Plaintiff v Defendants

1 Mr Barry Suckling gave a number of mortgages in favour of the Commonwealth Bank of Australia ('CBA') over properties that he owned either alone or with his wife.[1] Mr Suckling also entered into a guarantee with CBA in respect of payments to be made under a facility agreement by his company, National Builders Group Pty Ltd ('NBG'). [2] Mr Suckling founded that company in 1988 and was its sole director and shareholder. CBA was NBG's banker.

2 Most relevant to this proceeding are the properties at 51 Bruce Road, Mount Martha (the 'Mount Martha property'), and Unit 2703, 41-55 High Street, Southbank (the 'Southbank property') and the mortgages given in favour of CBA over those properties. There are two mortgages registered over the Southbank property. The first mortgage was given as security for three home loans. The second mortgage was given as security for Mr Suckling's liability under the guarantee and NBG's debt. There is one mortgage registered over the Mount Martha property and it was given as security for a home loan.

3 CBA claims that Mr Suckling is in default under the terms of all of the mortgages because he failed to do everything necessary to remove a caveat that was registered on the titles for each of the properties.

4 On 7 September 2012, CBA entered judgment in default of defence against Mr Suckling for a sum of approximately $5.6 million plus interest and costs and for possession of the Mount Martha property and the Southbank property. The judgment in respect of the Southbank property is based on the second registered mortgage. After judgment was obtained, the debt owed by NBG was repaid and consequently, there is no debt owed under the second mortgage over the Southbank property. Nevertheless, CBA remains in possession of the Southbank property. It relies on the first mortgage over the property that secures the home loans. CBA does not have a judgment in respect of that mortgage.

5 CBA does not yet have possession of the Mount Martha property as judgment has not been obtained against the other registered proprietor, who is Mr Suckling's wife and the second defendant.

6 Mr Suckling has applied to set aside the default judgment against him and he seeks an interlocutory injunction to restrain CBA from exercising any power of sale under the first registered mortgage over the Southbank property.

7 For the reasons which follow, the judgment should be set aside and the application for an interlocutory injunction should be granted.

The securities held by CBA and the alleged default

8 Mr Suckling obtained home loans from CBA for the properties at Mount Martha and Southbank, and another property in East Brighton (the 'East Brighton property'). As security for the home loans in respect of the Southbank property and the East Brighton property, CBA took first registered mortgages over both properties. As I have noted above, the Mount Martha home loan is secured by a mortgage over the Mount Martha property.

9 As I have also noted previously, Mr Suckling gave a guarantee in respect of the liability of NBG and CBA took second registered mortgages over the Southbank property and the East Brighton property as security for Mr Suckling's liability under the guarantee and the debt of NBG.

10 In addition to the CBA guarantee, Mr Suckling also gave a guarantee to Austereo Pty Ltd. On 21 September 2011, Austereo lodged a caveat on the Southbank, Mount Martha and East Brighton properties claiming 'an equitable interest as chargee in relation to the interest of Barry David Suckling'. The mortgages in favour of CBA included clause A13 in the following terms:

You must do everything necessary to remove any caveat placed on The Property without our consent.

11 Clause A19.2 of the mortgages provided that everything that Mr Suckling was required to do under the mortgages must be done promptly and to CBA's reasonable satisfaction.

12 The Austereo caveat came to the notice of CBA. On 10 October 2011, it wrote to Mr Suckling asking why the caveat had been lodged, what was required to resolve the issue with Austereo and when the caveat would be removed. In a letter of 27 October 2011, CBA stated that Mr Suckling was in default under the terms of each mortgage and required him to take all necessary steps to remove the caveat by 10 November 2011. The caveat was not removed.

13 By a notice dated 9 December 2011, CBA stated that Mr Suckling was in default under the terms of the first registered mortgages over the Southbank and East Brighton properties because he 'had not done everything necessary to remove' the caveat. The notice gave 31 days for the default to be remedied. A similar notice was sent in respect of the mortgage over the Mount Martha property.

14 By deed dated 19 December 2011 between NBG, Mr Suckling and Austereo, the debt owing to Austereo was to be repaid in two instalments with the last payment to be made by 20 February 2012. Austereo was required to provide a withdrawal of its caveat to Mr Suckling seven months after the last payment was made.

15 As the caveat had not been removed, on 30 January 2012 CBA served notices under s 76 of the Transfer of Land Act in respect of the first registered mortgages over the Southbank, Mount Martha and East Brighton properties requiring repayment of the full amount of the debts said to be secured by each mortgage.

16 In March 2012, CBA appointed a receiver to the assets of NBG. Shortly after that, NBG was placed into liquidation.

17 On 21 March 2012, CBA served a notice under s 76 of the Transfer of Land Act in respect of the second registered mortgage over the Southbank property.

18 Also in March 2012, Mr Suckling entered into a contract for the sale of the East Brighton property. He was unable to complete the sale as the Austereo caveat over that property had not been removed although the amount due to Austereo had been paid. Mr Suckling asked CBA if it would be prepared to have the sale contract novated to it. If CBA sold the property as mortgagee in possession, the Austereo caveat would not have prevented registration of the transfer to the purchaser.[3] To this end, a deed of novation was prepared and an execution version was sent to Mr Suckling's solicitor. No signed copy of the deed was in evidence, but there is an email from Mr Suckling's solicitor that 'the deed' was signed by Mr Suckling. The recitals in the execution version of the deed stated that Mr Suckling was in default under the East Brighton first registered mortgage and that CBA was entitled to sell the property. The purchaser did not agree to the novation and that sale did not proceed. The East Brighton property was sold by CBA as mortgagee in August 2012 for $95,000 less than the price in the earlier sale contract entered into by Mr Suckling.

19 On 27 April 2012, CBA served a further demand under s 76 of the Transfer of Land Act in respect of the mortgage over the Mount Martha property.

20 This proceeding for debt and possession of the Mount Martha and Southbank properties was commenced in May 2012. Mr Suckling filed an appearance but no defence. A week or so after a defence was due, CBA sought to enter judgment in default. Before judgment could be entered, it was necessary for CBA to file an amended statement of claim. The amendment was necessary because in the original statement of claim, the title particulars for the Southbank property as set out in the prayer for relief did not match the title particulars pleaded earlier in the statement of claim. On 7 September 2012 (which was nine days after the defence to the original statement of claim was due) CBA filed an amended statement of claim to address this discrepancy, and judgment was entered. CBA did not serve the amended statement of claim on Mr Suckling before entering judgment nor did it give notice of its intention to enter judgment.

21 The judgment and amended statement of claim were eventually served on Mr Suckling on 2 October 2012 and he was informed that CBA was exercising its power of sale over the Southbank property. CBA caused the tenant of that property to vacate. CBA took possession of the Southbank property on 21 December 2012 and began a marketing campaign. CBA is considering an offer to purchase the property that was made on 18 March 2013.

22 By a letter of 11 February 2013, Mr Suckling's solicitors informed CBA's solicitors that they had instructions to make immediate application to set aside the judgment. The application was made on 28 February 2013. Mr Suckling deposed that at the time that his defence was due to be filed, his company was in receivership and liquidation, he and his wife had separated and he was facing Family Court proceedings, he had no employment nor source of income, he had lost his family home and was living with one of his children and he was finding it difficult to concentrate and to provide detailed instructions to his solicitors. He knew that he needed to file a defence if he was to avoid CBA entering judgment but he was overwhelmed by his personal circumstances and did not have any funds with which to defend the claim. Further, he expected that the NBG debt would be cleared from the moneys recouped by the receiver and that his other personal home loan debts would be reduced substantially from the sale of the East Brighton property. In light of his personal and financial circumstances, he did not know if there was any utility in defending the proceeding notwithstanding that he believed that he had a good defence to at least part of the claim. He deposed that he did not expect CBA to move to obtain judgment against him without first notifying his solicitors, particularly as they had been in regular communication since early 2012.

23 Having learnt of the default judgment, Mr Suckling did not immediately apply to have it set aside. He lacked funds to do so and decided to await the outcome of the receivership to see whether financially there was any utility in seeking to set the judgment aside. Further, he deposed that he has only brought the application because it has not been possible to reach agreement with CBA. In this regard, Mr Suckling is of the view that he would be able to obtain refinance within 90 days for the amount now claimed by CBA and to make payment under protest. His solicitors have agreed to act for him without seeking funds for their professional fees until such time as he is able to make payment.

24 On 18 February 2013, CBA served a notice under s 76 of the Transfer of Land Act in relation to the Southbank first registered mortgage which, as I have said, secures some of the home loans granted to him. As I have noted above, the judgment for possession does not relate to that mortgage.

25 In short, CBA claims that Mr Suckling remains liable for a total amount of approximately $1.5 million in respect of the home loans and the first registered mortgages given as security over the Southbank and Mount Martha properties and says that it is entitled to remain in possession of the Southbank property. Mr Suckling places a value of approximately $3.5 million on the two properties and CBA did not seek to challenge that figure.

The application to set aside the default judgment

26 Rule 21.07 Supreme Court (General Civil Procedure) Rules 2005 provides that the Court may set aside a judgment entered in default of appearance or defence.[4]

27 CBA conceded that the default judgment was irregular but contended that that does not necessarily lead to the conclusion that the judgment must be set aside. It relied on the decision in Australia and New Zealand Banking Group Limited v Kostovski.[5] In that case, judgment in default of appearance was entered in the County Court. The writ and statement of claim both bore the heading 'In the Supreme Court of Victoria at Melbourne' and the writ directed that an appearance was to be filed in the Supreme Court, instead of in the County Court. The writ was issued by the County Court registry and bore the stamp of that registry. It also bore the stamp of a County Court proceeding number and list. In seeking to set aside the judgment, the defendant did not depose to any defence that he might have had to the claims. Chernov J (as he then was) stated:

I am by no means certain that the irregularity in this case brought about the result that the judgment was irregularly obtained. But even if that were to be the case, it is no longer the law (assuming that it ever was the law) that merely because the judgment was irregularly obtained, the defendant is entitled as of right to have that judgment set aside. R 2.01 and, arguably the court's inherent jurisdiction, empower the court to disregard any irregularity such as that arising for consideration here if the justice of the situation warrants it. It is not essential that the court first make an actual order that the irregularity be corrected before it can proceed to examine the substance of the matter. It can, in appropriate circumstances, disregard the irregularity.[6]

In the present case, bearing in mind principally that the irregularity did not relevantly prejudice the defendant and the fact that the defendant has not made out an arguable defence to the bank's claim for possession, it would be just in my view for the court to disregard the irregularity and to proceed to determine the substantive issue, namely, whether the defendant should have leave to defend.[7]

29 As I have noted, in the present case the prayer for relief in the original statement of claim gave the wrong volume and folio numbers for each of the Southbank and Mount Martha properties. The correct volume and folio numbers had been included in the paragraphs pleading that Mr Suckling was the registered proprietor of the property.[8] The amended statement of claim that was filed on the day that judgment was entered merely corrected the volume and folio numbers for each property in the prayer for relief. The only other differences between the original and amended statements of claim were that the title on the document was altered to show that it was an amended statement of claim and that it had been amended pursuant to r 36.04 Supreme Court (General Civil Procedure) Rules 2005.

30 Once the pleading was amended, Mr Suckling then had 30 days after it was served on him to plead to it pursuant to r 36.06(1) Supreme Court (General Civil Procedure) Rules 2005. However, judgment was entered on the amended statement of claim without Mr Suckling having any opportunity to plead to it. He was not served with the amended statement of claim until some time after judgment had been entered.

31 Nevertheless, given the nature of the amendments, it seems to me that this is the type of case in which the Court may disregard the irregularity dependent upon other matters that might be taken into account had the judgment been entered regularly. In this regard, in Kostokanellis v Allen,[9] the Full Court noted that there are a number of matters relevant to the exercise of the discretion to set aside a judgment, including whether the defendant has a prima facie defence on the merits, the reason why the defendant did not enter an appearance or a defence, and whether the application to set aside the judgment was made promptly after it was entered together with any prejudice to the plaintiff if the judgment is set aside. The case concerned an application to set aside a judgment that had been entered when the defendant was not represented and did not appear at the hearing of a summons for final judgment. The relevant rule at the time provided that judgments of the type that had been entered may be set aside on application supported by an affidavit. Except in cases where the judgment was entered irregularly, the affidavit was required to disclose the grounds of defence. The Full Court said:

... what the judge is required to do is to determine what, in his opinion, is the just way in which the court's discretion should be exercised. To do this must involve weighing up the extent to which the defendant is prejudiced by allowing the order and judgment to stand and the prejudice to the plaintiff in setting them aside. In many cases the situation will be that the plaintiff will not suffer any prejudice that cannot be remedied by an appropriate order as to costs. So far as the defendant is concerned, if he is unable to comply with r 14(b) [disclosing by affidavit the ground of defence], the order and judgment cannot be set aside and there would appear to be little purpose in doing so. On the other hand, if the defendant does show on affidavit a prima facie defence on the merits it would seem that usually he will be seriously prejudiced if he is debarred from being able to present his defence at a trial of the action. One cannot tell until this has been done whether or not the defendant will succeed in such a defence. While it is undoubtedly relevant to the judge to consider what explanation the defendant has for not appearing on the return of the summons of final judgment, the weight to be attached to his explanation will depend upon the circumstances. Thus, for example, where the explanation shows that his nonappearance was due to some mistake or to his being misled, this may well assist the court in deciding to exercise its discretion in his favour. Again, the explanation given may reflect on the question whether the defendant has made out a prima facie defence on the merits. However, it does not necessarily follow that if the explanation does not amount to something which can be categorised as a "sufficient reason" the defendant's application should fail. It must all depend on the circumstances.[10]

32 Mr Suckling claims to have four defences to CBA's claim:

1. He remedied the default in that he did everything necessary to remove the Austereo caveat.
2. The judgment obtained is for an amount more than he owes as a result of double counting by CBA.
3. The mortgage is liable to be set aside by reason of unconscionable conduct on the part of CBA.
4. He has an offsetting claim against CBA arising out of its failure to take over the sale of the East Brighton property from him.

33 The applications were argued on the basis that the default relied upon by CBA is an alleged failure to do everything necessary to remove the Austereo caveat and that if Mr Suckling had not breached that obligation, there was no default to trigger CBA's entitlement to enforce its mortgages. For the purposes of these applications, I have assumed that is the only alleged default relied upon.

34 Mr Suckling contends that the mortgage does not require that the caveat actually be removed. Rather, he says it merely requires everything necessary for removal to be done, and that is not the same thing. So, he says, the 9 December 2011 default notice allowed him 31 days to do everything necessary to have the Austereo caveat removed and 10 days later he entered into the deed with Austereo requiring Austereo to remove the caveat upon the payment of certain moneys. Having made the payments due under the deed, Austereo was bound to remove the caveat. Consequently he says he has done everything necessary under the terms of the mortgage to have the caveat removed. He submitted that this defence has strong prospects and, at the very least, is an arguable defence. If it succeeds, Mr Suckling says that it is a complete defence to the claim for possession.

35 CBA contends that the obligation to 'do everything necessary' imposes an absolute obligation and is a requirement to ensure that the caveat is removed. CBA submitted that it is selfevident that Mr Suckling has not done everything necessary to remove the caveat because:

(a) the caveat remains on the title to the property;

(b) by the deed, Austereo was required to remove the caveat in seven months' time, not forthwith;

(c) there appears no basis for the retention of the caveat if the debt it secured had been satisfied. Mr Suckling could easily have applied to the Court for its removal in the event that the caveator was recalcitrant; and

(d) Mr Suckling's own evidence is that he was unable to have the caveat removed when he sold the East Brighton property in March 2012, and for this reason he asked CBA to take over the sale as mortgagee.

36 CBA contends that to do everything necessary to have the caveat removed, Mr Suckling should have signed the deed, made the payment due to Austereo, required the caveat to be removed forthwith and if it was not removed, applied to the Court to have it removed. CBA submitted that the entry into a deed requiring the caveat to be removed seven months after payment does not amount to doing everything necessary.

37 Further, CBA submitted that in any event, by the deed of novation, Mr Suckling accepted that he had defaulted under the mortgage by failing to have the caveat withdrawn and further accepted that CBA's power of sale had validly arisen. CBA contends that Mr Suckling made an election by which he is bound and he cannot now be heard to say that he was not then in default.

38 CBA contended that even if the proposed defence by Mr Suckling was arguable, it could be determined now. It submitted that all the necessary evidence was before the Court, and the issue of whether or what Mr Suckling had done fulfilled the obligation to 'do everything necessary to remove' the Austereo caveat was a narrow issue.

39 CBA also submitted that there would be no utility in setting aside the judgment because there are now other monetary defaults that it could rely upon.

40 In my view, Mr Suckling has established a prima facie defence that there has been no breach of the terms of the relevant mortgages. Whilst, on one view, the issue is narrow and might be determined now, in my opinion it would be better determined at trial with the benefit of full argument and, possibly, further evidence. Indeed, Mr Suckling submitted that he has only put on the evidence necessary to establish a prima facie defence. If the matter is to proceed to trial, he would want to put on additional evidence. For example, if CBA wished to rely on the fact that the caveat is still registered on the property, he would want to put on evidence as to the reasons why that is so. Other evidence, including evidence about the dealings between Mr Suckling and Austereo and the circumstances in which the deed was entered into, may also be required. I cannot be certain on the evidence as it now stands and without the benefit of full argument that the matters set out in the deed of novation ought act as a barrier to Mr Suckling disputing that there has been a default and that the bank is entitled to possession. That too is a matter that would best be determined after a trial in which there has been further investigation of the facts and full argument. I do not accept the contention that there would be no utility in setting the judgment aside because there are other defaults that can now be relied upon (but which did not exist at the time that the original default notices were served). No doubt CBA may choose to exercise its rights and serve a fresh default notice specifying a new default that has arisen since the original notices were served. If it does, then it will be up to Mr Suckling to deal with the notice. Among other things, he may do so by rectifying the default within the time permitted or he may seek to persuade CBA that there is an error in the notice and that it is not valid. It is not a fait accompli that a fresh event of default will automatically lead to CBA being entitled to enforce its securities such that there is no point in setting aside the judgment.

41 As the matter is to be determined at trial, it would not be appropriate for me to consider on this application in any further detail the merits of this proposed defence nor the other possible defences that Mr Suckling wishes to argue. However, I will consider other factors relevant to the exercise of the discretion to set aside the judgment.

Other matters relevant to exercise of discretion

42 The reasons given by Mr Suckling for failing to file a defence and for the delay in making the application to set aside the judgment taken in context are reasonable. He was facing the prospect of spending time, energy and money when the practical outcome of doing so may have been financially pointless. He did not know whether the amount recovered from the receivership would clear the whole or a substantial part of the NBG debt. If it did not, then he may not have had the assets or means to meet any substantial undisputed part of that debt. Further, his personal circumstances provide the context in which Mr Suckling decided to adopt this 'wait and see' approach. As matters have transpired, it seems that Mr Suckling does have assets sufficient to meet his liability to CBA, including amounts in respect of which he disputes liability. In the circumstances of this case, the failure to file a defence in time and the delay in making the application to set aside the judgment do not weigh heavily against him. I also accept his evidence that part of the prejudice that he will suffer if the judgment is not set aside is that it is difficult for him to reinvigorate his business career. Further, there is no apparent prejudice to CBA if the judgment is set aside. It no longer relies on the guarantee and the second mortgage given as security for the NBG debt as that debt has been repaid. Although CBA also holds judgment against Mr Suckling for possession of the Mount Martha property, it has not obtained judgment against the second defendant (his wife) who is the other registered proprietor of that property and it cannot yet take possession of that property and sell it. Further, CBA did not dispute that the value of the Mount Martha property is almost double the debt claimed to be secured by the mortgage over that property. Even allowing for the fact that it may take some time for the matter to be heard and determined and that during that time interest and costs will continue to accrue, it does not seem to me that CBA is likely to suffer any significant prejudice if the judgment is set aside.

43 Finally, I wish to make some observations about the failure of CBA to give notice of its intention to enter judgment in default of defence. Of itself, this is not a reason to disturb the judgment. Indeed, I do not place much weight on it as a matter relevant to the exercise of the discretion in this case. In light of the evidence that Mr Suckling gave, it may have made no difference had notice been given. Whether it would or not is ultimately a matter of speculation and is of no assistance in determining whether the judgment should be set aside. Nevertheless, I would observe that the entry of judgment in the circumstances of this case where:

• CBA and its solicitors knew that Mr Suckling was represented;

• the judgment in default was entered shortly after the defence to the original claim was due;

• the judgment was based on an amended statement of claim that had not been served (albeit that on one view the amendments might be seen as minor);

• no warning was given that judgment was to be entered,

does not cast the bank, as an experienced litigant, or its solicitors in a good light. The ability to enter judgment in default of defence provides plaintiffs with a quick means of achieving what they set out to do without the need for the cost, delay and risk that a trial on the merits entails. In my opinion, plaintiffs exercising such a right should enter default judgment without taking an unfair advantage and should themselves be careful to comply with the Rules of Court. In many, if not most, cases, a plaintiff might best be certain of ensuring that they do not take an unwarranted advantage by notifying their opponent that if they do not file a defence within time, the plaintiff will exercise its rights to obtain judgment in default. As Bongiorno J (as he then was) said in French v Triple M Melbourne Pty Ltd,[11] 'Litigation is not a steeple chase nor even a bike race where a fall can determine the outcome.'[12]

44 Further, the failure to give notice of an intention to enter judgment in default of defence can lead to unnecessary expense to litigants where there is a prima facie defence available. There is the wasted cost to the plaintiff of entering judgment and the costs to both parties of the application to set aside the judgment. A simple telephone call or letter putting the defendant's solicitor on notice may well avoid those unnecessary costs.

Conclusion as to setting aside default judgment

45 It follows from what I have said in the preceding paragraphs that the default judgment entered against Mr Suckling should be set aside.

46 I will next consider Mr Suckling's application for an interlocutory injunction. Effectively, he seeks to restrain CBA from relying on the first registered mortgage over the Southbank property that secures the home loans (the 'Home Loan mortgage'). As I have noted, CBA does not hold a judgment for possession based on that mortgage. It says that it does not need a judgment as it is already in possession. CBA contends that it is entitled to remain in possession and to sell the Southbank property in exercise of its rights under the Home Loan mortgage. The default relied upon is again Mr Suckling's alleged failure to do everything necessary to remove the Austereo caveat.

47 Plaintiffs seeking an interlocutory injunction must establish that they have a prima facie case for the relief that they seek and that the balance of convenience favours the granting of an injunction.[13] The Court will consider either separately or as part of the consideration of the balance of convenience, whether the plaintiff is likely to suffer injury for which damages would not be an adequate remedy.[14] In considering how strong the plaintiff's case needs to be, the Court will take into account 'The nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks.'[15] The Court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been wrong to grant or refuse the injunction.[16]

48 As I have already said, in my opinion Mr Suckling has raised a prima facie defence that there has been no default because he has complied with the obligation to do everything necessary to remove the Austereo caveat.

49 Moreover, in my view the balance of convenience strongly favours the grant of the injunction given the amount of the debt claimed by CBA said to be secured by the Southbank mortgage (approximately $680,000) and the undisputed value attributed to that property (in the vicinity of $2 million). Consequently, if Mr Suckling fails in his claim against CBA, the full amount of the debt would seem to be adequately secured. Whilst CBA submitted that it had taken steps to enforce the judgment that it had obtained in respect of the second mortgage over the property, CBA could not point to any prejudice if it was restrained from selling the Southbank property in exercise of its powers under the Home Loan mortgage.

50 Taking all of these matters into account, it seems to me that the course with the lower risk of injustice is to grant the application for the interlocutory injunction. If no injunction were granted, then CBA intends to sell the Southbank property. If it does so, Mr Suckling will be deprived of his property. On the other hand, if an injunction is granted and it later turns out to be wrong to have done so, CBA will only have been deprived of recovering its debt immediately. Such delay could be compensated by an award of interest or damages. As I have said, the undisputed value attributed to the Southbank property is well in excess of the debt claimed by CBA. In addition, Mr Suckling is required to give an undertaking as to damages as part of the price to be paid to obtain the injunction.

51 CBA submitted that if it was to be restrained from exercising its power of sale, then Mr Suckling ought to be required to pay the amount of the debt into Court. In Inglis v Commonwealth Trading Bank of Australia,[17] Walsh J observed:

A general rule has long been established, in relation to applications to restrain the exercise by a mortgagee of powers given by a mortgage and in particular the exercise of a power of sale such that such an injunction will not be granted unless the amount of the mortgage debt if this be not in dispute, be paid or unless, if the amount be disputed, the amount claimed by the mortgagee be paid into court.[18]

52 Having quoted this passage, Finkelstein J, in CMG Equity Investments Pty Ltd v Australia and New Zealand Banking Group Ltd[19] said:

The benefit of a mortgage would be greatly diminished if this was not the rule, for the risk of a change in the value of the mortgaged property would lie with the mortgagee and not with the mortgagor, which is where it should lie.[20]

53 However, where there is a challenge to the validity of the mortgage, a serious challenge to the amount of the claim or the validity of the notice of demand, the courts have been willing to consider whether an order can be moulded to ensure adequate protection of the mortgagee and otherwise to do justice between the parties without requiring the mortgagor to pay the whole of the debt into court.[21] Here, whether there has been a default is a live issue for trial. Moreover, the value of the security appears to be more than double the debt alleged to be owing. As such, the risk to CBA of a change in the value of the land that would affect its ability to recover its full debt is relatively small. In all the circumstances, I do not propose to require Mr Suckling to pay the amount of the debt claimed into Court.

54 I will require Mr Suckling to give the usual undertaking as to damages and an undertaking to bring a claim (either by way of counterclaim in this proceeding or by separate proceeding) seeking a declaration that CBA is not empowered to sell the Southbank property under the Home Loan mortgage. Subject to those undertakings being given, I will grant Mr Suckling's application for an interlocutory injunction and will order that CBA be restrained from selling the Southbank property in reliance on default notices that have been served.

55 I will hear counsel as to the form of orders to be made.

[1] The second defendant, Ms Jo-Anne Maree Bird.

[2] The company is now known as ACN 092 675 164 Pty Ltd (in liquidation).

[3] Transfer of Land Act 1958 (Vic), s 77(4).

[4] In addition, the Court also probably has power under its inherent jurisdiction to set aside such a judgment: Bradvica v Radulovic [1975] VicRp 42; [1975] VR 434, 441.

[5] (Unreported, Supreme Court of Victoria, Chernov J, 2 July 1997).

[6] Ibid 5. See also, Starrs v Retravision (WA) Ltd [2012] WASCA 67 [36].

[8] In the case of the Mount Martha property, the statement of claim pleaded that the registered proprietors were Mr Suckling and his wife, the second defendant.

[9] [1974] VicRp 71; [1974] VR 596.

[11] [2006] VSC 36.

[13] Australian Broadcasting Commission v O'Neill [2006] HCA 46; (2006) 227 CLR 57.

[15] Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618, 622.

[16] Bradto Pty Ltd v State of Victoria [2006] VSCA 89; [2006] 15 VR 65.

[19] [2008] FCA 455; (2008) 65 ACSR 650.

[21] AED Oil Ltd v Puffin FPSO Ltd (No 5) [2011] VSC 60; Action Cycles Pty Ltd (Receivers & Managers appointed) v Ross [2011] VSCA 411 at [24].