Inglis v Commonwealth Trading Bank of Australia

High Court of Australia|1972-07-01|Before: Walsh J, Gibbs JJ

High Court of Australia Walsh J. Barwick C.J. Menzies and Gibbs JJ. Inglis v Commonwealth Trading Bank of Australia

ORDER Applications dismissed with costs. Appeal dismissed with costs. Dec. 3 Walsh J.

I propose to give judgment on the application for an interim injunction.

The amended statement of claim has been considered by me on an earlier occasion when I heard an application on behalf of the defendant that it should be struck out. On that occasion I ordered that certain parts of the amended statement of claim be struck out and an appeal from the order striking out those parts of the statement of claim has been dismissed.

The application which is now before me has been standing over and has recently been restored to the list for hearing. Meanwhile there has been in operation an undertaking given by the defendant that it would not sell or offer or advertise for sale or otherwise dispose of or attempt to dispose of the property "Lammermuir" referred to in the amended statement of claim before the Court has given its decision on the appeal and cross- appeal No. 59 of 1970 or thereafter until six weeks have elapsed from the service at the plaintiffs' address for service by the defendant on the plaintiffs of a notice given after the decision in the said appeal and cross-appeal that it intends so to act.

In the action the plaintiffs seek damages against the defendant for breaches of contract, for defamation, for fraud and for conspiracy. The amended statement of claim contains also a prayer for an order for accounts on the basis of wilful default, a prayer for a declaration that any debt which is claimed by the defendant to be due for payment by the plaintiffs to the defendant is more than counter-balanced by the damages which the plaintiffs claim from the defendant, a prayer for an order that the defendant return the title deeds of the property known as "Lammermuir", the subject of an indenture of mortgage, to the plaintiffs immediately, and prayers for an injunction to restrain the defendant from taking any action in respect of a certain notice of demand dated 30th August 1968 and from taking any action in respect of any other demand notice and an injunction, until the action be decided, from dealing in any way with the property, "Lammermuir".

It is not in dispute that a mortgage was executed by which the property "Lammermuir" was mortgaged to the defendant to secure an overdraft or that the plaintiffs became indebted to the defendant in respect of a debt secured by the mortgage or that the debt has not been paid off in money or that the mortgage has not been discharged.

The plaintiffs do dispute in affidavit evidence which is before me in this application as well as in their amended statement of claim that any debt is owed by the plaintiffs to the defendant under the said mortgage, but it is clear that they do not claim either that no indebtedness arose at any time or that the indebtedness has been discharged by payment.

The ground upon which the denial of the existence of any debt is based is that any debt that did exist is more than counter-balanced by the damages to which the plaintiffs claim to be entitled.

There is a dispute as to the value of the property "Lammermuir", but I find no need in this application to deal with that dispute.

The plaintiffs contend that there should be an injunction until all the issues in the action have been finally determined, in order to protect their proprietary interest in the property "Lammermuir" and to preserve that property so that if the plaintiffs should succeed in establishing their claim for damages in a total amount exceeding any amount in which upon the taking of accounts between the parties it is ascertained that the plaintiffs would otherwise have been indebted to the defendant, they may be in a position to claim that they hold the property free from the mortgage.

In an affidavit filed on behalf of the defendant it was stated that the plaintiffs, at the time of which the affidavit speaks, that is to say, 29th September 1970, were indebted to the defendant in an amount of $37,260.35, excluding legal costs incurred by the defendant with which it claimed to be at liberty to debit the account of the plaintiffs in terms of the mortgage.

It is proved that since that date no payment has been made in respect of that indebtedness. The plaintiffs have not made any offer to pay off the amount which the defendant claimed to be due under the mortgage or any of it or to pay any sum into court, whether that sum be the amount so claimed or any other amount.

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.

The rule, as it affects the exercise by a mortgagee of the power of sale, is stated in the following terms in Halsbury's Laws of England, 3rd ed., vol. 27, p. 301:

The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute, or because the mortgagor has commenced a redemption action, or because the mortgagor objects to the manner in which the sale is being arranged. He will be restrained, however, if the mortgagor pays the amount claimed into court, that is, the amount which the mortgagee swears to be due to him, unless, on the terms of the mortgage, the claim is excessive. Then there is a reference to a special case where the mortgagee was the mortgagor's solicitor. The plaintiffs contend, however, that such a rule can have no application in this case, in which the action brought by them is brought to establish a claim that upon balance there is no debt due by them to the defendant, but on the contrary, there is a balance due to them. They contend that that action is not one in which they seek to maintain rights in the capacity of mortgagors.

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.

The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed.

In my opinion the fact that such claims have been brought provides no valid reason for the granting of an injunction to restrain, until they have been determined, the exercise by a mortgagee of the remedies given to him by the mortgage.

The view that I have just expressed is in accordance with the recent decision of Megarry J. and of the Court of Appeal in Samuel Keller (Holdings) Ltd. v. Martins Bank Ltd. [1] . It is worthwhile, I think, to quote a passage from the judgment in that case of the judge at first instance, Megarry J., whose decision was afterwards affirmed by the Court of Appeal. He said this [2] :

Mr. Brodie cited certain authorities which tended to establish that apart, no doubt, from a formal release, and so on, nothing would discharge a mortgage debt save the actual payment and acceptance of the sum due. His Lordship then referred to several authorities which had been cited to him. Then he went on: To these may be added Bank of New South Wales v. O'Connor [3] . I do not think that what was said in Bolt & Nut Co. (Tipton) Ltd. v. Rowlands Nicholls & Co. Ltd. [4] was intended to affect that position. Certainly the concept that the appropriation of an unliquidated claim to a mortgage debt by the mortgagor will effect a discharge nisi of that debt seems both novel and awkward. Unless and until the mortgage in this case is discharged in the appropriate way upon actual payment and acceptance of the sum due, I think that the mortgage remains a mortgage, and that the mortgagee is entitled to any surplus proceeds of sale in the hands of the bank up to the amount properly due under the mortgage. A doctrine of the discharge of a mortgage debt by the existence or unilateral appropriation of an unliquidated claim is one to which I give no countenance: I regard it as neither convenient nor just. 1. [1971] 1 W.L.R. 43; [1970] 3 All E.R. 950. 2. [1971] 1 W.L.R., at pp. 47-48; [1970] 3 All E.R., at p. 950. 3. (1889) 14 App. Cas. 273. 4. [1964] 2 Q.B. 10.

In argument addressed to me on behalf of the plaintiffs, it was put that they have proprietary rights as owners of the property "Lammermuir" and that the Court will act to preserve those rights until all the matters in the dispute between the parties have been resolved.

But the proprietary rights as owners which the plaintiffs have are rights which are subject to and qualified by the rights over the property given to the defendant by the mortgage. If the defendant exercises the latter rights or threatens to do so that is not, as such, an act or a threatened act in contravention or infringement of the plaintiffs' proprietary rights. Of course, a mortgagee does at some times act, in purported exercise of the rights and the powers given to him by the mortgage, in a manner which is not a proper exercise of them and which does infringe the rights of the mortgagor. But that is not what is in question in this application, which is an application designed to prevent, until the action is determined, any exercise of the mortgagee's powers.

I am aware, of course, that the amended statement of claim includes charges that in relation to the keeping of accounts and in failing to give proper statements of account to the plaintiffs and in other ways the defendant has acted wrongfully. In this connexion, I may refer particularly, perhaps, to pars 94 and 94A of the amended statement of claim. But it is not those acts against which relief is sought in the present application.

In my opinion the fact that those charges have been made and there has not yet been an adjudication upon them is not a reason for restraining the defendant from exercising its powers under the mortgage. As I have stated, it is not in dispute that there was an indebtedness under the mortgage, that is to say, that there were advances of money which were not repaid. Neither the existence of disputes as to the correct amount of that indebtedness nor the claim already mentioned that, whatever it was, it had been counter-balanced by the claim of the plaintiffs for damages is a ground, in my opinion, for preventing the mortgagee from exercising its rights under the mortgage instrument.

In Morgan & Son Ltd. v. S. Martin Johnson & Co. Ltd. [1] , a passage was cited from the judgment of Lord Cottenham in Rawson v. Samuel [2] , and in which Lord Cottenham referred to some earlier cases which he described as being cases where - I quote his words - "the equity of the bill impeached the title to the legal demand".

[1949] 1 K.B. 107. 2. (1841) Cr. & Ph. 161, at p. 179 [ 41 E.R. 451, at p. 458].

One of those early cases was Piggott v. Williams [3] . In that case a solicitor filed a bill for foreclosure of an estate pledged as a security for costs and there was a cross bill alleging that the costs demanded were occasioned by the negligence and want of skill of the solicitor, and that therefore nothing was due. A demurrer to the cross bill was overruled. The plaintiffs in the present case have sought to place some reliance upon Morgan & Son Ltd. v. S. Martin Johnson & Co. Ltd. [1] , and upon the citation therein of the earlier authorities, to some of which I have referred. I have looked at the case of Rawson v. Samuel [2] and I do not find in it any support for the argument of the plaintiffs in the present case, nor do I think that the decision in Piggott v. Williams [3] assists them. That case was concerned with the question whether, against a plaintiff who had come to the court to enforce a security, the defendant could assert by a cross bill that nothing was due under the security, because the debt which it was intended to secure had never been incurred at all. That is not the situation in the present case.

(1821) 6 Madd. 95 [56 E.R. 1027]. 2. [1949] 1 K.B. 107. 3. (1841) Cr. & Ph. 161 [ 41 E.R. 451]. 4. (1821) 6 Madd. 95 [56 E.R. 1027].

In my opinion none of those early cases affects the principles enunciated in the recent case of Samuel Keller (Holdings) Ltd. v. Martins Bank Ltd. [4] , in which the court considered the case of Morgan & Son Ltd. v. S. Martin Johnson & Co. Ltd. [1] .

[1971] 1 W.L.R. 43; [1970] 3 All E.R. 950. 2. [1949] 1 K.B. 107.

The result then is that I consider that the well-established rule to which I referred earlier as the general rule, is not displaced in the present case by the circumstance that the plaintiffs have raised claims for damages and other claims against the defendant in an action brought by the plaintiffs in this Court.

I am of the opinion that the case is not one in which the Court should intervene to restrain the exercise by the mortgagee of whatever powers it has under the mortgage instrument. 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 application contained in the summons of 16th September 1970 is dismissed with costs.

I have before me a summons filed on behalf of the plaintiffs on 2nd October 1970. It sought a number of orders relating to the proceedings that should take place on the hearing of a different summons of 16th September 1970, in which an interlocutory injunction was sought.

I have dealt to-day with the latter summons which has been dismissed. The summons of 2nd October 1970, with which I am now dealing, was before me on 11th December 1970, together with certain other matters, including the summons of 16th September 1970, and was stood over to come on for hearing with the further hearing of the summons of 16th September 1970. It is in pursuance of that order and of a notice given consequentially upon that order that the matter is now before me again.

Having considered the nature of the orders which were sought by the summons of 2nd October 1970, I am of opinion that, as the application of 16th September 1970 has now been heard and determined, there is no reason to make any of the orders sought in the summons of 2nd October 1970. The matters to which it related are matters that are really past and gone and have no further relevance now.

For those reasons, I would dismiss this summons. I make no order as to its costs.

A summons was also taken out on behalf of the plaintiffs on 9th November 1971. In the circumstances which now exist and which are consequential upon the dismissal of the summons of 16th September 1970, I order that the summons of 9th November 1971 be dismissed with costs.

I have not heard anything, nor been referred to any authority, which causes me in the least to doubt the correctness of the refusal of Walsh J. to grant the interlocutory injunction sought by the appellant or the reasons which he gave for that refusal. I find no need to discuss the arguments offered, and the authorities referred to, by the appellant. Such of them as were relevant are sufficiently answered in his Honour's reasons.

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.

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