satisfied that the conduct in which Mr Pepper is alleged to have engaged is sufficiently arguably misleading and deceptive, contrary to Trade Practices Act, s 52, nor unconscionable within the meaning of Trade Practices Act, s 51AB. I do not overlook that unconscionable conduct within Trade Practices Act, s 51AB may, involve a wider concept than general law unconscionability, but, allowing for that, the evidence establishes no more than that Mr Pepper held out a reasonable hope that, if an unconditional offer of refinance were forthcoming, he might well persuade the mortgagees not to proceed with a mortgagee sale. As I have said, the offer that was forthcoming is not, in my view, sufficiently unconditional that proceeding with a sale in the circumstances would falsify any such representation or expectation.
14 Accordingly, that leaves for consideration the question of the sufficiency of service of the s 57(2)(b) notice. On that issue, the mortgagees rely on an affidavit of John Wooldridge, a licensed commercial subagent, sworn on 4 May 2005 - that is to say, long before the current dispute as to service arose - in which he deposes to service of the s 57(2)(b) notice and an accompanying letter from the mortgagees' solicitor, Aitken McLachlan & Thorpe, dated 28 April 2005, on the registered office of E&P, at Level 3, 383 to 385 Pacific Highway, Artarmon. Significantly, Mr Wooldridge deposes to service on one Lyndall Richards, a female person, apparently over the age of sixteen years and "apparently employed" at that address.
15 For E&P, Mr Freeman says that he had never seen the s 57(2)(b) notice before 5 September 2005, when the solicitors then acting for him, Koffels, received from Aitken McLachlan & Thorpe a fax enclosing a copy of Mr Wooldridge's affidavit. He says that yesterday, 7 September 2005, he spoke to Lyndall Richards, who is currently travelling in Europe, and asked her: "Back in April, DJ Capital apparently served a s 57(2)(b) notice on us for Arizona Road, do you remember getting it?", to which Ms Richards is said to have replied: "No way, definitely not. I would remember".
16 Mr Freeman also says that there are standard practices in his company's office for dealing with such matters and that anything of a legal nature, including any letter from a lawyer, is forwarded immediately to Koffels and a copy given to him.
17 But he also acknowledges that, in April 2005, Lyndall Richards did work for his office and was on reception duties at that time. He adds that Lyndall Richards was well known to DJ Capital, as she had frequent communications with them. But the affidavit of service is not sworn by an officer or employee of DJ Capital; it is sworn by a process server who, I infer from the form of the affidavit and from the accompanying letter on the letterhead of Aitken McLachlan & Thorpe, was instructed by Aitken McLachlan & Thorpe, and not directly by DJ Capital. In those circumstances, it would require something close to a conspiracy to give false evidence for the reference to Lyndall Richards to appear in paragraph 1 of the affidavit of service, if it was derived from information already known to DJ Capital, rather than from information gained by Mr Wooldridge at the time of service. It has to be said that, prima facie, such a conspiracy theory seems an unlikely explanation for the appearance of the name of Lyndall Richards as the recipient of service in Mr Wooldridge's affidavit.
18 On an application of this type, it is not necessary for an applicant for interlocutory relief to persuade the Court that it is more probable than not that the applicant's version would be accepted. There is sufficient in the evidence of Mr Freeman to raise an arguable case for final relief that service of the s 57(2)(b) notice was not effected. However, in the light of Mr Wooldridge's affidavit and the considerations to which I have referred, it cannot be said that it is a strong case, to the extent that the strength of a seriously arguable case weighs in the balance of convenience.
19 Accordingly, while I conclude that there is a sufficiently arguable case for final relief to cause me to consider the balance of convenience, I observe that it is not, prima facie, a strong one.
20 I turn then to the balance of convenience. Mr Cox has argued that this is a case in which the mortgagor would not be required to offer to redeem by paying into court the total amount due under the mortgage, because it is one in which it is contended that the power of sale has never arisen by reason of non service of a s 57(2)(b) notice.
21 Time does not permit an exhaustive review of the authorities on this question. Suffice it to say that, for present purposes, I accept that a case in which the issue is whether the power for sale has arisen at all is one which falls outside what Sugerman J described as the "ordinary type of case" in Harvey v McWatters (1948) 49 SR(NSW) 173. The ordinary type of case to which his Honour referred is one in which it is sought to restrain a mortgagee sale, either on the basis that the amount due is in dispute, or on the basis that there is some impropriety in the manner of exercise of the power of sale - typically, an impropriety which is liable to result in the sale being at an undervalue.
22 Sugerman J recognised that different principles apply when the issue is whether the power of sale has arisen at all. The same exception to the general rule was recognised by Powell J in Allfox Building Pty Ltd v Bank of Melbourne Limited (1992) NSW Conv R 55-734, in which his Honour said that if the challenge to the mortgagee sale were based upon the non existence or lack of present availability of the power of sale, either because the alleged breach of covenant relied on by the mortgagee was challenged, or because the occurrence of some other pre-condition, whether statutory or otherwise (which I take to include non service of a s 57(2)(b) notice) to the arising of the power of sale was in issue, then what was invoked was the auxiliary jurisdiction in equity to grant an injunction to prevent interference with one's legal rights, in which case the plaintiff was not to be required, as a condition of obtaining relief, to do equity by bringing into court the mortgage money, or offering to redeem. I accept that this is a case which falls within that exception, but as will be seen, that does not mean that no terms are imposed.
23 Mr Cox then argued that the potential loss to E&P if an injunction were declined very considerably exceeded the potential loss to the mortgagee if an injunction were granted. This depends largely on the valuation evidence. E&P adduced a valuation of Anthony Hickey and Peter Dorrough, who opined that the Charmhaven land had a market value of $7 million. However, it is to be noted that they also opined that the "forced sale market value" of the land would be between $3 million and $5 million.
24 The mortgagees tendered a valuation by Scott Arneil and Gregory M Jones of Robertson & Robertson, Consulting Valuers, who opined that the market value of Charmhaven was $2.9 million, and its forced sale value, $2.4 million. In the course of their valuation, they observed that the relevant local government authority was unable to commit to the timing of any future development, and expressed the opinion that urban release would be unlikely to occur within the next fifteen years.
25 The picture as to value is further clouded by the circumstance that, though there is only secondary evidence of them, Mr Freeman, in his affidavit, identifies that valuations had been obtained on 5 February 2005 from R V Dimond for $6.5 million, some time early in 2005 from Damian Winterburn for $2.8 million, and on 4 May 2005, from Duponts, for $4 million.
26 Given that the only valuations which are in evidence before me, other than on Mr Freeman's hearsay, are those of Arneil and Jones on the one hand, and Hickey and Dorrough on the other, it is to them that I should attribute by far the greatest weight.
27 All that can be said is that, based on those valuations and based, also, on the evidence that an offer has already been received at $3 million, and giving some slight regard to the other evidence of value referred to in Mr Freeman's affidavit, there is at least a distinct risk that the Charmhaven land will not sell for more than the $3.165 million currently outstanding to the mortgagees. It may well be that, in an environment other than a forced sale environment, it would realise more. Indeed, it is distinctly possible that in a non-forced sale environment, it may realise $1 million or $2 million more.
28 If an injunction is granted, the mortgagees will have wasted the funds already spent on marketing the property, and the fees which will be incurred to the auctioneer. There is some evidence that this may amount to some $20,000. There is a risk that the market will decline, that the sufficiency of the property to cover the entirety of the mortgage debt will be further diminished and, indeed, that the mortgagee may not even be able to recover the mortgage debt in its totality. There may be a shortfall of, perhaps, $100,000 or $200,000.
29 It is against that background that Mr Cox submits that the potential loss to E&P is in the order of millions of dollars, whereas the potential loss to the mortgagees is in the order only of hundreds of thousands of dollars.
30 That submission is seductive and attractive, but the case on balance of convenience is, I think, on the authorities, not so simple is that. That is because in Harvey v McWatters, what Sugerman J said should occur in cases other than those to which "the ordinary rule" applied, was not that no payment into court would be required, but that the amount ordered to be paid in would not necessarily be the whole amount claimed, as sworn to by the mortgagee or appearing from the terms of mortgage, but that the terms of payment in may be moulded, so as to require payment in of so much only as would suffice to give adequate protection to the mortgagee.
31 In my judgment, at least some hundreds of thousands of dollars, say $200,000, would be required to give adequate protection to the mortgagee in this case, having regard to the potential deficit. It was for that reason that I asked, at the conclusion of the hearing yesterday, whether any offer could be made to pay in any sum of money, to which the response from E&P was that, in the time available and in the circumstances, that was not possible.
32 That factor - namely, that I do not consider that, in the absence of the payment in of at least, perhaps, $200,000, there would be adequate protection to the mortgagee - is the most telling factor in terms of the evaluation of the balance of convenience in this case.
33 Another factor which has influenced my assessment of the balance of convenience is the timing of the application. I have given as full weight as I can to Mr Freeman's evidence that it was not until very recently that he became conscious of the reality that the mortgagee was serious about selling the property, but I cannot overlook that, as early as late July, or early August, he was aware that there was "a great big sign on the site", advertising it for sale "by auction", and that he soon thereafter became aware that it was a mortgagee's sign. Even if he had no notice of the s 57(2)(b) notice, Mr Freeman, and thus E&P, was on notice of the proposed sale and has been so for more than a month, yet left it until the last minute to make this application.
34 A further consideration is the sufficiency of E&P's undertaking as to damages, which has been proffered. All I know of E&P's financial position is that it owns the Charmhaven property, subject to the various encumbrances to which I have referred - which, at least on one view of the evidence of value, more than exhaust the equity in that property - and that, according to Mr Freeman's affidavit, it owns one other property, as to the value of which, and the encumbrances affecting which, there is no evidence. Bearing in mind the onus that lies on an applicant in this type of proceeding, I cannot be persuaded that E&P's proffered undertaking as to damages is a valuable one.
35 Finally, on the balance of convenience, I take into account the relative weakness of E&P's case on the question to be tried, to which I have already referred. I do not overlook the potential detriment to E&P, which I accept may turn out to be in the order of millions of dollars, but, having regard to what was said in Harvey v McWatters, and to the other considerations to which I have referred on the balance of convenience, I have concluded that the balance of convenience does not favour the granting of an injunction in this case.
36 Accordingly, I order that the notice of motion be dismissed, and that the costs of the motion be the defendant's costs in the proceedings.