Permanent Custodians Limited v McMahon

Supreme Court of NSW|2013-03-27|Before: Button J

EX TEMPORE Judgment 1Before the Court is a motion brought by the defendant seeking to restrain an auction that, I am informed, is to take place at 10:30am tomorrow with regard to a property called "Summerdowns". There is also an auction proposed, I am informed, with regard to another property known as "Wyrallah". The motion seeks to restrain those sales, and in particular, the sale set down for tomorrow until further order of the Court. What is proposed is that, if I were to make the order sought, the matter should promptly return to the Registrar's list in a week or two with an eye to quick determination.

Background 2A brief conspectus of the background is as follows. It seems that there is no dispute that the defendant and his wife entered into a loan agreement with the plaintiff for a sum of money. The agreement was guaranteed by companies associated with the defendants. It was also secured by a mortgage over a number of properties. 3The defendants defaulted in 2009, and mediation took place pursuant to the Farm Debt Mediation Act 1994 ("the Act"). That mediation was successful, in the sense that a document entitled "Heads of Agreement" was signed by the parties. Amongst other things, it called upon the defendants to do certain things by 15 August 2011. 4On the 11 August 2011, the Rural Assistance Authority ("the Authority") issued a certificate pursuant to s 11 of the Act. One of the matters about which the Authority expressed itself to be satisfied in that certificate was that there was default with regard to the farm mortgage. I interpolate to say that the latter term is defined in s 4 of the Act. However, its parameters are not entirely clear. 5It seems that the defendants failed to comply with their obligations pursuant to the Heads of Agreement. Eventually, the plaintiff filed a statement of claim in this Court seeking possession of the properties and a sum of money. That was resolved by way of the entry of consent orders giving the plaintiff possession and quantifying a debt of approximately $3.75 million by the plaintiffs owed to the defendants. At that stage the defendants were represented. 6Later, a writ of possession was issued and I am informed it has been enforced. In other words, the plaintiff is in possession of "Summerdowns". As I have said, it is proposed that "Summerdowns" be sold tomorrow and, as I understand it, "Wyrallah", at some indeterminate date.

Submissions 7The submission by the solicitor for the defendant, who is the applicant on the motion is, as I understand it, a reasonably simple one. He submits that the decision of the High Court of Australia in Waller v Hargraves Secured Investments Ltd [2012] HCA 4; (2012) 245 CLR 311 calls into question precisely what is the farm mortgage with regard to which the Authority needs to be satisfied there is default at the time of the issue of the certificate. He submits that it is reasonably arguable, to use an inexact phrase, that the Heads of Agreement entered into at the end of the mediation forms the farm mortgage, and not the original mortgage entered into at the time of the loan. The solicitor for the defendant submits that it is reasonably arguable, therefore, that the certificate was misconceived, in that as at 11 August 2011, there was no default with regard to the obligations of the defendants in the Heads of Agreement. 8He further relied upon the decision of McCallum J in Hargraves Secured Investments Limited v Sharpe [2013] NSWSC 177. In that case, handed down less than a month ago, and in circumstances of similar urgency to this one, her Honour was prepared to restrain an auction founded on an argument similar, but not identical to, the argument made in these proceedings by the solicitor for the defendant. 9Finally, the solicitor for the defendant submitted that the sale of the property by way of auction would be an irrevocable step, and the balance of convenience calls for that to be restrained, at least for the time being. 10Counsel for the plaintiff submitted that there is, in truth, no arguable case based upon the decision of the High Court to which I have referred. He submitted that the construction contended for by the solicitor for the defendant would lead to bizarre results that would not be in the interests of persons whom the legislation is designed to protect. 11Secondly, he submitted that in Waller v Hargraves Secured Investments Ltd there had been three separate loan agreements, each one extinguishing the prior ones, and there had been a deed entered into after a mediation that had the same effect. In short, he submitted that the decision of the High Court could be distinguished without difficulty. 12In Hargraves Secured Investments Limited v Sharpe, he submitted the deed extinguished the prior loan and mortgages and, therefore, changed the rights of the parties substantially. In short, he submitted that Hargraves Secured Investments Limited v Sharpe could be distinguished as well. 13Quite apart from his submissions on the substantive question, counsel for the plaintiff submitted that the balance of convenience is a central factor for me to consider in determining whether or not relief in the nature of injunctive relief should be granted. He submitted that the original default occurred over three years ago, and yet this application is brought on figuratively at one minute to midnight. He further submitted that this Court would be very slow to overturn or frustrate consent orders entered into some time ago by parties who were represented. And he submitted that the whole history of the proceedings demonstrates that the defendants have been dilatory, and perhaps dishonest, in their conduct since the default. 14Finally, I permitted him from the Bar table to inform me of his instructions as to the total debt, the fruits of other mortgagee sales, and the expected fruits of this sale. In short he submitted that the plaintiff will never see all of its money, and all that will happen if the orders sought in the motion are granted, is that the plaintiff will incur further costs as a result of the postponed auction, and interest will continue to accrue daily, with no recourse on the part of his client. 15I should say, however, that I permitted the solicitor for the defendant to indicate that, on his instructions, at least, there may be a question as to whether or not, in truth, there will be a shortfall with respect to the debt owed to the plaintiff. 16Ultimately, counsel for the plaintiff submitted that, even if the submission of the solicitor for the defendant is completely correct, it will ultimately be fruitless litigation in that nothing more than a temporary stay of a mortgagee sale would be able to be achieved.

Determination 17It is to say the least highly regrettable that such an application would be placed before the Court almost exactly 24 hours before the auction, with the consequence that I have not been in a position to consider the matter with time for a great deal of reflection. 18However, considering the decisions of the High Court and McCallum J, I am unable to rule out completely the possibility that the submission of the solicitor for the defendant with regard to the true construction of the Act could be correct. I consider that, even if it would be as a matter of reality nugatory to do so in the circumstances of this case, I should be slow to take a step that would preclude the defendant from having the proper procedures adopted by way of a piece of legislation that is, in broad terms, beneficial to persons in his position. 19I accept the submission of counsel for the plaintiff that there are four broad questions requiring determination, in an application such as this. The first is: is there a serious question to be tried; the second is: has the plaintiff demonstrated that, in short, damages will not be an adequate remedy; the third is: does the balance of convenience justify the granting of the injunctive relief; and the fourth is: whether there are any further discretionary factors that tell against the making of the orders sought. 20I have already dealt with the first factor and, as I have indicated, come to the view, perhaps hesitantly, that there is a serious question to be tried. As for the second factor, there is force in the submission of counsel for the plaintiff that it is difficult to conceive of circumstances in which the defendant could be entitled to damages if the sale goes ahead. That may well be right but I do not regard it as determinative. 21With regard to the third factor, namely, the balance of convenience, I accept many of the submissions of counsel for the plaintiff. However, in light of the irrevocable nature of the sale of the property or properties in question, I consider that the balance of convenience favours restraining the sales, but for a period of no more than two weeks. I should also indicate, at this stage, that I certainly will require an undertaking as to damages from the defendant or defendants. 22The fourth and final matter is whether there are discretionary factors that weigh against the granting of the injunction. I shall not repeat the factors to which I have referred earlier in my judgment, but suffice to say there certainly are such factors. I have weighed them in my determination, but again I do not regard them as determinative. 23In short, I am prepared to make the orders sought in the notice of motion filed today, in particular orders 6 and 7. 24During the hearing I requested counsel for the plaintiff to formulate whatever orders he would seek to best protect the position of his client, as against the possibility that those orders would be made. He indicated he would seek an undertaking as to damages arising from the making of orders. He would also seek to have the matter given expedition by me. 25I make the following orders: (1)The plaintiff by itself, its servants and agents be restrained from auctioning, selling, alienating, leasing or otherwise disposing of properties known as: (a)"Wyrallah" 498 Coraki Road Gundurimba via Lismore NSW 2480 until further order. (b)"Summerdowns" Reynolds Road Casino, NSW 2471 until further order. (2)The defendants give the plaintiff the usual undertaking as to damages. (3)The defendants to serve the evidence upon which they rely by 9 April 2013. (4)Stood over before the Registrar to 10 April 2013. (5)Costs reserved.

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: 04 April 2013

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