defendant. Application for interlocutory mandatory injunction refused; defendant ordered to formally proffer the undertakings it had offered (to execute a mortgage securing $439,000 and not to further...
Key principles
A mandatory interlocutory injunction will not be granted solely to put an applicant in the position of a secured creditor where there is no evidence of urgency, threat of...
Where a defendant proffers adequate undertakings which protect the applicant's position (here, to execute a mortgage for a specified sum and not further encumber the property...
In deciding an interlocutory mandatory injunction the court must identify which standard applies (the 'high degree of assurance' test or the 'lower risk of injustice' test) but,...
Issues before the court
Whether the plaintiff was entitled to an interlocutory mandatory injunction compelling the defendant to execute a mortgage securing the plaintiff's...
Cited legislation
No linked legislation citations have been extracted yet.
Plain English Summary
Elan sought an interlocutory mandatory injunction to force Clarence Street Freeholds to execute a mortgage promised under a settlement agreement. The court found that Elan had a serious case and that the defendant's asserted defences lacked satisfactory interlocutory evidence. However, because there was no evidence of urgency or insolvency and the defendant offered undertakings (to execute a mortgage for $439,000 and not to further encumber the property), the court refused the mandatory injunction as speculative. The defendant was ordered to formally proffer the undertakings.
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Deep Dive
1,751 words · generated 14/06/2026
What happened
This was an interlocutory application in the Supreme Court of Victoria brought by Elan Trading Corporation Pty Ltd (Elan) against Clarence Street Freeholds Pty Ltd (formerly Sharpe Partners Properties) to compel execution of a mortgage by interlocutory mandatory injunction. The mortgage was a term of a 28 March 2001 settlement and release agreement between parties connected with earlier commercial dealings (see [12], [15], [18]). The agreement defined 'Outstanding Moneys' (principal amounts totalling $689,900 less set-offs, leaving approximately $439,000 plus interest) and required the Sharpe Group to provide a mortgage over 201-203 Clarence Street, Sydney, as security (see [15], [18]).
Payment under the agreement due 1 July 2001 was not made and Elan commenced proceedings seeking specific performance of the settlement agreement and, in the interlocutory application, sought an order compelling execution of the mortgage as security for the claimed indebtedness (see [15], [18]). The defendant did not deny the general factual matrix but contested the quantum and asserted set-off claims and an alleged later variation/settlement said to waive interest (see [25], [28], [58]). The defendant offered by way of undertaking to execute a mortgage securing $439,000 and to refrain from further encumbering the Clarence Street property pending trial (see [25], [55]).
Warren J heard the matter. The core inquiries were whether there was a serious question to be tried, and where the balance of convenience lay, specifically, whether it was appropriate to grant the drastic remedy of a mandatory interlocutory injunction to compel the defendant to execute the mortgage, or whether the defendant's undertakings sufficed to protect Elan pending trial (see [31], [35], [55], [64]). The judge found a serious question existed and that, because the defendant's asserted set-off and variation lacked satisfactory affidavit evidentiary foundation, Elan satisfied either the 'high assurance' standard or at least the 'lower risk of injustice' standard (see [58], [61]). Nonetheless, because there was no evidence of insolvency or imminent dissipation and undertakings were offered, the court refused the interlocutory mandatory injunction and ordered the defendant to formally proffer those undertakings (see [61], [64]).
Why the court decided this way
Two lines of principle governed the decision: first, the threshold requirements for mandatory interlocutory injunctions; second, the weighing of the balance of convenience.
Threshold and applicable standard. Warren J canvassed two approaches. Historically, courts required a 'high degree of assurance' that at trial it would be shown the injunction was rightly granted (see [35]). More recently, courts have focused on selecting the interlocutory course that carries the lower risk of injustice if it turns out to be wrong (the test articulated in Films Rover and quoted at [38]). The judge expressly acknowledged these formulations and framed the inquiry in terms of whether the plaintiff had a serious question to be tried and what course minimised the risk of injustice (see [31], [35], [38], [51]).
Application to facts: sufficiency of evidence. The judge found that the defendant's asserted set-offs and alleged subsequent variation (a purported waiver of interest) were supported by inadequate affidavit material, the Rosier affidavit asserted facts on instructions but was substantially refuted by Mr Fleming's affidavits (see [28], [58]). For interlocutory purposes, that lack of credible evidence meant Elan met the higher assurance threshold or, at the least, the lower risk test for likely success at trial (see [58], [61]).
Balance of convenience and urgency. Mandatory interlocutory relief is an exceptional remedy. Warren J emphasised that past cases granting such relief usually involved urgency or a real threat to the applicant (such as insolvency or dissipation), a feature absent here (see [61]). The plaintiff essentially sought to secure creditor status in anticipation of potential future insolvency; the judge characterised that as speculative and not a sufficient foundation for mandatory relief (see [61]).
Undertakings as adequate protection. The defendant had proffered to execute a mortgage for $439,000 and to refrain from further encumbering the Clarence Street property pending the trial. The judge found those undertakings to be ample protection against the plaintiff's asserted prejudice and, in the exercise of discretion, preferred acceptance of undertakings over a mandatory order (see [55], [64]).
Thus, despite the plaintiff's prospects of success on the merits, the lack of immediate risk and the availability of acceptable undertakings led the court to refuse the mandatory interlocutory injunction while compelling formal proffer of the undertakings (see [64]).
Before and after state of the law
Before this line of cases, interlocutory mandatory injunctions were often approached with a requirement for a high degree of assurance: plaintiffs had to show it was highly likely they would succeed at trial to justify a mandatory order (see [35]). Films Rover (quoted at [38]) introduced or illustrated the risk-of-injustice formulation: choose the interlocutory course that carries the lower risk of injustice should the court be 'wrong'.
Warren J in Elan affirms both approaches but demonstrates their practical synthesis: even where a plaintiff may satisfy the higher standard for interlocutory success (because the defendant's defences are weak on affidavit), the court will still decline mandatory relief if there is no urgency or pressing risk, and if alternative protective measures (like undertakings) are available. The decision reinforces a conservative posture towards mandatory interlocutory relief: success on the merits (or good prospects) is necessary but not sufficient; the balance of convenience, urgency, and availability of undertakings remain decisive factors (see [58], [61], [64]).
Practically, the decision confirms that obtaining a mortgage by interlocutory compulsion to secure a speculative future risk of insolvency is unlikely to succeed; instead, a plaintiff must show present risk to justify such coercive early relief.
Key passages with plain-English translation
Paragraph [38] (quotation from Films Rover): "The principal dilemma... lower risk of injustice..." Plain-English: When deciding whether to grant an interlocutory injunction, courts must consider which outcome would cause the least unfairness if the court later turns out to have been mistaken. This is the touchstone for the judge's approach.
Paragraph [58]: The judge describes the defendant's evidence for set-off and variation as unsatisfactory and notes the plaintiff's refutation. Plain-English: The defendant's claims that it owed less (because of set-offs or a later agreement) were poorly supported in sworn evidence, making the plaintiff's case stronger for now.
Paragraph [61]: "It is, so far as I am aware, unprecedented... achieve the status of a secured creditor..." Plain-English: The court will not use interlocutory mandatory injunctions simply to let someone jump the queue and become a secured creditor on the chance the defendant might go broke later.
Paragraph [64]: "the proffering of the undertakings... is ample protection..." Plain-English: Because the defendant offered to formally promise to give the specific security and not to encumber the property, that promise protects the plaintiff enough that forcing the mortgage now is unnecessary.
What fact patterns trigger this precedent
The judgment is most directly instructive where:
Parties have a contractual obligation to provide security (for example a mortgage) under a settlement or contract, but the obligor has not complied on time.
The claimant seeks mandatory interlocutory relief to compel execution of that security before trial.
There is a dispute about quantum or defences (set-off, alleged variation) that is arguable but supported by weak interlocutory affidavit evidence.
There is no evidence of immediate threat such as insolvency, asset dissipation, or urgency that would render undertakings inadequate.
The defendant is willing to provide undertakings (e.g. to execute the security for a specified sum and not to further encumber the asset).
In such patterns Elan indicates courts will generally prefer to accept undertakings and refuse mandatory interlocutory relief, unless there is evidence of urgency or risk that makes such undertakings inadequate.
How later courts have treated it
This judgment itself cites authorities to situate the approach to interlocutory mandatory injunctions (see [35]-[51]). The judgment does not record subsequent appellate treatment of Elan itself; it is a first-instance decision applying established principles. Practitioners should treat Elan as an example of the application of the Films Rover 'lower risk of injustice' methodology in combination with a pragmatic insistence on urgency or demonstrable risk before ordering mandatory interlocutory performance of security obligations.
If relying on Elan in later proceedings, one must check (a) whether later appellate authority has altered the assessment of undertakings versus mandatory relief; (b) whether courts in other jurisdictions have applied Elan's emphasis on requiring evidence of urgency. Elan remains a useful guide on the practical application of the balance of convenience where undertakings are offered and no imminent risk is demonstrated (see [61], [64]).
Still-open questions
Quantification and sufficiency of undertakings: Elan accepted an undertaking to execute a mortgage for a specified sum ($439,000). An open question is how courts will approach undertakings that are less precise, for example where the defendant offers to 'grant security to the court's satisfaction' without a fixed amount. Elan suggests precision strengthens the undertaking but does not fully elaborate on borderline cases (see [55], [64]).
Evidence threshold for interlocutory defences: Warren J assessed the defendant's affidavit evidence as so unsatisfactory it carried little weight for interlocutory purposes (see [58]). The precise evidentiary threshold for when a putative defence (set-off or variation) will displace the 'high assurance' standard remains fact-sensitive and uncertain; different judges may weigh affidavit inconsistencies differently.
The role of insolvency risk: Elan emphasises the absence of insolvency as crucial (see [61]). Courts will need to delineate the degree of insolvency risk or other forms of prejudice that suffice to justify mandatory relief. For instance, impending insolvency backed by financial reports may produce a different result from mere speculation.
Interaction with statutory security regimes: Where the asset in question is governed by statutory priority or registration regimes (for example, PPSA-type frameworks), the utility of interlocutory compulsion versus protective undertakings may raise additional practical and legal questions not addressed in Elan.
Appellate weight: As a single first-instance decision, Elan's persuasive force outside Victoria depends on later citation and appellate treatment. Practitioners must verify subsequent authorities that confirm, distinguish or qualify the approach taken in this case.
Conclusion
Elan Trading Corporation v Clarence Street Freeholds illustrates a careful, pragmatic approach to mandatory interlocutory injunctions. Even where a plaintiff shows strong prospects on the merits, the absence of urgent risk and the availability of precise undertakings will commonly tip the balance against coercive interlocutory orders to create security. The decision reinforces that interlocutory mandatory relief is exceptional and oriented to preventing immediate injustice rather than securing speculative future creditor status (see [61], [64]).
MANDATORY INJUNCTION - agreement - execution of mortgage - balance of convenience.
[3]
The plaintiff seeks an interlocutory mandatory injunction to compel the defendant to execute a mortgage in favour of the plaintiff. The circumstances relied upon by the plaintiff relate to a prior financial history between the plaintiff and the defendant culminating in terms of settlement. The plaintiff has issued proceedings by writ in the Commercial List to enforce terms of settlement, including execution of a mortgage, said to have been reached between the plaintiff and the defendant.
[4]
It is necessary at the outset to consider, briefly, the background circumstances.
[5]
The general facts relating to these proceedings were contained in two affidavits sworn by one Donald Brownlie Fleming. Mr Fleming is the managing director of the plaintiff, Elan Trading Corporation Pty Ltd ("Elan").
[6]
In about May 1999 Mr Fleming met one Jeffrey James Meads who was associated with an accounting firm known as Sharpe Hume Pty Ltd. As a result of the meeting Mr Meads introduced Mr Fleming to one Grahame Norman Sharpe. Ultimately, Messrs Fleming, Meads and Sharpe agreed to form a national accounting practice known as "the Sharpe Group". The proposal proved unsuccessful and, ultimately, disputes occurred between Mr Fleming and the others such that differences occurred. The differences were eventually resolved and the relevant parties, including the plaintiff Elan, representing the interests of Mr Fleming and the defendant, representing the interests of Mr Sharpe entered into a settlement and release agreement dated 28 March 2001 ("the agreement").
[7]
It was a term of clause 2.7 of the agreement that "the Sharpe Group", being the group associated with the interests of Mr Sharpe, acknowledged an existing liability to re-pay to the Fleming Group, being the interest associated with Mr Fleming, the full amount of an item described as the "Outstanding Moneys". It was a further term of the agreement that the outstanding moneys be re-paid in full by way of bank cheque made out to Elan no later than 1 July 2001. The agreement defined "the Outstanding Moneys". The total of the amounts, excluding interest (clause 1.1(h)) was $689,900. There was a separate debt for the amount of $250,000 relating to another entity known as "the Hall Group". The latter amount constituted a set-off and the parties agreed that such amount had to be deducted from the sum of $689,999. The balance of "Outstanding Moneys" was the sum of approximately $439,000 plus interest. The outstanding moneys allegedly owed by the Sharpe Group to the Fleming Group under the agreement were not paid pursuant to the terms of the agreement on 1 July 2001. As a consequence the plaintiff, Elan, instituted the present proceeding seeking specific performance of the agreement.
[8]
Clause 2.9 of the agreement provided that the Sharpe Group must make available to the Fleming Group, as security for the re-payment of the outstanding moneys, a mortgage over the property known as "the Clarence Street property" being the property located at 201-203 Clarence Street Sydney, New South Wales. As a consequence, Elan applied by way of summons for an interlocutory mandatory injunction that the defendant execute a mortgage over the Clarence Street property to secure the outstanding moneys pursuant to the terms of the agreement.
[9]
An affidavit was filed on behalf of the defendant in opposition to the application by one Peter Rosier, a solicitor acting on behalf of the Sharpe Group. The affidavit of Mr Rosier did not challenge the general facts contained in the affidavits of Mr Fleming as already recounted.
[10]
The ambit of the dispute between the plaintiff and the defendant was confined. The defendant acknowledged that it owed obligations to the plaintiff under the agreement. However, the dispute related to the width of those obligations. The defendant proffered by way of undertaking to execute a mortgage in favour of the plaintiff for the sum of $439,000, and no more. It proffered an undertaking, also, not to further encumber the Clarence Street property pending the trial of the proceeding. The dispute between the parties appeared to revolve around the calculation of the amount of interest payable by the defendant to the plaintiff pursuant to the terms of the agreement. The plaintiff's position was one where it accepted the proposal that the defendant provide a mortgage in the sum of $439,000 save by injunctive order but wished to be provided with additional security by way of such mortgage securing a calculation of the amount of the interest then owing. The principal position of the plaintiff was that it wished to be placed in the advantageous position of being a secured creditor of the defendant for the full amount that it claimed it was owed under the terms of the agreement. So much, urged the plaintiff, enabled it to preserve the status quo.
[11]
The defendant's position was that it claimed that it had a right of set-off against the plaintiff in relation to the outstanding moneys under the agreement. The items constituting the alleged set-off were said to arise from transactions involving an entity known as Farmtel Finance Pty Ltd and a company known as York Consultants Pty Ltd. There was no evidence as such of set-off, merely an indication by Mr Rosier of a set-off on instructions from his client. An additional matter relied upon by the defendant was an alleged further settlement of the agreement on 16 August 2001 said to have been reached between one James Batty on behalf of Farmtel and Mr Fleming on behalf of the plaintiff. These matters were deposed to in an affidavit of Mr Rosier. Mr Fleming, by way of further affidavit, refuted the matters deposed to by Mr Rosier. It is to be observed that in Mr Rosier's affidavit sworn 23 August 2001 he deposed that he was informed by Mr Batty that on 17 August 2001 Mr Batty had a conversation with Mr Fleming to the effect that the interest component of the agreement would be waived on the condition that a mortgage over the Clarence Street property was provided immediately.
[12]
For the purposes of the interlocutory application it was conceded by Mr Tsalanidis who appeared on behalf of the defendant that there was no dispute that there was a serious question to be tried between the parties. Rather, Mr Tsalanidis submitted that on the balance of convenience the weight fell in favour of his client because of the matters his client proffered and, also, the potential claim of set-off. Mr I. Jones who appeared on behalf of the plaintiff submitted that the balance of convenience favoured the grant of the mortgage because of the terms agreed under the agreement and, further, on the basis that there was no prejudice to the defendant giving the mortgage that it had agreed to execute pursuant to the terms of the settlement. The plaintiff, it was said, by contrast, would suffer prejudice if the defendant further encumbered any remaining interest in the Clarence Street property. Mr Jones submitted that damages would not be an adequate remedy for the plaintiff in such circumstances as it would be exposed as an unsecured creditor in respect of an asset that the defendant had agreed to provide as security under the terms of the settlement agreement.
[13]
Until relatively recently the general approach applied by the courts in considering whether or not to grant an interlocutory mandatory injunction was whether or not there is a "high degree of assurance" that at the trial it will appear the injunction was rightly granted: see Business World Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, 501-503; also, Shepherd Homes Limited v Sandham (1971) Ch 340, 351. However, the high assurance test has not been followed uniformly: see Business World, supra, at 501-503; Films Rover International Limited v Cannon Film Sales Limited (1986) 3 All ER 722, 780-1; (1987) 1 WLR 670, 680. Consequently, in more recent times the courts have adopted the course at the interlocutory stage that appears to "carry the lower risk of injustice".
[14]
In Films Rover, Hoffman J, as he then was, (at 680) observed:
[15]
"The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the 'wrong' decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been 'wrong' in the sense I have described. The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle."
[16]
The High Court addressed the injustice of the relevant circumstances when concerned with mandatory injunctions in the context of the continuation of an alleged tortious conspiracy: see Patrick Stevedores Operations No. 2 Pty Ltd and ors v Maritime Union of Australia & ors [1998] HCA 30; (1998) 195 CLR 1, 31.
[17]
In a different approach, Kaye J of this Court in Belgrave Nominees Pty Ltd and ors v Barlin-Scott Airconditioning Aust. (Pty Ltd) [1984] VicRp 75; (1984) VR 947 considered all the circumstances and determined that it would not be just to confine plaintiffs to a remedy in damages and ordered a mandatory injunction. As little later, in State Transport Authority v Apex Quarries Limited [1988] VicRp 26; (1988) VR 187, Kaye J held that an injunction may lie to restrain a defendant from breaching a negative term or stipulation of a contract, notwithstanding that the effect of the injunction might be to compel performance of a contract where equity would not decree specific performance. When considering the question of the balance of convenience Kaye J held that the proper test is not whether damages would provide the plaintiff with an adequate remedy but rather whether it is just in all the circumstances, that the plaintiff should be confined to his remedy in damages. The learned judge held in Apex Quarries that damages would not be an adequate remedy and that the balance of convenience favoured enjoining the defendants.
[18]
More recently, the Appeal Division of this Court in D.S. & N. Nominees Pty Ltd and ors v Movieland Franchise Systems Pty Ltd, unreported judgment delivered 15 September 1994 considered the granting of an injunction that required the appellants to cease the conduct of a business and the assignment of a lease of premises prior to trial. The Appeal Division appeared to maintain the high degree of assurance test.
[19]
Of course, an interlocutory injunction, more so a mandatory injunction, will never be granted lightly: National Australia Bank Ltd v Bond [1991] 1 VR 529. Whether a court applies the high assurance test or the lowest risk of injustice test, a serious issue to be tried must be made out. The defendant conceded that a serious issue arose here. The question was where the balance of convenience lay.
[20]
On the basis of the defendant's proposal the plaintiff would have the benefit of undertakings as to the effecting of the mortgage to secure the sum of $439,000 and interest at a specified amount. The plaintiff would have the protection, also, of an undertaking not to further encumber the Clarence Street property. In support of the defendant's position there is no evidence of its insolvency.
[21]
On the other hand, there is no adequate evidence of the set-off relied upon by the defendant in support of the assertion that the moneys owed by it under the agreement are subject to the set-off. Furthermore, there is a clear dispute between the parties as to whether or not there was a further settlement agreement or variation of the original agreement. I observe that the evidence by Mr Rosier on behalf of the defendant does not meet the total refutation by Mr Fleming in his affidavit. On this basis, therefore, the plaintiff satisfies the high assurance test of success. Even if it did not, it does at the very least make out the lower risk of injustice test. My view in this respect is based upon the fact that there is no satisfactory evidence by the defendant even for interlocutory purposes of the alleged set-off. Furthermore, there is no satisfactory evidence for interlocutory purposes that the agreement was re-negotiated or varied. The matter is entirely refuted by Mr Fleming. I observe that a number of opportunities were provided to the defendant to provide evidence on affidavit as to the surrounding circumstances of the agreement and subsequent events. The opportunity was not taken advantage of. It seems to me, therefore, on balance that the evidence of the defendant through Mr Rosier even for interlocutory purposes is so unsatisfactory that I should allocate it little if any weight. It follows, further, that the plaintiff has good prospects, for interlocutory purposes, on either the high assurance standard or the lower risk of injustice test of success at trial.
[22]
However, is it entitled, therefore, to have the benefit of preserving the status quo pending the trial of the proceeding that is security for the defendant's potential obligations under the agreement? In each of the authorities referred to where a mandatory injunction was granted the court was faced with an element of urgency or threat to which the applicant was subject and thereby provided the foundation for the mandatory injunction granted: see State Transport Authority v Apex Quarries Limited, supra; Business World Computers Pty Ltd v Aust Telecommunications Commission, supra; also, Films Rover International Limited & ors v Cannon Film Sales Limited, supra. As I have observed already there was no evidence of actual or potential insolvency on the part of the defendant. In so far as there was any threat to the plaintiff there was none made out on the evidence. On proper analysis the foundation for the seeking of the mandatory injunction was the alleged breach by the defendant of the agreement. Essentially, therefore, by way of an application for an interlocutory mandatory injunction the plaintiff was endeavouring to secure the outcome it would hope to achieve at the final determination of the proceeding. So far as I am aware it is unprecedented for a party to be granted a mandatory injunction on an interlocutory basis where all that the party seeks to do is achieve the status of a secured creditor presumably in the event that insolvency may occur at a later point in time. In my view to grant the injunction in these circumstances would constitute no more than speculation in so far as the future of the defendant is concerned. Furthermore, it would be an inappropriate application of the principles usually applied by the courts in the granting of interlocutory injunctions.
[23]
In any event, in so far as the exercise of the discretion is concerned I am satisfied that the proffering of the undertakings by the defendant is ample protection and satisfaction to the complaints by the plaintiff against the defendant. In weighing up the balance of convenience and bearing in mind the proffering of the undertakings adverted to it seems to me that the balance lies with the defendant. It follows that the application for an interlocutory mandatory injunction will be refused but that the defendant will be required to formally proffer the undertakings foreshadowed.
Parties
Applicant/Plaintiff:
Elan Trading Corporations Pty Ltd
Respondent/Defendant:
Clarence Street Freeholds Pty Ltd [2001] VSC 339
Cases Cited (2)
(1988) 82 ALR 499
(1998) 195 CLR 1
AI Analysis
Outcomedefendant
Disposition:
Application for interlocutory mandatory injunction refused; defendant ordered to formally proffer the undertakings it had offered (to execute a mortgage securing $439,000 and not to further encumber the Clarence Street property pending trial) (see [64]).