BACKGROUND
2 Melissa Russell (nee Awburn), the plaintiff, owns shares in Pialligo Horticulture Pty Ltd ACN 139 772 464 and is married to John Russell. Those shares, pursuant to the Constitution of Pialligo Horticulture, grant the plaintiff an exclusive right to occupy, use and enjoy the leasehold property described as Lot 2, 18 Kallaroo Road, Pialligo ACT 2609. Lot 2 is one of four adjoining lots in which Pialligo Horticulture holds an interest pursuant to a Crown lease. There are four shareholders in Pialligo Horticulture. Each shareholder has corresponding exclusive rights conferred in relation to one of the lots, with such rights being conferred by the Constitution. I will refer to the plaintiff's shares as the Lot 2 shares.
3 The plaintiff's evidence is that in about 2010, her husband set up Pialligo Horticulture as the company that owned the land located at 18 Kallaroo Road, Pialligo. She said her husband used the main commercial lot to operate the Pialligo Estate business. An orchard, olive grove and winery are located on the Pialligo Estate lot, and are referred to as "the farm". The remaining three lots were residential. The plaintiff says she did not take too much notice of "the lease agreements and things." The current directors of Pialligo Horticulture, [REDACTED], are the owners directly or indirectly of the two residential lots other than Lot 2. Her husband was previously a director of Pialligo Horticulture. The plaintiff has never been a director of Pialligo Horticulture.
4 The plaintiff deposes that her husband organised a loan with St George (now part of Westpac) and "all that sort of thing" to fund the purchase, of what she refers to as Lot 2. The plaintiff says that Lot 2 was intended to be "the house lot for our family" and that they had obtained development approval for plans to build. She says that after financial setbacks, including the effect of the COVID-19 pandemic on the Pialligo Estate business, "there was a real strain on everything and we couldn't build". She says that:
… in order to get an extension to the DA we dug a third of a basement so that some work had been done. That was fenced off and has remained fenced off since. The lot has just been sitting there. There is a big electric gate for access to the residential lots next to the Pialligo Estate lot. The people living at Lot 1 have access to the electronic gate. Another lender has taken possession of the commercial lot that had the Pialligo Estate business. This lot has not been maintained for 6 months, it is on the market and currently for sale.
5 The first three defendants, Desi Nominees Pty Limited ACN 008 601 330, Rovera Investment Fund Pty Ltd ACN 151 726 073 and Sofia (ACT) Pty Limited ACN 151 041 262 are the grantees of security interests in the Lot 2 shares created under three Specific Security Agreements (SSAs) executed in 2020 and 2022 and of guarantees and indemnities included in certain loan agreements executed by the plaintiff as guarantor in 2020 and amended with the signed consent of the plaintiff in 2022. The fourth defendant, MilDesi Security Holdings Pty Limited ACN 636 039 766, is a non-trading entity created as the security trustee for the first to third defendants collectively.
6 The first three defendants are each lenders who have provided funding to various businesses associated with the plaintiff's husband, conducted under the names of Pialligo Estate and Pialligo Farm (the Loans). The detail of the loan arrangements are as follows.
7 Desi Nominees is the trading trustee for the Desi Nominees Pty Ltd Superannuation Fund. In June 2020, Desi Nominees gave a loan facility pursuant to an agreement titled "Desi Loan Agreement - Pialligo Estate Facility". This loan agreement was signed by the plaintiff. It was secured by a SSA (Estate SSA). There is an equivalent loan agreement by which Desi Nominees provided the Pialligo Farm Facility, which was also secured by a SSA (Farm SSA).
8 Rovera was previously named Skela ACT Pty Ltd. In June 2020, Rovera gave a loan facility pursuant to an agreement titled "Skela Loan Agreement - Pialligo Estate Facility". This agreement was signed by the plaintiff. It too was secured by the Estate SSA. There is an equivalent loan agreement by which Rovera gave the Pialligo Farm loan facility. This facility was also secured by the Farm SSA.
9 Sofia is the trading trustee for the Rovera Construction Pty Superannuation Fund. In June 2020, Sofia gave a loan facility pursuant to an agreement titled "Sofia Loan Agreement - Pialligo Estate Facility". This agreement was signed by the plaintiff. The Sofia Loan Agreement - Pialligo Estate Facility was secured by the Estate SSA. There is an equivalent loan agreement by which Sofia gave the Pialligo Farm loan facility. This facility was also secured by the Farm SSA. There is also a SSA granting security over the Lot 2 Shares to MilDesi.
10 Westpac Banking Corporation is the mortgagee, with the mortgage presently securing a debt of approximately $1.3 million plus interest. The defendants' security interests rank second after Westpac. Both Westpac's and the defendants' security interests are caveated on the title of Lot 2. The defendants have also registered interests on the Personal Property Securities Act 2009 (Cth) (PPSA).
11 A letter of demand dated 25 May 2023 addressed to the plaintiff states on its face that it was sent by hand and express post as well as by email. The letter of demand called on the plaintiff's guarantees in respect of the loan agreements and alleges that collective debt remaining on the Loans is $8,190,488.62 (principal and interest). The letter of demand notes that whilst the plaintiff's guarantee is limited to the Lot 2 shares, that limitation is subject to exceptions including for incidences of fraud, gross negligence, unlawful act, unlawful omissions or wilful default. The plaintiff deposes that she did not receive the letter in May 2023 and that the defendants did not have any contact details for the plaintiff. I note that the email address for service under the loan agreements for the plaintiff was the email address to which the letter of demand purports to have been sent. That email address appears to be the plaintiff's husband's email address. The same email address is nominated in the Loan Agreements in respect of both the plaintiff and her husband.
12 The plaintiff explains that the timing of her application, on in effect the eve of the auction, as follows:
(1) the defendants did not provide a substantive response to the email of the plaintiff's solicitor of 20 June 2023 until 9 August 2023;
(2) the plaintiff spent September 2023 raising money from family and friends to instruct lawyers and a detailed letter was sent to the defendants on 19 September 2023; and
(3) on 9 October 2023 the defendants provided nine calendar days' notice of the online auction of Lot 2.
13 In July 2023, Westpac agreed to an interim hardship arrangement as a result of which the plaintiff's loan repayment amounts were reduced to interest only in the sum of $8,899 (estimated, until further notice) for the months from 31 July 2023 to 31 December 2023. Once all the scheduled varied loan repayment amounts are made, Westpac agreed to adjust the loan account so that it was no longer in arrears on the basis that arrears will be incorporated into the loan and loan repayments and the loan expiry term will be adjusted accordingly. In the event that the conditions of the hardship arrangement are not met, Westpac reserves its rights, including, in certain circumstances, to require full repayment of the balance of the loan. The evidence is silent as whether the plaintiff has complied with the hardship arrangement.
14 The plaintiff tendered an email from Westpac in which Westpac confirmed that its position was that if the sale of the Lot 2 shares occurs as a result of the defendants' exercise of their purported power of sale and the debt owing to it is repaid from the sale proceeds, then it will comply with any request to produce the share certificates at the settlement.
15 The SSAs provide for, in effect, a power of sale which may be exercised when an event of default, as defined in the guarantees, (EOD) has occurred. On this application, on the assumption, which is otherwise disputed, that the SSAs and guarantees are enforceable against the plaintiff, it was not in dispute between the parties that an EOD has occurred and the power of sale has been enlivened.
16 The defendants have caused a real estate agent to list the Lot 2 shares for sale via an online auction that was due to be held at 1pm, 18 October 2023. The marketing which preceded the auction being set down has essentially comprised two phases.
17 First, on 24 August 2023, a sale by expressions of interest with a closing date of 19 September 2023 (EOI process) was advertised on Bidder.com.au, view.com.au, Realtair, Homely, On The House, Allbids.com.au, Agentpoint / Canberra Weekly, Rate My Agent, Domain.com.au and Realestate.com.au. No expressions of interest (offers) were received. Ten contracts, being agreements for the sale of the Lot 2 shares, were distributed. By 12 October 2023, five of the recipients had confirmed they were no longer interested.
18 Secondly, on 5 October 2023, a sale by public online auction on 18 October 2023 was advertised by the same means as the EOI process had been advertised. As at 6.01pm, 17 October 2023, there were no registered bidders. By 6.59pm, 17 October 2023, there was one registered bidder. There is no evidence from the defendants' real estate agent as to whether the sole registered bidder is known to the agent with conduct of the sale or that there is a basis for believing that the registered bidder is considered to be an interested buyer with capacity to bid.
19 The defendants submit that the apparent lack of interest in the auction does not support an inference that the steps taken by the defendants to market the shares have been inadequate. The defendants submit that the more likely inference is that the apparent lack of interest reflects the reality that the "property" being auctioned is in the form of shares in a private company conferring exclusive rights in relation to the leasehold of a vacant lot, the primary feature of which is a "hole in the ground". As noted above the "hole in the ground" is a remnant of steps taken to commence works on a development application which has not otherwise been substantially progressed. Relatedly, I note that the provisions of the Constitution, which is annexed to the sale agreement, are somewhat complex and include some apparent internal inconsistencies which may also be a factor in the level of interest that has been shown in the property to date.
20 The plaintiff has led evidence from two experienced real estate agents to the effect that the manner in which the sale of the Lot 2 shares has been marketed falls below reasonable market practice in a number of respects, including critically the following. First, in relation to allowing sufficient time for steps to be taken to educate potential buyers about the somewhat uncommon nature of the transaction whereby the property being transmitted comprise shares in a company and although the Constitution is annexed to the contract, there is no information as to the company's financials. In this respect, I note that there is in evidence a letter from a director of Pialligo Horticulture which asserts that the Lot 2 shares are subject to a lien in favour of the company for unpaid dues (in an unspecified amount). Secondly, the evidence of the real estate agents relied on by the plaintiff suggests that reasonable market practice would require a method of sale other than by online auction and allow for a greater investment in advertising. In this respect, I note the evidence on this application is that to date the quantified outlay for advertising has been approximately $1,300. The real estate agent retained by the defendants has confirmed that the choice of an online auction as the method of sale was at the sellers' request.
21 The plaintiff deposes to her concerns arising from her understanding of the manner in which the defendants have marketed the shares as follows:
That makes me think the Defendants want the lot for themselves. My concern is the Defendants sell the property for $1.3 million and a dollar to someone associated with themselves. I want to sell the property to get the better value for it. The Defendants are not doing justice to the lot.
22 The recent evidence led by the defendants on this application sheds light on the steps taken to date in marketing the property and correct a number of misapprehensions about the process that were held by the plaintiff at the time she gave her affidavit.
23 By originating application, the plaintiff seeks, as her primary claim, to set aside the SSAs on the equitable principles stated in Garcia v National Australia Bank Ltd [1998] HCA 48; 194 CLR 395. The plaintiff as a fallback, seeks relief pursuant to various provisions under the Australian Securities and Investments Commissions Act 2001 (Cth) for the SSAs to be declared as being void ab intio on the basis of unconscionable conduct. As noted above, the plaintiff does not dispute that she signed the relevant documents. She maintains that she is entitled to equitable relief because she alleges that the defendants knew or should have known that she was married to their customer, Mr Russell; she did not understand the purport or effect of the 2020 or 2022 SSAs or guarantees and that her husband obtained her signature through the trust and confidence that she reposed in him; the defendants did not take any steps to explain the 2020 or 2022 transactions to the plaintiff and did not require or encourage her to obtain independent legal advice; and the plaintiff was a volunteer. The claim for final relief falls to be determined on another day. For present purposes the exercise of a prima facie case is not in dispute.
24 The plaintiff undertakes that if the interlocutory injunction is granted she will herself move to market and sell the Lot 2 shares in accordance with the advice she has received from experienced real estate agents as to the best way in which to maximise the sale price that may be achieved. She deposes to having already engaged an agent for this purpose.
25 In the alternative to an injunction, the plaintiff seeks an order that the proceeds of the sale of the Lot 2 shares, net of payments to Westpac necessary to discharge the mortgage and the costs of the sale, be paid into a solicitor's controlled monies account, pending resolution of her claim against the defendants.
26 At the hearing, the plaintiff did not press prayers 3 and 4 of the originating application.
27 The interlocutory application came before me on 17 and 18 October 2023 in my capacity as the Commercial and Corporations Duty Judge. The plaintiff initially sought to proceed on an ex parte basis. I directed the plaintiff to immediately notify the defendants of the application, as well as the entities named as interested parties in the originating process, Westpac and Pialligo Horticulture. On being notified of the application the defendants appeared by counsel to contest the application, seeking time to adduce evidence during the course of 17 October 2023, which evidence was supplemented overnight. Neither Westpac or Pialligo Horticulture sought to be heard.