The plaintiffs in these proceedings are MCDS Group Nominees Pty Limited ("MCDS") and Mr Warren Anderson. MCDS is the trustee of the Warren Anderson Trust. It became the trustee shortly prior to the commencement of the proceedings in place of Owston Nominees No 2 Pty Limited ("Owston"). Its sole director is Mr Anderson's daughter.
Owston has been in liquidation since November 2010. Mr Anderson is an undischarged bankrupt. MCDS is itself admitted to be impecunious.
The first defendant, Angas Securities Limited ("Angas"), lent considerable sums to Owston. The second defendants, Messrs Duncan and Powell, are receivers and managers appointed by Angas in March 2009 over certain assets of Owston. In November 2009, they were appointed as receivers and managers over other property of Owston, including the property known as the Fernhill property in Mulgoa ("the property"). The receivers have been in possession of the property ever since, and are in the process of selling the now sub-divided land. Angas is a registered mortgagee over the property.
MCDS has lodged three caveats over various parts of the property. By the caveats it claims interests in the land based on alleged voidable transfers by the mortgagee in possession or a voidable appointment (presumably by Angas of the receivers), and pursuant to the matters alleged in these proceedings. The caveats were lodged on about 3 August 2016.
By a Notice of Motion filed on 30 August 2016, later amended on 6 September 2016, Angas seeks various orders, including orders under s 74MA of the Real Property Act 1900 (NSW) for the removal of the caveats. That aspect of the motion was referred to the Duty List for hearing.
On 10 October 2016 the plaintiffs filed a Notice of Motion by which interlocutory orders are sought restraining Angas from completing two contracts for sale in respect of parts of the property, and restraining Angas from exercising any rights of sale in respect of various other parts of the property which have not yet been sold.
On an application under s 74MA the Court enquires whether the caveator would have been granted an interlocutory injunction to protect the interest claimed in the caveat. If no such interlocutory injunction would have been granted, the caveat should be ordered to be withdrawn (Bayblu Holdings Pty Limited v Capital Finance Limited [2011] NSWCA 39 at [20]). There is thus a significant degree of overlap between the issues raised by the respective applications. They were heard together in the Duty List on 11 October 2016.
The plaintiffs, for whom Mr Ogborne of counsel appeared, submitted that there was a sufficiently arguable case for final relief to warrant the grant of interlocutory relief having regard to the balance of convenience. It was submitted that it was arguable that no power of sale had come into existence. In essence, the plaintiffs contended in their written submissions:
1. that Angas had failed to serve a notice under s 57(2)(b) of the Real Property Act at any time prior to purporting to exercise a power of sale over the property;
2. that the debt secured by mortgage AF380603 had been repaid prior to 19 November 2010 when the second defendants were appointed as receivers and managers of the property, such that Owston had a right to redeem the mortgage and Angas held the property on constructive trust for Owston; and
3. that even though Angas later took an assignment of a mortgage from Balanced Securities Limited (mortgage AD948203) Angas was seeking only to exercise powers of sale under mortgage AF380603.
The s 57(2)(b) point was dealt with by the defendants, for whom Mr Roberts SC appeared, by the tender of a section 57(2)(b) notice dated July 2011 in respect of mortgage AF380603. The point was not then taken further by Mr Ogborne in his oral submissions.
In relation to the debt position as at 19 November 2010, evidence was adduced from Mr Luckhurst-Smith, a director of Angas, that the amount outstanding at about that time (under loan number 359) was in excess of $2.5 million. Mr Anderson, who swore two affidavits in support of the plaintiffs' application, did not accept the authenticity or accuracy of that evidence, but did not otherwise make any attempt to contradict it. Some other parts of Mr Anderson's affidavit (sworn on 29 September 2016) contained calculations or estimates which are said to indicate that Angas ought to have received certain amounts of net proceeds of sale of various properties and chattels in 2009 and 2010. However, that material does not in my view provide a firm basis to doubt the apparent accuracy of Mr Luckhurst-Smith's evidence concerning the debt outstanding on loan 359 at the time the receivers and managers were appointed in 2010.
As for mortgage AF380603, its provisions secure all amounts owing to Angas under any agreement (including any mortgage) between Owston and Angas. That would include all amounts owing under the mortgage between Owston and Angas which Angas took by assignment from Balanced Securities Limited. Mr Ogborne did not contend to the contrary.
There is evidence before the Court that, taking into account the assigned debt, Angas is presently owed about $45 million by Owston. The validity of the assignment is not challenged by the plaintiffs; neither is the extent of the assigned debt, which was about $36.6 million at the time of the assignment in 2012. There is no suggestion that such debt has since been reduced.
It is relevant to note, in considering the strength of the plaintiffs' claims, that despite the fact that aspects of the receivership have previously been the subject of litigation in which either or both of Owston and Mr Anderson were parties, there has not previously been any dispute that Owston was significantly in debt to Angas. It was not contended in such litigation that there was no debt owing at the time any of the receivers were appointed. It was not contended in such litigation that no power of sale had arisen. The earlier litigation includes Family Court proceedings in 2012 in which Mr Anderson unsuccessfully sought to restrain Angas from exercising its power of sale over the property.
It seems to me that in all the circumstances the plaintiffs' claim that Angas does not have a power of sale that is exercisable in respect of the property must be regarded as very weak, and falls short of raising a serious question to be tried as to the existence of a power of sale.
To the extent that the plaintiffs allege that the defendants have breached duties in their dealings with Owston's property, such claims do not support the interests claimed in the caveats. If ultimately accepted, such claims would afford monetary relief only on an account. In any event, these claims need to be viewed in the light of the fact that Angas is indisputably owed about $36.6 million.
I note that the plaintiffs also suggest that the sale process being undertaken by Angas amounts to a "fire sale". I am unable to accept that suggestion, which in my view is not made out on the evidence of Mr Anderson to which I was referred in this regard. On the contrary, the weight of evidence suggests that Angas has made considerable efforts over many years to sub-divide and then proceed to sell the property.
In my assessment of the evidence before the Court, the plaintiffs have not shown a sufficiently strong case to justify the grant of interlocutory relief to restrain Angas from proceeding with the two existing contracts for sale, or to restrain Angas from exercising rights of sale in relation to other parts of the property (see Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [65]).
In addition, it seems to me that the balance of convenience is against the grant of the interlocutory relief claimed.
The granting of such relief would stymie the sale process and lead to the already substantial level of debt increasing further. Whilst MCDS offers the usual undertaking as to damages, it is conceded that such undertaking lacks substance. In addition, in circumstances where the claim that Angas does not have a power of sale is very weak, there is no offer to pay into Court the amount claimed by the mortgagee to be due, or even some portion of such amount. This is not a case where the ordinary requirement to pay money into Court would be relaxed to that extent.
The evidence shows that Angas has undertaken significant work in relation to the sub-division, marketing and sale of the property over a number of years. Preventing completion of the two contracts will of course have a detrimental impact upon the purchasers under those contracts. Those contracts are due for completion (subject to the giving of a 21 day period of notice).
It was not suggested that declining to grant the interlocutory relief sought would prevent the plaintiffs from pursuing their monetary claims against the defendants, or render those claims futile.
Finally, it is relevant to note, as a matter going to discretion, that there is no satisfactory explanation given as to why the present claims, and the interlocutory relief sought in respect of them, are only being advanced now, many years after the appointment of the receivers and the commencement of enforcement action under the mortgage.
I should mention one further matter relevant to discretion. It appears from the Court file that on 29 September 2016 the Court was informed (on a without admissions basis) that MCDS would provide its consent to the variation of certain agreements concerning the property known as Biobanking Agreements. A form of consent was provided to the plaintiffs' solicitor on 30 September 2016. Despite a further request made on 5 October 2016 for the consent to be executed, the consent had not been provided when the matter came before the Court on 11 October 2016. During the course of the day a form of consent was provided to the legal representatives of the defendants, but this form was not executed by MCDS in accordance with s 127(1) of the Corporations Act 2001 (Cth). It is a matter of some concern that the statement made to the Court on 29 September 2016 was not acted upon in a timely manner, regardless of whether such statement is treated as a formal undertaking to the Court.
For the above reasons, I am not prepared to grant the interlocutory relief sought by the plaintiffs. Further, I conclude that MCDS would not have been granted interlocutory injunctions to protect the interests it claims in its caveats over the property. Accordingly, those caveats will be ordered to be withdrawn. It is not necessary to consider various arguments advanced by the defendants concerning the manner and form in which the interests were claimed in the caveats.
The defendants sought an order that MCDS be restrained from lodging any further caveats in respect of the property. However, I was informed that MCDS has not lodged any caveats over the property other than those the subject of the present application. In these circumstances, I consider that the protection afforded by s 74O of the Real Property Act is sufficient.
The orders of the Court are:
1. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) that the following caveats registered by MCDS Group Nominees Pty Limited be withdrawn by 4pm on 13 October 2016:
1. Caveat AK648702Y registered over titles 1/260373, 2/260373, 3/260373, 4/260373, 2/211795 and 12/610186;
2. Caveat AK648720W registered over titles 100/717549, 2/541825, 10/615085 and 11/615085; and
3. Caveat AK643467J registered over titles 6/173159, 1/570484, 31/237163 and 1/549247.
1. Order that paragraphs 1, 2 and 3 of the plaintiffs' Notice of Motion filed on 10 October 2016 be dismissed.
2. Order that the plaintiffs' pay the defendants' costs of the defendants' application for removal of the caveats, and the defendants' costs of the plaintiffs' application for injunctive relief.
[2]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 13 October 2016