2 Emmanuel owns two allotments of land near Loxton in South Australia for that purpose. They are planted to vines and mixed fruit. Those are Section 840, Newton Road, Loxton (Crown Lease War Service Irrigation Perpetual No 364, Register Book Volume 1220, Folio 24), and Lot 2, Section 832, Gosse Road Loxton (Crown Lease War Service Irrigation Perpetual No 333, Register Book Volume 1209, Folio 12). The Quirkes own other allotments upon which vines and mixed fruit are also grown. These are Section 836, Newton Road, Loxton (Crown Lease War Irrigation Perpetual No 314, Register Book Volume 1200, Folio 29), Lot 12, Section 839 Newton Road, Loxton (Crown Lease War Service Irrigation Perpetual No 353 Register Book Volume 1210, Folio 13), and Lot 2, Section 824, (Crown Lease War Service Irrigation Perpetual No 330 Register Book Volume 1212, Folio 7). Although conducted on separately owned allotments, the businesses of Emmanuel and Mr and Mrs Quirk are operated by them as a single business.

3 In order to finance its land and operations, Emmanuel had borrowings with the Commonwealth Bank of Australia ("CBA") in excess of $900,000, comprising of an overdraft facility, a fixed debt of $550,000, and a variable loan. That borrowing was secured by mortgages over the above five properties owned by Emmanuel and the Quirkes.

4 Prior to April 2001, the fruit grown by Emmanuel and Mr and Mrs Quirke would be sold to various separately owned packing sheds for distribution to buyers. The Quirkes were dissatisfied with this process. They believed themselves "at the mercy" of the packing sheds, and the prices those sheds were willing to pay for the fruit. In pursuance of the goal of higher payments to fruit growers, in about June 2000 the Quirkes became involved in an organisation known as the Citrus Reform Association. In about March 2001 Mr Bill Lekakis became president of that Association. Mr Lekakis, the Quirkes, and the other members of the Association were interested in the idea of acquiring a community packing shed. The Association began to investigate the possibility of purchasing the Berri and Loxton packing sheds of the Riverland Fruit Co-operative ("RFC"), a company which had been placed into receivership in about December 2000 or early 2001.

5 The sequence of events which follows is taken substantially from the affidavit of Mr Stegmeyer filed on behalf of the defendants, as the several dates are borne out by the dates of various documents. On 5 April 2001, a company named Oz Fruits International Pty Ltd ("Oz Fruits") was registered. Both Mr Lekakis and Mr Quirke were directors of Oz Fruits along with a Mr Lindner. Mrs Quirke and Julie Lekakis (the wife of Mr Lekakis) were also directors of Oz Fruits from 5 April 2001 to 9 May 2001.

6 In about April 2001, the first defendant, National Australia Bank Limited ("NAB") was approached on behalf of Oz Fruits, seeking finance for the purchase of the packing sheds of RFC. The directors of Oz Fruits informed Mr Stegmeyer, the Agribusiness Manager of NAB in Renmark, that the company had successfully tendered for the purchase of the sheds, plant and equipment. Mr Stegmeyer then prepared two Business Credit Submissions to be submitted to NAB in relation to various aspects of the finance application. Initially Oz Fruits sought a facility limit of $2,310,000, which amount was then reduced to $1,400,000 on the basis that the balance of the funding would be sought from another financier. It was proposed that the finance would be secured by mortgages over the assets of Oz Fruits, including the properties to be acquired from the RFC, the assignment of life policies held by the directors and proposed Chief Executive Officer of Oz Fruits, and a guarantee and indemnity given by Mr and Mrs Quirke, Mr Lekakis and Mr Lindner. That guarantee and indemnity was to be supported by first registered mortgages over two of the allotments owned by the Quirkes, and second registered mortgages over two properties owned by Mr Peter Lindner. NAB already financed the fruit growing operations of Mr and Mrs Lekakis and held "all moneys" first mortgages over their land. Both Business Credit Submissions were rejected by the NAB on 4 April 2001 and 31 May 2001 respectively.

7 As mentioned above, at the time of the Oz Fruits application, Mr and Mrs Lekakis were customers of NAB. On the recommendation of Mr Lekakis, in about April 2001, Mr Quirke approached NAB about transferring the borrowings of Emmanuel from CBA to NAB. Those discussions took place at about the same time as the application to finance Oz Fruits but the application was independent of the Oz Fruits application. Emmanuel also required additional funding of $240,000 to cover the CBA's break costs and the losses that it had incurred in the 2001 apple harvest. Mr Stegmeyer proposed a number of facilities with a total borrowing of $1,150,000. Those proposed facilities were approved in May 2001 and letters of offer were sent to Emmanuel on 8 and 12 June 2001. It was proposed that the facilities would be secured by a registered mortgage debenture (No 815564) over the whole of the assets of Emmanuel, a registered mortgage (No 9157496) over the two allotments owned by Emmanuel, and a guarantee and indemnity for $1,150,000 given by Mr and Mrs Quirke supported by a registered mortgage (No 9157497) over one of the allotments owned by them. On 19 June 2001 the Quirkes accepted and signed the proposed loan facilities on behalf of Emmanuel. Settlement of those facilities occurred on 6 July 2001.

8 Following the rejection by NAB of the Oz Fruits application, and the refinancing of Emmanuel's borrowings, in July 2001 Mr Lekakis and Mr Quirke again approached NAB seeking funding for a joint packing venture of smaller scale than the Oz Fruits venture. This second joint venture was to be between the Quirkes on the one hand, and Mr and Mrs Lekakis on the other, and again it was the object of the joint venture to purchase the packing shed of RFC.

9 Mr Stegmeyer states that Mr Lekakis and Mr Quirke informed him that they had made an offer of $230,000 for the packing shed. However the receivers and managers of RFC had refused to deal with them because of their involvement in the failed Oz Fruits venture. An offer of $220,000 was then made by a company named Wawego Pty Ltd ("Wawego"). The directors of Wawego were acquaintances of Mr Lekakis and Mr Quirke, and it was they who negotiated with the receivers and managers of RFC in relation to the purchase of the packing shed. The Quirkes and the Lekakis' were all shareholders of the company, and on 29 August 2001, after settlement, Mrs Quirke and Mrs Lekakis became the directors.

10 It was proposed that Wawego would hold the assets of the venture, and that an entity named Dayrise Produce Pty Ltd ("Dayrise Produce"), would be responsible for the trading and operations of the venture. Dayrise Produce was incorporated on 12 June 2001, with Mr Lekakis and Mr Quirke as its directors. Mr Lekakis and Mr Quirke, along with Emmanuel and Dayrise Pty Ltd, a company owned by Mr and Mrs Lekakis, were the shareholders of Dayrise Produce.

11 Wawego's offer of $220,000 was accepted by the receivers and managers of RFC. That purchase price comprised of $160,000 for land and $60,000 for plant and equipment and sundry items. Emmanuel paid the deposit of $22,000 for the packing shed, which, according to Mrs Quirke, was treated as a loan to Wawego. The joint venture also required additional funding for further plant and equipment, and Mr Stegmeyer was advised that prior to applying for finance with NAB, Mr Lekakis and Mr Quirke had paid a deposit on a packing line to be purchased for $150,000.

12 Mr Stegmeyer prepared a Business Credit Submission for a finance package for Wawego and Dayrise Produce totalling almost $600,000. That was approved by NAB on 26 July 2001, subject to Dayrise Produce obtaining a citrus packing license from the Citrus Board of South Australia.

13 Because the Quirkes and the Lekakis' did not want to disclose their identity to the vendor before settlement, an initial advance of $240,000 by way of overdraft facility was made to Dayrise Produce, and after settlement and the appointment of Mrs Quirke and Mrs Lekakis as directors of Wawego, the finance package was restructured by way of a $175,000 overdraft facility to Dayrise Produce and a $420,000 loan to Wawego. Those loans were secured by registered mortgage debenture over the whole of the assets of Dayrise Produce and of Wawego, registered mortgage over the land purchased by Wawego and guarantees and indemnities by Mr and Mrs Quirk, Mr and Mrs Lekakis, Dayrise Pty Ltd and Emmanuel, with cross guarantees between the two companies. Those guarantees were secured by their respective mortgage debentures and registered first mortgages over two of the allotments owned by Mr and Mrs Quirke. It will be remembered that NAB already held first "all moneys" mortgages over the land owned by Mr and Mrs Lekakis.

14 For various reasons which are not presently relevant, the financial position of Dayrise Produce deteriorated. Further funds were needed to continue operations. At the suggestion of NAB, Mr and Mrs Quirke provided some funds by obtaining credit on personal Visa accounts. Later, a sum of $75,000 was transferred from the account of Emmanuel to Dayrise Produce. The amounts of the shareholder guarantees were increased, as was the overdraft facility. Besides extending substantially the facility from NAB, Dayrise Produce became heavily indebted to Emmanuel, and Emmanuel's loan from NAB was substantially increased as a result.

15 Eventually, in September 2002, Dayrise Produce ceased trading. On 12 June 2003 NAB appointed a receiver and manager of Dayrise Produce. On 26 August 2003 NAB appointed the second defendant as receiver and manager of Emmanuel.

16 No statement of claim has yet been filed in the proceedings, but in their affidavits the plaintiffs say that they intend to plead causes of action based on s 52, s 51AA, s 51AB, s 51AC, s 80, s 82, s 87 and s 75 of the Trade Practices Act 1975 (Cth) and the equivalent provisions of the Fair Trading Act 1987 (SA) and for remedies in contract, negligence, under the Misrepresentation Act 1972 (SA) "and at common law and in equity".

17 By way of interlocutory relief the plaintiffs seek the following:

2. That NAB be restrained from "executing or purporting to execute upon" any rights under the terms of the mortgage debenture and mortgages granted by Emmanuel;

3. That NAB be restrained "from executing or purporting to exercise" any rights it may have against Mr and Mrs Quirke arising out of any mortgage or security agreement between NAB and Mr and Mrs Quirke, including the mortgages supporting the guarantee of the debt to Dayrise Produce and Wawego.

18 The application does not seek restraint against NAB specifically in respect of the mortgage over the one allotment which supports the guarantee of the debt of Emmanuel to NAB save by the general words referred to in par 3 above.

19 The plaintiffs, in affidavits filed in support of their application, allege that, in order to finance the purchase of the packing shed by Wawego, they refinanced their own business with NAB as part of that package. However, the timing of the various transactions suggests that that is not so, save possibly in respect of the failed application by Oz Fruits, which appears to have been initiated at about the same time as they initiated their application to NAB to refinance their own operations. However, the Oz Fruits application failed, while that of Mr and Mrs Quirke succeeded, to be followed later by the application by Wawego and Dayrise Produce.

20 The plaintiffs allege first that Mr Stegmeyer represented that NAB, because the plaintiffs requested it, would take a second mortgage over the five properties owned by Mr and Mrs Lekakis as well as the first mortgage security over the two unencumbered allotments of the plaintiffs - a transaction which they say never occurred. Secondly, they allege various other representations from which they seek to infer that the bank undertook not to disadvantage them by seeking to enforce securities against them in priority to whatever security the bank might have had over the property of Mr and Mrs Lekakis. Thirdly, they complain that NAB failed to warn them that the financial position of Mr and Mrs Lekakis was far worse than it appeared to the plaintiffs to be. In short, they were satisfied that Mr and Mrs Lekakis were financially stable and were able to sustain repayment of 50% of the secured debt if the enterprise failed. Had the bank made known to them the true position in respect of all these matters they would not have entered into the arrangement. Fourthly, they allege that the system of cross guarantees and all monies mortgages was introduced to them by NAB in order that NAB could gain additional security for the separate debts of Mr and Mrs Lekakis.

21 The substance of the plaintiffs' allegations and the nature of the relief they intend to claim would suggest that they wish to attack the validity of the finance transactions into which they entered and to seek orders setting aside the guarantees and mortgages of their respective properties.

22 It appears that an auction sale of the Wawego property and the plant and equipment used in the premises has already taken place, although settlement has not occurred. The second defendant is in the course of inviting tenders for the purchase of the allotments owned by Emmanuel. It is not clear at this stage whether NAB is presently exercising rights under the mortgages of the allotments owned by Mr and Mrs Quirke, but it would seem that that is likely. Notices of demand have been served under the guarantees.

23 The Emmanuel debt to NAB now exceeds $1.57 million. The indebtness of Wawego and Dayrise Produce to NAB exceeds $1.18 million. The total indebtedness therefore exceeds $2.75 million. The five allotments were valued in March 2003 at $2.56 million. However, since then there has been a substantial reduction in the plaintiffs' water entitlement, and the valuer estimates that that may reduce the total value to between $1.7 and $1.8 million.

24 The alleged representations relied on by the plaintiffs would appear to relate only to the financing of Wawego and Dayrise Produce. Because the plaintiffs allege that this was part of a total package involving the refinancing of Emmanuel and their own operations, they attempt to link the representations to that part of the transaction involving the refinancing of Emmanuel. However, the documentation and its timing do not support a finding that these were linked or dependent transactions. The relevant negotiations were well separated in time. Accordingly, it would not be possible to find, on the material presently before the Court, that there is a serious question to be tried that the plaintiffs relied on any of the representations of the nature alleged in negotiating the refinancing of the Emmanuel debt with NAB. There are therefore no grounds at present for attacking that transaction.

25 However, that does not mean that, if otherwise justified, a restraining order should not be made in respect of the sale of the Emmanuel property and that of the plaintiffs. By virtue of the cross guarantees and all money mortgages that the plaintiffs have given, the allotments owned by Emmanuel, as well as those owned by the plaintiffs, are effectively security for the debts of Wawego and Dayrise Produce. If there is a serious question to be tried that the guarantees and the mortgages supporting the loans to Wawego and Dayrise Produce should be set aside, and if an interlocutory injunction to restrain the enforcement of securities given in respect of that transaction is justified, such a restraining order should extend to the enforcement of any security supporting the guarantee under attack. This is so, particularly where there appears to be a substantial shortfall between the value of all the properties and the total debt now due to NAB.

26 If the plaintiffs are to succeed in the present application I must be satisfied first that there is a serious question to be tried that the plaintiffs' guarantee and supporting mortgages for the financing of Wawego and Dayrise Produce should be avoided or that an order should be made that they be not enforced: s 87 Trade Practices Act 1974 (Cth), s 85 Fair Trading Act 1987 (SA).

27 I turn then to consider the plaintiffs arguments. As to the failure to obtain the second mortgage over the property of Mr and Mrs Lekakis, the evidence indicates that the bank in fact did take a second mortgage over one of the properties owned by Mr and Mrs Lekakis. However, the failure to obtain any further second mortgages, assuming for present purposes that the representation was made, would have made no difference to the security held by NAB over the property of Mr and Mrs Lekakis because the first mortgage of the properties contained an "all monies clause" which effectively provided security to NAB over the properties, by means of the guarantees of Mr and Mrs Lekakis, in respect of the debts of Wawego and Dayrise Produce to NAB.

28 As to the suggestion that something was said which assured the plaintiffs that if the guarantees were called upon, they would only be called upon equally against the plaintiffs and against Mr and Mrs Lekakis, the evidence does not go far enough to justify an arguable case. There is no allegation that an undertaking in those terms was given. At most there was an acknowledgment that the joint venture was a 50:50 project between the two families. The assertions relating to conversations to that effect are extremely vague. The acknowledgment was not expressly related to any undertaking as to enforcement, nor is it reflected in any documentation. There is insufficient evidence at the moment to suggest that there is a serious question to be tried on that issue.

29 In so far as the plaintiffs rely on a failure on the part of NAB to inform them of the financial position of Mr and Mrs Lekakis, in my opinion NAB had no obligation to do so. Indeed, without the authority of Mr and Mrs Lekakis, they had an obligation of confidentiality in respect of the affairs of Mr and Mrs Lekakis. Equally importantly, there is no evidence before the Court to show that it was the impecuniosity of Mr and Mrs Lekakis which placed the plaintiffs in their present predicament. Rather, the evidence suggests that the substantial shortfall has been brought about by some disastrous trading results of Dayrise Produce, and that Emmanuel's position has been compromised by its extending credit to Dayrise Produce. What is surprising about the arrangements undertaken by the plaintiffs is that they were undertaken apparently without any inquiry or analysis of the financial position of their joint venturers and co-guarantors.

30 Finally, there is no foundation on the evidence for the suggestion that NAB undertook the financing of the packing shed project in order better to secure itself in respect of the existing debt of Mr and Mrs Lekakis, nor is there any evidence from which one could infer that either the initial granting of the facility or the subsequent transfers of money by the plaintiffs to Dayrise Produce were as a result of some form of actionable economic duress.

31 In short, I cannot be satisfied on the evidence before me that there is a serious question to be tried which would justify the setting aside of the guarantees and mortgages on which the defendants are now relying for the purpose of recovering the debt due to NAB.

32 That is sufficient to dispose of the plaintiffs' application. However, if I am wrong in holding that there is not a serious question to be tried, I turn to consider the balance of convenience in the granting or withholding of an interlocutory injunction. Mr Livesey, counsel for the defendants, relies on Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 for the proposition that unless the plaintiffs pay into court or otherwise provide security for the outstanding debt, they are not entitled to a restraining order of the nature which they seek. In that case, Walsh J, at first instance, said, at 164 - 165:

"A general rule has long been established, 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.

.........

In my opinion, the authorities which I have been able to examine establish that for the purposes of the application of the general rule to which I have referred, nothing short of actual payment is regarded as sufficient to extinguish a mortgage debt. 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."

33 On appeal, Barwick CJ, with whom Menzies and Gibbs JJ agreed said, at 169:

"The case falls fairly, in my opinion, within 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 by order upon the exercise of the respondent mortgagee's rights under the mortgage."

34 In my opinion, however, that general principle cannot always be applied where the mortgage debt itself is in dispute. In Inglis' Case, the amount of the mortgage debt was not in dispute. What the plaintiff was claiming was that it should be offset by a claim for damages that the plaintiff had for breach of contract, defamation, fraud and conspiracy. Where the validity of the transaction itself is under challenge, and I must assume that that is the case in these proceedings, there is room for an exception to the rule as stated in Inglis.

35 Such a case was Glandore Pty Ltd v Elders Finance and Investment Co Ltd [1984] FCA 407; (1984) 4 FCR 130. Morling J referred, at 134 - 135, to the decision of Sugerman J in Harvey v McWatters [1948] NSWStRp 58; (1948) 49 SR (NSW) 173 and continued:

"It was held in Harvey v McWatters that where a mortgagor seeks an interlocutory injunction to restrain his mortgagee from selling, there is a distinction with respect to the terms that will be imposed as to payment into court between the case in which the power of sale is admittedly exercisable and the only dispute is as to the amount due or the mode in which the mortgagee proposes to exercise the power, and the case in which the very matter in dispute is whether the power of sale is exercisable at all. Sugerman J held that, in the first case, the general rule is that the mortgagor will be required to pay into court the amount demanded by the mortgagee, unless it appears from the terms of the mortgage that the amount claimed by the mortgagee is wrong. He further held that in the second class of case, the amount which would be ordered to be paid into court is not necessarily the whole amount claimed or appearing to be due under the terms of the mortgage, and in such a case the terms as to payment into court that are imposed upon the mortgagor may be moulded so as to require payment in of so much only as will suffice to give adequate protection to the mortgagee.

........

It is clear on the authorities that if the present case be regarded as one in which the mortgagor's real claim against the mortgagee is for damages only, interlocutory relief should be granted only upon terms that the amount of the mortgage debt is paid into court. The general rule referred to in Inglis' case would apply in such a case. But if it be not regarded as such a case, it is open to the court to grant the relief sought upon such terms other than payment of the full amount of the mortgage debt into court as the court thinks appropriate."

36 This does not mean, however, that, whenever the validity of a mortgage is challenged and there is a serious question to be tried, it is appropriate for the court to grant an injunction free of any conditions on the part of the plaintiff. As Heerey J said in M & J Pty Ltd v Australian and New Zealand Banking Group Ltd (Unreported, 27 March 1998) [1998] FCA 309:

"In my opinion, it would, in general, not be correct to exercise that discretion in favour of an applicant in a case such as this, merely on its being shown that there is a prospect, however modest, of success on an allegation of oral misrepresentation. If that were so, the rule would be, in effect, reversed, and would be that where misrepresentation is alleged in such a way that one could not deny the seriousness of the question to be tried, and the applicant claims rescission, prima facie the contract the mortgagor and mortgagee have made must be suspended.

It seems to me that the adoption of any such principle would be, in the long run, pernicious, because it would tend to destroy or weaken people's confidence in such bargains and in the rights of holders of security."

37 In that case the debt had fallen due by affluxion of time, the applicants had no prospect in the foreseeable future of paying the debt and the allegations of misleading conduct were "not overwhelming strong".

38 Other cases where the rule in Inglis had not been strictly applied were discussed by Matheson J in National Australia Bank Ltd v Zollo [1995] SASC 4988; (1995) 64 SASR 63, and King AJ, having referred to that discussion, in Elders Ltd v Di Giorgio (Unreported, 12 September 1997) Judgment No. S6364 said, at 5:

"What emerges, in my opinion, is that the Court has a discretion whether to restrain the mortgagees, but it is a discretion which must be exercised with due regard to the rights of the mortgagee and the primary rule."

39 Therefore, this is not a case for the necessary application of the rule in Inglis' Case. The balance of convenience involves the exercise of a discretion with due regard to the rights of the mortgagee and to that primary rule.

40 If the plaintiffs have a serious question to be tried, it is not particularly strong.

41 The plaintiffs have not offered any payment or security towards the elimination of the substantial debt due to NAB, a major portion of which relates to the financing of the plaintiffs' own operations. The defendants have granted the plaintiffs significant forbearance while they have attempted unsuccessfully to sell some land and refinance the debt.

42 The immediate cause of the substantial debt incurred by the joint venture, and certainly in respect of the plaintiffs' own operations, appears not to be related to events surrounding the financing arrangements, but to an unforeseen series of adverse trading conditions. Delay in exercising the power of sale, with the accrual of substantial interest, can only prejudice the defendant, given that there is every prospect that the sale of the properties will not now cover the amount of the plaintiffs' debt.

43 The Court has been supplied with no information as to the actual financial position of Mr and Mrs Lekakis, or what steps have been taken (if any) by NAB against them[1], or what prospects the plaintiffs have of recovering from them a pro rata share of any losses that they might have incurred consequent upon the failure of the packing shed venture.

44 While I realise that sale of one or more of the plaintiffs' properties will adversely affect their ability to produce income, and that the income of NAB will be but minutely affected by loss of interest on or even some portion of the capital of these loans, I have no information as to the actual effect sale of one or more of the properties will have on the plaintiffs' ability to earn income or their ability to be able to continue in business. On what has been put to me, I cannot be satisfied that, if the plaintiffs have a case, damages will not be an adequate remedy.

45 Having due regard to the rights of NAB and the primary rule expressed in Inglis' Case, the discretion on the balance of convenience must, in this case, be exercised in favour of the defendants.

46 For these reasons the plaintiffs' application is dismissed.

[1] Since preparing these reasons I have become aware of an application for possession by NAB against Mr and Mrs Lekakis which has been heard by a Master, the final result of which would appear to be not yet resolved: National Australia Bank v Lekakis (17 October 2003) [2003] SASC 360.