Perpetual Nominees Ltd v Parist Holdings Pty Ltd

(12722/05) Perpetual Nominees Limited (plaintiff) Parist Holdings Pty Limited (defendant) (13177/05) Perpetual Nominees Limited (plaintiff) PARTIES : Parist Holdings Pty Limited (first defendant) Versatec Industries (second defendant) (3483/05) Parist Holdings Pty Limited (plaintiff) Perpetual Nominees Limited (defendant)

FILE NUMBER(S) : SC 12722/05; 13177/05; 3483/05

Mr R Newlinds SC & Ms T Wong (plaintiff) COUNSEL : Mr P Williams (in person) (defendant) Mr Payne (solicitor) (second defendant in 13177/05)

Gray & Perkins (plaintiff) SOLICITORS : TressCox (second defendant in 13177/05)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

12722/05 PERPETUAL NOMINEES LIMITED v PARIST HOLDINGS PTY LIMITED

13177/05 PERPETUAL NOMINEES PTY LIMITED v PARIST HOLDINGS PTY LIMITED & 1 OR

3483/05 PARIST HOLDINGS PTY LIMITED v PERPETUAL NOMINEES LIMITED & 1 OR JUDGMENT (ex tempore) 1 HIS HONOUR: Parist Holdings Pty Limited is the registered proprietor and Permanent Nominees Limited is the registered first mortgagee of land at 260 Captain Cook Drive, Kurnell. On 6 June 2005, Perpetual took possession of three strata units which comprise part of the Kurnell land, and appointed its employee Brian Anthony Chittenden controller of those assets, alleging that Parist was in default under its mortgage. On 15 June 2005, Parist commenced proceedings 3483/05 in the Equity Division, in which it asserted that it was not in default, that the controller was not validly appointed, and that Perpetual was not entitled to possession, claiming injunctive and declaratory relief and damages for trespass. Perpetual commenced proceedings in the Common Law Division, 12722/05 on 27 June, and 13177/05 on 20 July, for possession of the remaining lots which comprise the Kurnell land, the subject of its mortgage.

2 The proceedings have been expedited, and were set down for final hearing commencing on 5 December 2005. In the course of argument that day and the following day, issues arose which had not been anticipated, and in order to permit Parist (which was and is represented by its Director, Mr Williams) and Perpetual (whose counsel was called upon to address issues which had not until then been foreshadowed) a full opportunity to be heard and to adduce relevant evidence, and to facilitate the resolution of all issues (given that a relevant period of grace would expire on or about 9 December) - including the question of whether and, if so, for how long, the issue of any Writ of Possession might be deferred - the proceedings were adjourned to yesterday, with directions for the filing and service of any further evidence upon which either party might wish to rely in the meantime, without then deciding whether or not such further evidence would be permitted to be adduced.

(1) Whether, as at 6 June 2005, Parist was in default, or estopped from denying that it was in default, so as to entitle Perpetual to possession. In this respect, Perpetual relies on, first, a monetary default - namely, failure to pay instalments of interest - and Parist contends that there was no valid determination by Perpetual of the amount of interest payable and consequently no default in payment of interest; and secondly, several non-monetary defaults identified retrospectively by Perpetual, in respect of which it concedes it has suffered no substantial prejudice.

(2) Whether, as at today's date, Perpetual is entitled to possession, in which respect Perpetual relies on failure to repay principal upon expiry of the term of the loan on 1 December 2005. 4 A subsidiary issue is whether, and if so for how long, issue of a writ of possession should be deferred.

5 The Kurnell land was formerly comprised in folio 6/226818. By mortgage 9789945, dated 10 July 2003, Parist mortgaged the land to Perpetual as security for payment to Perpetual, as custodian of the ING Mortgage Pool, of "all moneys owing now or at any time in the future by the mortgagor".

6 The Kurnell land was subdivided by DP270389 into four lots, and became folios 1-4 in DP270389. On 3 June 2005, folio 2/270389 was cancelled upon registration of the Strata Plan 72745, which created 12 strata lots numbered 1-12 in Strata Plan 72545. Those strata lots, and the remaining lots 1, 2 and 3 in DP270389, are encumbered by Perpetual's mortgage. However, as I understand the position, lot 1 is dedicated for the purposes of roads, and has not otherwise featured in the current proceedings; it is not the subject of Perpetual's claims for possession.

7 On 1 December 2004, Parist's pre-existing loans from Perpetual were consolidated into one Term Loan Agreement of that date. Although Mr Williams has, at times in the course of these proceedings, sought to raise complaints about Perpetual's conduct leading to that re-arrangement and consolidation, no such complaint has been raised on the pleadings; to the contrary, in its Statement of Claim in the Equity Division proceedings, Parist pleads and propounds an allegation of breach by Perpetual of the Term Loan Agreement of 1 December 2004. As I think I have previously made clear in the course of the hearing, I regard any complaints about Perpetual's conduct prior to the Term Loan Agreement of 1 December 2004 as outside the scope of and irrelevant to these proceedings.

8 By the Term Loan Agreement, Perpetual agreed to advance to Parist $22,697,938.47 for a term of one year, and Parist agreed to repay the loan on 1 December 2005. It is not in dispute that Parist's obligations under the Term Loan Agreement continue to be secured by Perpetual's pre-existing mortgage over the Kurnell land.

9 Perpetual's mortgage incorporated the provisions of Filed Memorandum 8322762 which provides, by clause 10.2, that at any time after an Event of Default occurs, how and when Perpetual in its absolute discretion decides, Perpetual may inter alia demand and require immediate repayment of the secured money, exercise any right power or privilege conferred by law equity the Mortgage or any of the Collateral Documents, and eject occupants from enter on or taking possession of the mortgaged land. For the purpose of the Mortgage and the Filed Memorandum, the Collateral Documents include the Term Loan Agreement, and a Fixed and Floating Charge dated 10 July 2003 to Perpetual over Parist's assets and undertaking.

10 Clause 12.3 of the Fixed and Floating Charge provides that, following an Event of Default, Perpetual may enter into possession of manage and use the Mortgaged Property, and clause 13 provides that Perpetual may appoint a person to be Receiver and Manager of any Mortgaged Property. I infer that it was in reliance on that clause that Mr Chittenden was appointed controller of the three strata units of which possession was taken on 6 June 2005.

11 Clause 15.1 of the Term Loan Agreement provides that any notice or communication which must be given, served or made under or in connection with the Term Loan Agreement must be in writing in order to be valid, and goes on to provide for means of service of such Notice.

12 Clause 23.1 provides that in the event of inconsistency between the Term Loan Agreement and any other Loan Document (which includes each Security, and thus the Mortgage and the Filed Memorandum incorporated in it), the terms and conditions of the Term Loan Agreement prevail.

13 The Term Loan Agreement also provides, by clause 11.1, that at any time after an Event of Default Perpetual may cancel the facility, require immediate repayment of the Debt and recover the same from Parist, and exercise any powers rights or privileges conferred by law, the Term Loan Agreement, the Securities or any other Collateral Document.

14 I deal first with the question of Perpetual's claim to be entitled to possession as at today's date. In so doing, I shall not at this stage address whether a writ of possession should be issued immediately or deferred, leaving consideration of that question until the other substantive issues have been resolved. 15 For its claim for possession as at the date of hearing, Perpetual relies upon Parist's default in repayment of the principal, repayment of which was due on 1 December 2005. 16 The Term Loan Agreement provides, by clause 10.1, that Parist will, at the option of Perpetual, be in default upon occurrence of any of the listed Events of Default, including (a) if there is default in the performance of any term agreement or condition contained in or implied by the Term Loan Agreement, any Loan Document or any other collateral document or security, and such default is not rectified within seven days of its occurrence where the default is monetary, and otherwise within 21 days.

17 The Mortgage provides, by clause 10.1 of the Filed Memorandum, that an Event of Default will occur at Perpetual's option if there is default in the performance of any term, covenant, agreement or condition contained or implied in the Mortgage or any Collateral Documents.

18 Under the Term Loan Agreement the principal was repayable on 1 December 2005. Failure to repay it by that date was a monetary default, and if caught by clause 10.1(a) of the Term Loan Agreement, there was no available Event of Default until the seven-day grace period provided by that clause had elapsed. To the extent that there is any inconsistency in respect of the entitlement to a grace period between the Term Loan Agreement and the Mortgage, the Term Loan Agreement prevails over the Mortgage pursuant to the provisions of clause 23.1 of the Term Loan Agreement, to which I have referred, and would do so in any event being a specific document relating to this loan transaction as distinct from the Filed Memorandum which applies generally to loans secured by mortgages which incorporate its provisions. As at 6 December 2005, the second day of the hearing, the seven-day grace period had not expired.

19 However, Mr Newlinds of Senior Counsel, who appears with Ms Wong for Perpetual, argues that upon its proper construction, clause 10.1(a) of the Term Loan Agreement, insofar as it confers a period of grace in respect of monetary defaults, does not apply to defaults in repayment of principal at the conclusion of the term of the loan. This submission is advanced primarily by reference to clause 11.1 of the Term Loan Agreement which, as I have foreshadowed, provides that at any time after an occurrence of Event of Default the lender may, in the manner and at the time the lender in its absolute discretion deems appropriate, (a) cancel the facility or (b) require immediate repayment of the debt and recover the same from the borrower and/or any guarantor or (c) exercise any powers, rights or privileges conferred by law, the Agreement, the Securities or any other Collateral Documents or Securities on it. Mr Newlinds contends that sub-paragraphs (a) and (b) - providing for cancellation of the facility, or requiring immediate repayment of the debt - have no work to do in the context of default in repayment of principal at the expiration of the term of the loan, since the facility has then expired and the debt is in any event immediately repayable. 20 But while that may be so, clause (c) certainly does still have work to do in that event, and that circumstance deprives Mr Newlinds' argument, to the extent that it is based on clause 11, of much of its force. Moreover, the plain words of clause 10.1(a), in referring to monetary defaults, on their face apply to defaults in respect of repayment of principal as they do to other monetary defaults. Accordingly, to my mind, a default in repayment of principal at the expiration of the term is a monetary default within clause 10.1(a), and I do not accept the argument that clause 10.1(a) should be construed in a manner which excludes from its scope default in repayment of principal at the expiration of the term.

21 It follows that, as at 6 December 2005, an available Event of Default under clause 10.1(a) had not occurred, but as at today, 15 December, the seven day grace period has expired, the principal has not been repaid, there is an available Event of Default under clause 10.1(a) now, and on that basis, Perpetual is entitled to possession now. As I have said, the question of when any writ should issue I shall defer, until the other substantive issues have been resolved.

22 I turn then to the question of Perpetual's entitlement to possession as at the date it took possession of the three strata units, namely 6 June 2005. 23 In considering that question, it is necessary to note that upon settlement of the Term Loan Agreement on 1 December 2005, $625,000 of the capital advanced was applied to capitalised interest, to be retained by Perpetual and applied against interest as it accrued. 24 Provision for the payment of interest was made by clause 3.2 of the Term Loan Agreement, which provided that Parist would pay interest on the principal sum at the "higher rate", the first of such payments to be made on the first day of the month following 1 December 2004, provided that if no Event of Default had occurred, and if Parist, within seven days of every day on which interest was payable, paid interest at the "lower rate", then Perpetual would accept interest at the lower rate in lieu of the higher rate for every payment for which the proviso had been satisfied. 25 The higher rate was defined to mean the lower rate plus 4 percent. Clause 1.14 defined the lower rate to mean the aggregate of the Benchmark Rate and the margin. The margin was defined to mean 3 percent per annum, and clause 1.1 defined the Benchmark Rate to mean: the rate as determined by the lender on 1 December 2004 and then as redetermined by the lender quarterly on or about the first business days of January, April, July and October in each year. The lender will (but without having any obligations to do so) when determining and redetermining the Bench Mark Rate refer to the level at which 90 day bank bill products have been trading by the major Australian trading banks rounded up to the nearest five basis points.

26 Parist contends that there is no valid provision for the determination of the Benchmark Rate, on the basis that the definition set out above leaves the fixing of a substantial obligation under the contract entirely to the discretion of one of the parties [see Placer Developments Limited v Commonwealth of Australia (1969) 121 CLR 353, 356, 358-361; Godecke v Kirwan (1973) 129 CLR 629, 646-647]. Although it might be thought that that principle applies only when it is the promisor who is given a discretion - which is not the case here, since the discretion to fix interest is not that of Parist, which is obliged to pay interest by reference to the Benchmark Rate fixed by Perpetual - Gibbs J in Godecke suggested otherwise, following Beattie v Fine [1925] VLR 363, in which Cussen J had recognised no such distinction in holding that an option for renewal "at a rental to be agreed upon by the lessor" gave rise to no contractual obligation.

27 For Perpetual, Mr Newlinds refers to the judgment of the Court of Appeal in South Sydney Council v Royal Botanic Gardens Trust [1999] NSWCA 478. In that case, clause 4(b) of the lease provided that the yearly rent payable may be determined by the trustees at the commencement of each relevant period (after an initial period for which the lease fixed the rent at $2,000), provided that (i) the trustees notify the lessee of the yearly rent as so determined as soon as practicable after the commencement of each such period, (ii) that any necessary adjustment of rent be made on the next day for payment of rent following such notification, (iii) that the yearly rent determined not, in any event, be less than $2,000, and (iv) that in making any such determination the trustees may have regard to additional costs and expenses which they may incur in regard to the surface of the Domain above, or in the vicinity of the parking station and the footway which arise out the construction and maintenance of the parking station by the lessee. Both parties accepted that there was a binding and valid lease despite the lack of clarity about the formula for determining rent after the initial period. The Court of Appeal took the view that the effect of clause 4(b)(iv) was to describe the only matters to which the trustees were entitled to have regard in determining rent. The essential question was whether (as the primary judge, Hodgson J, had held) the requisite certainty was provided by the implication of a formula, namely "a fair and reasonable rent", or (as the Court of Appeal concluded), by clause 4(b)(iv) providing an exhaustive formula of the matters which could be taken into account.

28 Spigelman CJ said (at [16]) (emphasis added):- It must be the case, and indeed was common ground, that there be some restriction on the ability of the Trust to determine a rent payable pursuant to the lease. That restriction is either found in the terms of a criterion such as a 'fair and reasonable' rent, or it is found in the specification of the facts and matters to which the Trust "may have regard" under cl 4(b)(iv). If the latter is exhaustive, then there is neither room, nor need, for an implied term . 29 That passage is important for two reasons: first, that although His Honour said (at [12]), in the passage relied upon by Mr Newlinds, that it was no objection to enforceability of a contract that it left to a party determination of a price or payment, such a power to determine the price or payment would be restricted either by criteria expressly provided by the contract, or by an implied term such as that it be fair and reasonable; and secondly, that if the contract provided the requisite criteria, there was not then room to imply a term that the rent be "fair and reasonable". 30 In Kabwand Pty Limited v National Australia Bank Ltd (1989) ATPR 40-950, the Full Court of the Federal Court considered a clause in a loan agreement which provided for the payment of interest at 15.25 percent subject to the Bank, at its discretion, varying that rate "conforming with general movements in the Bank's interest rates". The borrower argued that that provision was void for uncertainty. The Court (Lockhart, Hartigan and Hill JJ) identified that there were, in fact, three relevant principles. The first is that if parties to a contract do not agree on a fundamental term there will be no contract at all [G Scammell & Nephew Limited v HC & JC Ouston [1941] AC 251; Kabwand]. The second is that there is no contract if its effect is that one party is left to choose whether or not it will perform it, since the obligation is illusory [Thorby v Goldberg (1964) 112 CLR 597; Godecke v Kirwan; Kabwand). The third is that there can be no concluded bargain if a vital matter has been left to the determination of one of the parties [Placer v The Commonwealth; Godecke v Kirwan; Kabwand]. In Kabwand, as in the present case, it was the third of those principles which was of potential application. The Court concluded in these terms: Whatever may be the case where a loan agreement provides that the lender may select any interest rate it pleases, the present is not that case. Here the rate of increase or decrease of interest must conform to the general rates of interest charged to customers of the bank, that is to say there is an objective market standard to be applied at all times. In these circumstances we do not think that it can be said that any of the three principles sought to be applied have application. As the trial Judge said, and we agree, the present clauses as to interest are "not to be construed as giving to the cross claimant a power at large. A borrower may challenge any increase on the basis that it has been fixed otherwise than in conformity with the general movements referred to". 31 In Cross v National Australia Bank Limited (FCA, 29 April 1994, unreported) Drummond J held a provision in a lease, which empowered the lessor (which was a bank) to recover interest from the lessee on any arrears of rental and on the accelerated future rentals from the due dates until payment "at such rate as is determined by the bank from time to time" - it not being suggested that this could be read as a reference even to the bank's own benchmark rate - was void and illusory, but severable. 32 These cases establish that while determination of a price or payment under a contract may be left to the party entitled to receive the price or payment, that will be so only where there are criteria - either express, or such implied criteria as "fair and reasonable" - by which that party's decision can be tested, and that where an express formula is provided, there is no room to imply criteria such as "fair and reasonable". In Royal Botanic Gardens and in Kabwand, there were such criteria; in Cross there were not. 33 If the provision relating to interest be void in the present case, it must be because the mechanism for its calculation infringes the third principle, since this is not a case in which the parties have not agreed on a fundamental term, nor is it a case in which one party has been left to choose whether it will perform the contract. The question is whether a vital matter, namely the rate of interest - or more precisely, one component of it, being the benchmark rate - has been left to the determination of one of the parties, namely Perpetual, without a criteria against which Perpetual's determination can be tested. That makes it necessary to construe the definition of "Benchmark Rate" in clause 1.1, particularly having regard to its second sentence, which provides that in determining the benchmark rate the lender will, without having any obligation to do so, refer to the 90 day bank bill rate. There would be considerable force in the argument that the Benchmark rate was to be the 90-day bill rate, were it not for the direct inconsistency between the apparent obligation imposed on Perpetual to refer to the 90 day bill rate, and the express statement that it has no obligation to do so. The two simply cannot sit together and to my mind there is no sensible reconciliation of them which does not involve doing violence to the language of the clause. I do not think it is possible to disregard the words "but without having any obligation to do so", which have presumably been deliberately included in the definition. Either the second sentence in the definition is incapable of being given sensible meaning, or the proviso that there is no obligation to have regard to the 90-day rate prevails over the initial statement that the lender will have regard to that rate. 34 I do not accept the submission that I should resort to pre-contractual letters of offer to construe the contract. While the letter of offer states that the interest rate was to be the 90-day bill rate plus 3%, that is not what the contract provided. In my opinion it would be impermissible to use that letter of offer as illustrating the intentions of the parties [Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 194 CLR 337, 352 (Mason J). 35 Accordingly, in my opinion, clause 1.1 of the Term Loan Agreement must be read as leaving the Benchmark Rate to be determined by the lender without any constraint or reference criteria, and that distinguishes the case from Kabwand and brings it within the judgment of Drummond J in Cross. For that reason, I think the provision which confers on the lender the ability to determine whatever Benchmark Rate it likes is void. I do not accept Mr Newlinds' argument that, if the provision relating to determination of the Benchmark Rate is void, the Court can substitute a "fair and reasonable" rate: consistently with Royal Botanic Gardens, there is no room to imply such a term where the parties have made provision for a particular formula and criteria.

36 As in Cross, the void provision is severable from the contract, leaving the other components of the "interest equation" intact, so that although there will be no "Benchmark Rate" included in the equation, so that there remains a minimum content of the obligation to pay interest at the lower rate of 3 percent (being the margin) and the higher rate of 7 percent (being 4 percent above the lower rate).

37 Parist's next argument is that, assuming that there was a valid provision for determination of the benchmark rate, nonetheless for there to be a valid determination, there has to be a communication of the determination to the borrower. In other words, it is said that notification of the determination to the borrower is an essential part of making a determination of the Benchmark Rate under the Term Loan Agreement. Another way of putting this is that the words "and notified" should be implied after the word "as determined" in the definition of Bench Mark Rate in order to give business efficacy to the contract. 38 I agree with this submission. In my opinion, it is essential to give business efficacy to the Contract that a determination of the Benchmark Rate be notified to the borrower. Otherwise, the borrower cannot know what is its obligation, how interest is calculated, whether calculations are correct, when capitalised amounts would be exhausted, what were the higher and lower rates, and whether it was or would be in default. I do not accept this is sufficiently covered by a Mackay v Dick term imposing on the parties generally an obligation to co-operate in doing what is necessary to enable the other to have the benefit of the contract. Normally, when a party is given a right under a contract to make a determination or an election which may affect the position of the other party, communication of that election or decision is part of making it. For example, if a party is given a right to terminate a contract upon default, its election to terminate takes effect when it is communicated, and not just when it is made in the mind of the party given the right. Similarly, a determination of a rate of interest, in the absence of any provision of the contract excusing communication, to my mind requires communication and, as I have said, is necessary to give business efficacy to the contract. 39 Some support for this view may also be derived from clause 6.4 of the Term Loan Agreement, which gives the lender an absolute discretion "without the need to communicate its election to anyone" to apply payments received by it in reduction of whatever part of the debt it elects. The circumstance that communication of the lender's decision is expressly dispensed with by that clause is some, at least slight, support for the view that in the absence of any such dispensation, communication is required. Further support is provided by clause 15.1, to which I have referred, and which provides that any notice or communication which must be given, served or made under or in connection with the document must be in writing in order to be valid, and goes on to provide for service. I reject the submission that there is an obligation to communicate the determination only if the borrower requests it. The communication is part of the determination process, and there is no determination unless and until it is communicated. The borrower cannot know the extent of its obligation to pay interest until communication takes place.

40 It is unquestionable that Mr Murphy, on behalf of Perpetual, made a decision as to what should be the Benchmark Rate, but that decision was never notified nor communicated to Parist. I reject the submission that the determination was sufficiently communicated by any of the later correspondence which set out total amounts of interest said to be due or in arrears, or even which specified the prevailing interest rate at the higher rate. None of those communications communicated a determination as to what the Benchmark Rate was at any particular time.

41 The Benchmark Rate, referred to in clause 1.1 of the Term Loan Agreement, is not necessarily any general benchmark used by Perpetual for all of its lending consistent with clause 1.1. Perpetual could legitimately adopt a different Benchmark Rate for every loan to every different borrower which it might have. For that reason, it would not be enough that there may be a general Benchmark Rate advertised by Perpetual from time to time, of which there is in any event no evidence. If there were, it would not follow that any such benchmark was the benchmark rate determined for the purposes of and applicable to this particular contract.

42 It follows that in my opinion, there was never any valid or effective determination of the Benchmark Rate. Accordingly, the lower rate comprised only the 3 percent margin. The capitalised sum of $625,000 was sufficient to cover that for about 11 months. There was no default in payment of interest as at 10 June 2005.

43 However, Perpetual says Parist was estopped from denying that it was in default in respect of interest. The alleged estoppel arises from a letter from Atkinson & Vinden, the solicitors then acting for Parist, to Gray & Perkins, the solicitors for Perpetual, dated 3 June 2005, which stated, "Whilst our client does not dispute that it is 2 months in arrears of its monthly loan repayment, we are instructed that the arrears of the monthly loan repayment will be paid from settlement of the 3 sales referred to in the following paragraph". 44 Mr Williams says Atkinson & Vinden were not authorised to make such a statement on behalf of Parist, but it seems to me that such an admission was within the implied authority of solicitors acting for Parist, if not expressly authorised by the instructions of one Mr Harris, who was then giving instructions on behalf of Parist to Atkinson & Vinden.

45 The evidence of detrimental reliance, however, such as it is, is to be found in the affidavit of Perpetual's solicitor, Mr Anderson, sworn 21 June 2005. He says that in forming the opinion on 6 June 2005 that Parist was in default he relied, inter alia, upon that statement, and that had the issues raised in these proceedings been raised by Parist prior to 6 June, he would have reviewed the advice given to him by Perpetual in relation to its rights before taking possession of units 2, 4 and 5, and having reviewed his advice, would have sought further instructions in relation to the taking of possession of the units. However, Mr Anderson does not say that his advice would have been different. In the absence of evidence that the advice he gave would have been different, I am unable to find that Perpetual would suffer detriment if Parist were permitted to resile from the position reflected by the representation contained in the Atkinson & Vinden letter. In those circumstances it would not be unconscionable for Parist to resile from that position, and accordingly, I would not hold Parist estopped from denying that it was in default in respect of payment of interest.

46 Notwithstanding that the default in payment of interest on which Perpetual relied to take possession of the three units was, in my opinion, not available, Perpetual might, nonetheless, be able to justify its possession by reliance on any of the non-monetary defaults which it has raised. For this purpose, I propose to take into account only those monetary defaults which were pleaded in the defence, which are to be found in paragraphs 16(b) and (c) of the defence in the Equity proceedings. Of them, Mr Newlinds ultimately relied, in my opinion correctly, only on two, and I shall come to them after making some short observations about the others, which I think it is fair to say they were not pressed.

47 Paragraph 16(b)(i) and (ii) of the defence relied on, amongst other things, the circumstance that there had been a parting with possession of the leasing of two of the units. The only evidence that there had be a parting of possession or leasing was a statement which used the word "tenant" to describe occupants of certain units, which was attributed to Mr Williams and a colleague, by Mr Anderson. Mr Williams gave a different version, not entirely inconsistent, but which did differ as to whether the word "tenant" was used. No one was cross-examined on that topic. Although many aspects of Mr Williams' evidence were unsatisfactory, the evidence does not persuade me that there had been a parting of possession, let alone one which took place more than three weeks - the applicable grace period - before 6 June 2005. Accordingly, in my opinion Mr Newlinds was right not to press the Events of Default referred to in 16(b)(i) and (ii) of the Defence.

48 Similarly, he was right not to press the Event of Default concerning the caveat by Rintree, as the evidence makes tolerably clear that there was consent on the part of Perpetual to the encumbrance to Rintree.

49 I come then to the two events on which Mr Newlinds ultimately relied. The first was non-compliance with an undertaking, given at the time of settlement on 1 December 2004, "to forward confirmation that outstanding Council rates had been paid in full within five business days from the date of settlement of the Term Loan Agreement", contrary to clause 10.1(j) of the Filed Memorandum which made it an Event of Default if "the Mortgagor ... breaches any undertaking at any time given to the mortgagee or its solicitors".

50 The evidence plainly establishes that the outstanding Council rates the subject of the undertaking were, in fact, paid on or very shortly after settlement, but the evidence also shows, and Mr Williams ultimately conceded, that the undertaking to forward confirmation to that effect was not met. Accordingly, there was an available event of the default under 10.1(j) as at 6 June 2005, albeit a highly technical one, in respect of which relief against forfeiture would have been granted.

51 Next, Mr Newlinds relied on the circumstance that a caveat was lodged in January 2005 by Energy Australia in respect of the Kurnell land, claiming an interest "pursuant to an agreement to create easement dated 6 April 2004" between Parist and Energy Australia. Clause 2.13 of the Filed Memorandum provides inter alia that the Mortgagor shall not grant an easement which affects the mortgaged land without the Mortgagee's prior written consent. The Caveat is at least some evidence of an agreement to grant an easement, but that falls short of actually granting an easement. The law recognises a distinction between the grant of an interest in land, and an agreement to grant an interest in land. That distinction has been particularly recognised in the field of equitable mortgages which have been held not void for contravention of s 23C or 54A of the Conveyancing Act because they are neither an agreement for sale, which is required by s 54A to be in writing, nor an actual grant as opposed to an agreement to grant an interest in land, which would be voided by s 23C if not in writing: Baloglow v Konstanidis [2001] NSWCA 451; Khouri v Khoury [2004] NSWSC 770]. Clause 2.13(e) refers to the "release grant or variation" of an easement. An agreement to grant an easement is not the grant of an easement. I would not hold that the Energy Australia caveat evidences the grant, as distinct from an agreement to grant an easement and, accordingly, the relevant Event of Default is not established.

52 Reliance was also placed on clause 2.13(g), which refers to lodging, permitting, or allowing to be lodged any caveat, and goes on to provide that the Mortgagor must promptly, at its own expense, do anything necessary to remove any caveat lodged by any person. It seems to me that the mere fact that a caveat is lodged does not prove that the Mortgagor lodged, or permitted, or allowed a caveat to be lodged: that phraseology assumes a capacity to prevent it. It would be different if there were evidence that there had been a consent to a caveat being lodged, but the evidence here does not go so far. 53 Nonetheless, and subject to one matter to which I shall come, it remains the circumstance that there was as at 6 June an available Event of Default, namely, the non-compliance with the undertaking to furnish evidence of payment of outstanding rates.

54 The one remaining matter which requires consideration is the effect of requirement in clause 10.1(a) of the Mortgage that it there will be an Event of Default "at the Mortgagee's option". It seems to me that this means that there is no Event of Default unless and until the Mortgagee decides that one or other of the matters relied upon is constituted or is to be regarded as an Event of Default. However, I think it must also be said that when the Mortgagee goes in possession, it is to be taken as having exercised its option to treat all available events of defaults as having occurred. As there was an available Event of Default under 10.1(j), however technical, the Mortgagee, by taking possession on 6 June, exercised its option to treat that as an Event of Default and to put Parist into default.

55 It follows, in my opinion, that as a matter of the strict application of the contract, Perpetual was entitled to take possession as it did on 6 June 2005. It also follows that had an application been made for relief against forfeiture, that application would almost certainly have succeeded. Nonetheless, Perpetual's legal entitlement to take possession on 6 June 2005 is a complete answer to the claim that it wrongfully took possession, and a complete answer to Parist's claim against it for damage for trespass. Parist's claim in the Equity proceedings must, therefore, fail.

56 That then brings me to consideration of whether, and if so for how long, any issue of a writ for possession should be deferred. 57 I must first refer briefly to the valuation evidence. Perpetual tendered a valuation by CB Richard Ellis as at 23 January 2004 which opined that the Kurnell land was then worth $32 million "as is with development approval", $37 million upon completion of stage 2, and $59,850,000 gross realisation upon completion of stage 3. More recently, Perpetual has tendered further evidence in the form of valuation by Oracle in July 2005 which opines that the remaining available parts of the Kurnell land, on an individual lot basis are worth $31,445,000, but in one line $25 million. The difference between the two figures is attributable to what is said to be a profit and risk allowance of between 20 and 25 percent. To my mind, that profit and risk allowance is a little high, and while this is not a case for determination on any final basis of the value of the property, I would be inclined to think that the lower end of the range was in the order of $27.5 million rather than the $25 million asserted to by Oracle.

58 On the question of deferring the issue of the writ, Mr Newlinds makes the following points, though not necessarily in this order. First, that Perpetual has a contractual right to possession. That submission is correct and, whatever may have been the position in June, it is no longer a merely technical right, but one which exists in circumstances that it has not been repaid the principal upon expiry of the agreed term. Secondly, it is put that the debt is, on the most favourable view for Parist, $22.5 million, and increasing at $4,000 a day, and that when provision is made for selling and holding costs, it can be seen that the security may be barely adequate to cover that date. Thirdly, it is said that Perpetual needs access to the property urgently in order to ready it for sale, and that the longer that that access is delayed or denied, the greater the risk that the security will be insufficient to meet the debt. Fourthly, it is said that whatever may have been found to be the position so far as interest is concerned, Parist believed it was in default in respect of interest from about June, and has been asking for time and grace ever since, and has achieved nothing in the interim. I do not think that is entirely correct, because Parist has at least achieved an offer of refinance from St George, albeit conditional and, like every such offer of finance, expressed to be not binding at this stage, and Parist has apparently accepted and paid the commitment fee for that offer.

59 Mr Williams, for Parist, contends, in substance, there is a realistic probability that he will be able to refinance if given some time to do so. He points to the availability of the St George offer, and to the circumstance that what he says is the last remaining condition to be satisfied, namely, the fixing of a price of at least $30 million for nearby land owned by another of his companies, which has recently been resumed by the State Government, is imminent. Under the statutory provisions relating to compensation for the resumption of land, I accept that it is likely that an offer must be made in respect of the resumed interest in the very near future. Mr Williams' argument in this respect would have been much more compelling if he had been prepared to give some undertaking or assurance as to the remaining available equity in the adjoining property once the Receiver had been removed and making any such equity available to Perpetual, but he is not prepared to give any such assurance or undertaking in circumstances where the Receiver was in control of the other company.

60 So far as the evidence shows, Perpetual has not yet served a s 57(2)(b) notice, and it is not in a position to sell. Evidence adduced by Perpetual suggests that it will not be in a position to sell for some six months and even then, only if it is entitled to possession almost immediately in order to start putting the property in order for sale. However, Perpetual offers an undertaking that if the Writ of Possession is issued forthwith, it will not exchange any contract for sale of any portion of the Mortgaged Property on or before 13 February 2006. 61 On the one hand I think there is some prospect that Mr Williams might be able to achieve a refinance, given the cumulative effect of the compensation for the resumption of the adjoining land and the offer from St George if given time to do so. On the other hand, as Mr Newlinds has pointed out, this is not a case in which the damage to Parist is going to be exacerbated by granting possession at this stage, in the sense that there will be furniture which cannot be removed, capital which cannot be taken from the site, and families which cannot be rehoused.

62 Perpetual has not been repaid the principal upon expiry of the loan. It is not being paid interest. It has a legal right to possession. Ultimately, and although Perpetual may have obtained a judgment for possession more expeditiously than otherwise would have been the case had it not commenced proceedings until its entitlement to possession had accrued, I have to ask whether there is any legitimate basis upon which it can be said that Perpetual should not be entitled to exercise its legal rights. Try as I might, I am unable to find any such basis. I have with some reluctance come to the conclusion that the Writ for Possession should issue forthwith, upon the undertaking which Perpetual has given. I have tried to explain in the course of argument that in my view this in no way prevents Mr Williams from negotiating with financiers for a refinance up to 13 February 2006, and in particular does not prevent him from redeeming the Mortgage, in conjunction with a refinance, at any time prior to 13 February 2006.

64 In proceedings 3483/05, I order that the proceedings be dismissed.

65 In proceedings 12722/05, I give judgment for the plaintiff for possession of the land exercised in folio identifier 1/SP72545, 3/SP72545, 8/SP72545, 9/SP72545, 10/SP72545, 11/SP72545 and 12/SP72545, being the strata units situate at and known as units 1, 3, 8, 9, 10, 11 and 12 in Strata Plan 72545 at 260 Captain Cook Drive, Kurnell in the State of New South Wales. Upon the undertaking of the plaintiff by its counsel that if the Writ of Possession is issued forthwith, it will not exchange any contract for sale of any portion of the Mortgaged Property on or before 13 February 2006, I order that the plaintiff have leave to issue a Writ of Possession to give effect to such judgment, such writ may issue forthwith. 66 In proceedings 13177/05, I give judgment for the plaintiff for possession of the land comprised in folio 3/270389 and 4/270389, being the property situate at and known as lots 3 and 4, 260 Captain Cook Drive, Kurnell in the State of New South Wales. Upon the undertaking of the plaintiff by its counsel that if the Writ of Possession is issued forthwith, it will not exchange any contract for sale of any portion of the Mortgaged Property on or before 13 February 2006, I grant leave to the plaintiff to issue a Writ of Possession to give effect to such judgment, such writ may issue forthwith.

67 It seems to me that although Perpetual has ultimately succeeded in all three proceedings, a substantial amount of time and argument has been spent on issues on which Perpetual has not succeeded, and ultimately Perpetual succeeded in obtaining possession on an amendment made on the first day of the hearing, but which even then was a claim for possession to which it did not become entitled until or about early this week. In those circumstances, and while it is a blunt instrument, I think justice of the case is met by orders in each proceedings that Parist pay one-half of Perpetual's costs.

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