M & J Pty Ltd v Australian & New Zealand Banking Group Ltd [1998] FCA 309

REASONS FOR JUDGMENT Background In this proceeding the applicants seek to set aside certain securities ("the Securities") over a number of Hobart properties. They also claim damages for misleading conduct in relation to the Securities. The applicants now seek an interlocutory injunction to prevent the first respondent ("the Bank") from enforcing its powers under some of the Securities, pending the determination of the proceeding. The first applicant, M & J Pty Ltd ("M & J"), is the trustee of a family discretionary trust, the potential beneficiaries of which include the second applicant ("Mr Hunniford") and his wife, the third applicant ("Mrs Hunniford"). Mr Hunniford has for some 27 years practised as a solicitor in Hobart and has also been involved in land development. Mrs Hunniford is engaged in home duties and sometimes works part-time at Mr Hunniford's legal practice. Securities affected by this ruling The Bank has undertaken not to enforce some of the Securities pending the hearing and determination of the proceeding. The undertaking covers securities over the matrimonial home (situated at 4/31 Fitzroy Place Hobart) and securities over a vacant block of land situated at 56 Lipscombe Avenue, Sandy Bay on which Mr and Mrs Hunniford have for some time planned to erect a new home. The securities the subject of the interlocutory application (the "Interlocutory Securities") are the following: 1. Mortgage by M & J over Unit 4 Salamanca Galleria (Certificate of Title Volume 4511 Folio 87, now Certificate of Title Volume 60166 Folio 4); 2. Mortgage by M & J over Unit 18 Salamanca Galleria (Certificate of Title Volume 4511 Folio 92); 3. Mortgage by Mrs Hunniford over Units 12 and 13 Salamanca Galleria (Certificate of Title Volume 4225 Folio 1 and 2, now Certificate of Title Volume 60166 F12 and 13); and 4. Mortgage by Mrs Hunniford over Unit 14 Salamanca Galleria (Certificate of Title Volume 4225 Folio 3, now Certificate of Title Volume 60166 Folio 14). The Salamanca Galleria is a commercial development in Hobart. Basis of applicants' claim The applicants claim that the Bank and its officers (including the second and third respondents) engaged in unconscionable conduct and/or misleading and deceptive conduct in creating the Securities, in breach of their common law duties and in breach of sections 51A, 51AB, 52 and 53 of the Trade Practices Act 1974 (Cth). Their claims are based on principles similar to those stated by the High Court in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. I do not need to decide the merit of those claims for the purposes of this ruling. However I note that the principles arising out of Amadio and similar decisions apply where the person claiming relief is the surety for a debt. As Fullagar J said in Union Bank of Australia Ltd v Puddy [1949] VLR 242 at 247, "the surety is a 'favoured debtor', and the Courts look upon his interests with a jealous eye" (cited with approval by Gibbs CJ in Amadio at 458). Both M & J and Mrs Hunniford are principal debtors, rather than sureties. The Interlocutory Securities are in respect of direct borrowing. In the case of M & J, the loans were advanced for the purchase of the very properties which are the subject of the securities. Moreover, there is no suggestion in the material that Mrs Hunniford was at any disadvantage vis-ŕ-vis her husband. I therefore find it difficult to see how Amadio-type principles could apply to them, and in particular to M & J. However, I need not consider the matter further because there is another ground which compels refusal of an interlocutory injunction. For present purposes, I will accept that there is a serious question to be tried. Injunction Generally, a court will not grant an injunction restraining a mortgagee from exercising powers conferred by a mortgage, in particular the exercise of a power of sale, unless the amount of the mortgage debt is paid into court: Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 (Walsh J, confirmed on appeal: (1972) 126 CLR 168). The general rule applies even where the mortgagor is claiming damages against the mortgagee: Inglis. Counsel for the applicants submitted that the general rule should not apply in this case and relied on Glandore Pty Ltd v Elders Finance and Investment Co Ltd (1984) 4 FCR 130. In Glandore, so the argument went, Morling J distinguished between two classes of case regarding a mortgagee's power of sale. In the first class, 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. In such a case, the general rule in Inglis applies. In the second class of case, there is a question whether the power of sale is exercisable at all, for example if the validity of the mortgage itself is under challenge, as is the case here. In that class of case, the general rule in Inglis will not apply and courts have a discretion to mould relief to suit the circumstances of the case. I do not consider that the two types of case are so clear cut. While it is true that the general rule in Inglis has been relaxed in some circumstances, the whole circumstances of the case will be relevant as to whether the discretion to relax the rule should be exercised. The following statement of Pincus J in Mainbanner Pty Ltd v Dadincroft Pty Ltd (1988) ATPR 40-896 (at 49,662) is applicable to the present case: "The facts of the Glandore case were not by any means identical with this one, but it must be conceded that one reading of the case enables one to extract from it the rule which Mr Crowe mentions. The fundamental principle, however, is that the mortgagee will not be restrained from exercising its security rights at the instance of the mortgagor unless the amount, if it be disputed, is paid into court. Here, there is no possibility of that being done, on the evidence of Mr Lubke. I have noted that not only in the Glandore case, but in other decisions, such as that of the Full Court of the Supreme Court of Queensland in Clarke v. Japan Machines (Aust.) Pty. Ltd. (No.2) (1984) 1 Qd.R. 421, there has been some tendency to relax the requirements of the rule I have mentioned, and I am prepared to assume the correctness of the contention advanced by Mr Crowe that I have some discretion to do so. 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. As Mr Lubke, who gave his evidence in a frank and impressive way, conceded, he has no expectation or hope that within some short time money will be advanced or obtained to pay out the mortgagee. He wants to carry on more or less indefinitely without discharging the debt, while the process which he hopes will result in the business recovering is carried out. Of course, he seeks an order permitting that to occur only until the case is disposed of, and Mr Crowe says that the matter does not seem to be very complicated, and could be dealt with before too long, subject to the availability of a judge. Looking at the matter as one of principle, it appears to me that the essential elements of it are this: 1. there is some evidence that the mortgagee may have adequate security, and I am inclined to think it will; 2. there is a serious question to be tried; 3. the allegations of misleading conduct are not overwhelmingly strong, but one could certainly not deny the possibility of their succeeding. The principal debt fell due last December, not by any process of acceleration, but simply under the parties' agreement; the applicants have no prospect, in the immediately foreseeable future, of paying the debt. I can see that it might be convenient if the courts had and freely exercised a general jurisdiction temporarily to reform the parties' bargain in such cases as these, but the general principle set out in Inglis & Anor v. Commonwealth Trading Bank of Australia (1972) 126 C.L.R. 161 must be respected, until it is changed by a court whose decisions are binding on me, or by the legislature. It seems clear enough that there is no sufficient strength in the present circumstances to justify departure from that principle. Since the applicants are unable to offer the performance of the condition which the principle requires, viz. payment into court, the application for interlocutory relief must be refused." In any case I note that in Glandore, the debtors were ordered to pay the outstanding interest and expenses of the mortgagee. Neither M & J nor Mrs Hunniford have offered to pay any amounts into court. Also, in Glandore the value of the security was more than double the amount of the mortgage debt. By contrast, in this case the debt relating to the Interlocutory Securities exceeds the value of the properties. In those circumstances, I can see no reason why the general rule stated in Inglis should not apply. Accordingly, I dismiss the application. There will be an order that the applicants pay the Bank's costs.