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[2026] NSWSC 599
Supreme Court of NSW
2026-05-29
Hammerschlag CJ in Eq
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: MCR Melrose Pty Ltd v Borger Crane Hire & Rigging Services Pty Ltd [2026] NSWSC 599
Hearing dates: 25 May 2026
Date of orders: 29 May 2026
Decision date: 29 May 2026
Jurisdiction: Equity
Before: Hammerschlag CJ in Eq
Decision: The Amended Statement of Claim is dismissed with costs.
Catchwords: CONTRACT — Construction — Where a Business Sale Agreement contract provides for apportionment of a purchase price to equipment, goodwill and other assets less “Less Encumbrances” and all figures to be updated “upon receipt of payout figures for the Encumbrances for all financed equipment” and to be confirmed on Settlement Date — Where at the date of sale the Vendor is party as borrower/lessee to a number of finance agreements relating to cranes on which both principal and interest are payable — Where before Completion the finance agreements are novated to the Purchasers — Where financier provides payout figures before Completion which include principal and interest component — Where figures are not confirmed on Settlement Date but are not in dispute — Where Purchaser calculates purchase price and pays on the basis of the payout figures – Vendor contends that because of the novation the adjustment for Encumbrances should be principal only and no interest and brings proceedings for declaratory relief and payment to it of the interest component of the adjustment — HELD — The adjustment for Encumbrances includes both principal and interest component and absence of confirmation on Settlement Date is no bar to the Purchaser’s claim for adjustment including interest component — Proceedings dismissed
Original judgment source is linked above.
Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), r 42.34
Cases Cited: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
Category: Principal judgment
Parties: MCR Melrose Pty Ltd (ABN 73 083 164 845) (Plaintiff)
Borger Crane Hire & Rigging Services Pty Ltd (ABN 98 001 947 413) (First Defendant)
Borger Holdings Pty Ltd (ABN 70 150 149 321) (Second Defendant)
Representation: Counsel:
MW Young SC (Plaintiff)
S Andrews (Defendants)
Solicitors:
Finn Roache Lawyers (Plaintiff)
Webb Henderson (Defendants)
File Number(s): 2025/00188485
Publication restriction: Nil
This case transpires to be about $361,058. The Court Book spans 473 pages.
The Plaintiff owned a mobile crane business called Melrose Cranes. It sold it to the Defendant by an undated written Business Sale Agreement, apparently entered into on 24 October 2024 (the Contract). The Completion Date was stipulated to be 6 November 2024 or some other date agreed by them in writing. As it happened, Completion occurred on 5 November 2024.
The purchase price was $22,500,000, to be adjusted downwards by the accrued entitlements of the Plaintiff’s employees as at the Completion Date, and Encumbrances estimated in the Contract to be $16,200,000.
The controversy is about the amount of the adjustment for Encumbrances. There had been a dispute about employees’ entitlements (pleaded in the Plaintiff’s Amended Statement of Claim), but it was resolved.
As at the date of the Contract, the Plaintiff (as lessee) was party to 49 equipment finance contracts, including for cranes. Five such contracts are relevant, each one for a crane. [1] They are styled “Master Chattel Mortgage Agreement (Sub-Hire)” (Mortgages) and each of them was with a financier called De Lage Landen (DLL). DLL used the trading name Manitowoc Finance.
The Mortgages record that DLL paid the supplier for the cranes. The payment is treated as a loan by DLL to the Plaintiff, on the security of the equipment.
The selling price of the equipment (including GST) is the total Loan Amount. The Plaintiff was required to pay, over a period of time, a fixed amount comprising the total Loan Amount (ie. the principal) plus an additional amount representing interest. The repayment was by way of a large instalment at the start, then a series of lesser monthly instalments and finally a large “balloon” payment. The total of the instalments equal the Loan Amount plus the additional interest amount.
The Mortgages make no provision for early repayment or discharge by the Plaintiff.
The two provisions in the Contract which are pertinent are the definition in cl 1.1 of “Encumbrance” and cl 4, which provide:
1.1. Definitions
…
Encumbrance means any mortgage, Security interest, charge (fixed or floating), lien, pledge, hypothecation, title retention, option, restriction as to transfer, use or possession, or any agreement to create any of them, other than:
a) a charge or lien arising by operation of law;
b) any lien, retention of title arrangement or other encumbrance arising in the ordinary course of business.
as outlined in Schedule 7.
…
4. Purchase Price
The Purchase Price is apportioned as follows. All figures to be updated upon receipt of payout figures for the Encumbrances for all financed equipment:
These figures are to be confirmed on Settlement date
| $22,450,000.00 | Cranes + Trucks + Light Vehicles + Trailers + Ancillary Liftin and Rigging Gear | | $20,000.00 | Goodwill | | $30,000.00 | Other Assets (Office, Workshop and Other Equipment) | | $22,500,00.00 | Purchase Price | | ($3,200,000.00) | less adjustment of Entitlements of the Transferring Employees (estimated at $3.2m to be adjusted as at the Completion Date) | | $19,300,00.00 | adjusted Purchase Price | | ($16,200,000.00) | Less Encumbrances estimated to be $16,200,000.00 | | ($20,000.00) | Less insurance excess payment as per Clause 7.3 c) | | $3,080,000.00 | Surplus to the Vendors |
Schedule 7 is a list of the Encumbrances. The Mortgages are listed.
Where cl 4 refers to “Less Encumbrances” this self-evidently means less the value of Encumbrances, that is, less the amount that needs to be paid to free the security. The chapeau makes it clear that that value is to be derived from payout figures (which must obviously be provided by the lender/lessor/mortgagee).
The Contract is a commercial contract and interpreting it requires an objective assessment of what a reasonable person would have understood its provisions to mean. Preference is given to a construction which avoids commercial inconvenience and upholds the parties’ bargain. The Court will prefer a construction which avoids capricious, unreasonable, inconvenient or unjust consequences: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [47]-[51].
The commercial object which cl 4 intends to secure is that the Defendant pays as the part of the purchase price attributed to the equipment it is getting, the unencumbered equity in that equipment. In other words, the purchase price is reduced by the amount the Plaintiff (or the Defendant as the new owner) would have to pay DLL to remove the Encumbrance.
Prior to Completion, two materially relevant things happened:
DLL provided a payout figure of $4,791,698 (for all the Mortgages – broken up into an amount for each one); and
By undated written Agreement for Novation Accession and Release, DLL and the Defendant (without the involvement of the Plaintiff) novated the Mortgages to the Defendant (thereby effectively releasing the Plaintiff), for no additional consideration. It is not in dispute that on the date of Completion, the Mortgages were effectively transferred from the Plaintiff to the Defendant, ie. the Defendant became the borrower and the security giver.
The figure of $4,791,698 was used by the Defendant to calculate the Encumbrance adjustment to the purchase price for the Mortgages. I will refer to it as the Adjustment Amount.
It is not in issue that the Adjustment Amount exceeded the principal, ie. the Loan Amount, then outstanding, by $361,058. In other words, the Adjustment Amount includes $361,058 attributable to interest (presumably discounted to present day value) payable over the remaining life of the Mortgages.
The Plaintiff argues that the Encumbrance value of the Mortgages (which were novated to the Defendant for no additional consideration) cannot exceed the outstanding principal on the date of the novation, as I understand it, because having been novated to the Defendant, there was no liability on the Plaintiff to pay interest after that date.
I reject this submission.
The amount payable to free the equipment of Encumbrance was the same the moment before the novation and the moment after it. The novation had no effect on the Encumbrance value of the equipment. The Mortgages were not discharged, they were novated.
If the Plaintiff’s submissions were correct, its logical consequence would be that there should be no adjustment at all because after the novation neither principal nor interest was any longer payable by the Plaintiff. The Plaintiff correctly did not embrace this as a maintainable outcome. Senior Counsel for the Plaintiff described the proposition as a “playful suggestion”.
Upholding the Plaintiff’s submission would have the consequence of giving it a windfall gain. Had it discharged the security it would have had to pay the full payout figure but because of the novation the interest component would have to be borne by the Defendant. This would entail giving the expression “Less Encumbrances” a meaning which does not accord with the ordinary meaning of the words used and would have a capricious, unreasonable or unjust outcome.
I observe that cl 4 provides that the “figures are to be confirmed on Settlement Date”. No such confirmation took place. But neither party correctly contended that the clause did not operate if there was no formal confirmation or that such confirmation was a condition precedent to the operation of the Contract. I would in any event hold that if there was no confirmation it would be implied that the figure must be reasonable. Given that they were provided by DLL and not disputed by the Plaintiff as being genuine payout figures I would hold them to be reasonable and sufficiently proved.
No claim for any adjustment other than that as articulated above was pleaded by the Plaintiff. It follows that the Plaintiff’s claim cannot succeed.
I record that had the Plaintiff succeeded, I would nevertheless not have made an order in its favour for costs because its maximum verdict was less than the threshold provided in UCPR 42.34(1)(a) and these proceedings could have been brought in the District Court. Additionally, the Plaintiff did not persist in its claim with respect to employee entitlements.
The Amended Statement of Claim is dismissed with costs.
The Exhibits are to be returned.
**********
They were entered into respectively on or about 25 September 2020, 11 April 2023, 28 November 2023, 18 January 2024 and 13 May 2024.
MCR Melrose Pty Ltd
Borger Crane Hire & Rigging Services Pty Ltd
(2015) 256 CLR 104