(b) what order for costs should be made in respect of the proceedings at first instance.
32 It is important to realise that the present proceedings were proceedings between a mortgagor and a mortgagee. Mortgagors have relatively few rights to proceed against their mortgagee. Once the mortgagee's powers have arisen, the mortgagor is only entitled to restrain the exercise of those powers on very limited grounds. A dispute as to the quantum of the mortgage debt where there is no dispute as to whether there has been a default does not entitle a mortgagor to an injunction: Harvey v McWatters (1948) 49 SR (NSW) 173.
33 I should add that there is no right to an interlocutory account, and a mortgagor is not entitled to a partial account. A mortgagor cannot pick out one or more aspects of the accounts between the parties and litigate that alone. The Court of Appeal has decided this on numerous occasions; see eg Colin D Young Pty Ltd v Commercial & General Acceptance Ltd (24 August 1982, unreported, C/A); Kennedy v General Credits Ltd (1982) 2 BPR 9456 and Adams v Bank of New South Wales [1984] 1 NSWLR 285.
34 To succeed then, the plaintiff had to show that (a) there is an arguable case; (b) that the balance of convenience favours the grant rather than the refusal of the injunction; and (c) damages are not an adequate remedy. This case concerns (a).
35 Accordingly, unless the plaintiff could convince the Court on a prima facie basis that nothing was owing under the mortgage, its application for an interlocutory injunction had to be dismissed.
36 Thus the question before the Judge and before us was whether the plaintiff had shown an arguable case as at the date of filing of the summons that no money was owing under the mortgage.
37 There are some facts which tend in this direction. The most significant of these is that there was no advance by cheque as specifically required under clause 3 of the loan agreement.
38 The prime answers given by the defendant before the trial judge were that (a) there was an estoppel by the recital in the mortgage; and (b) the advance had been made to the mortgagor by a series of journal entries which reduced its debt to Constructions. Both were unsustainable on the existing evidence as discrete answers to the claim that no money was owing under the mortgage. They were both disposed of by Hamilton J in a perfectly correct fashion.
39 However, the written submissions of Mr Grieve QC who appeared for Finance before Hamilton J went further. He submitted that the whole of the circumstances showed that there must be an estoppel by convention. It appears that this was overlooked by the learned Judge who did not rule on it. It is thus necessary to turn one's attention to that doctrine.
40 In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, 244, five Justices of the High Court said:
"Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying."
41 Accordingly, it is necessary to examine the evidence to see the strength of the case on conventional estoppel.
42 There is some difficulty in performing this exercise because at the relevant times all the books of account were being handled by the employees of the Westpoint group and there were some common directors between the various companies on both sides of the record. However, because of the plaintiff's own minutes and Mr Church's affidavit, the exercise can be done.
43 The minutes which bear a date 4 December 2001 which are annexure C to Mr Church's affidavit of 7 May 2002, show that Chocolate Factory Apartments Ltd knew that the $1.216 million to be received from the Bank of Western Australia Ltd would be paid to Finance in reduction of the amount secured by its mortgage rather than to Constructions.
44 Mr Kalyk, solicitor who appeared for the respondent plaintiff in this Court, argued that the mortgage was only ever a security, it was not a document pursuant to which any monies were lent and all that was meant by that minute was that the security provided by the mortgage would be lessened. However, with respect, it is impossible to accept that submission, because if no monies were lent under a mortgage in this form, there is no security anyhow, and secondly, it is impossible on that basis to see why a cash payment of $1.216 million would be made to Finance as mortgagee.
45 Then as I have indicated earlier, by letter of 28 March 2002 Mr Carey sent to the plaintiff his calculations as to what was owing. Mr Church in the affidavit which I have just mentioned, raised very limited objections to those calculations. He accepted as a starting point that Constructions was owed $626,876.06, but asserted that $1,077,824.69 had to be deducted from that figure leaving a balance in favour of the plaintiff.
46 However, in relation to the claim by Finance, apart from the veiled objection caught up in the words "amount, if any, advanced" there is only a denial of the $37,976.58 claim, and otherwise merely an indication that the plaintiff cannot accept that the actual figure owing is $593,212.31. When one looks at schedule 4 on page 26 of Mr Church's affidavit, one can see that Finance's claim is for (a) three sets of 10% retention monies arising under Constructions' claims 1-16 totalling $1,697,213.90; (b) "other amounts financed" $37,976.58, a total of $1,735,190.48 less the $1,216,000 received from the Bank of Western Australia, leaving a balance of $519,190.48. There is not one word of denial of this claim other than item (b). Thus there is $481,213.90 which was claimed by Finance which was not in dispute.
47 Care must be taken to separate any disputed claim by Constructions against the plaintiff from the claims of Finance against it. The claims of Finance were virtually (a) the $519,190.48 claim; and (b) the $539,212.31 claim (there was also a third claim for $43,260.53 interest which was denied but this could be put aside for the moment). Where a claim is made by one party and only partially answered in circumstances where, as in the present case, one would expect there to be a full answer if one was available, a court can take into account that there has been no answer when one was required; see Thomas v Hollier (1984) 156 CLR 152, 157 per Gibbs CJ.
48 The affidavit of Mr Rundle sworn on behalf of the appellant, said in paragraph 11 that Constructions received payments from Bankwest totalling $14,262,666.91 and the balance $1,735,190.40 from Finance. He says the payments from Finance were made by the journal entries in Exhibit GJR 2. There was no reply to this affidavit, presumably because it was sworn the day before the hearing. However, what it states is almost uncontestable. The plaintiff does not have any figures to rebut it and so the best it can do is in effect to say that it does not know and cannot admit that the total amount was advanced, and that the journal entries do not bind it. It says that up until 12 April 2001 when the majority allowed the minority to sue it in this action, the accounting was under the control of Westpoint and it is thus not certain of the amounts involved.
49 Whilst, of themselves the journal entries are not persuasive as they were made by people in the Westpoint camp, they add to the case that there was a convention between the parties that Finance would provide finance for the project and that even though no cheques were drawn as required by the loan agreement, Finance did advance monies to the plaintiff by reducing its debt to Constructions so that after allowing for the payment of $1.216 million by the Bank of Western Australia at least $481,213.90 was still owing to Finance when the proceedings were commenced.
50 On the evidence before the Court the plaintiff did not establish a prima facie case that no monies were owing under the mortgage. Accordingly its claim for interlocutory relief should have been dismissed.
51 It follows that leave to appeal should be granted, the appeal allowed and the interlocutory injunction discharged.
52 However, I cannot conclude these reasons without some reference to the orders that were made and the orders which must now be made.
53 After making the decision he did, the orders the Judge made were, with respect, appropriate with two possible exceptions: (a) it does not appear that any undertaking as to damages was taken; and (b) the order was open-ended. The mortgagee should have been asked what it claimed under the mortgage, and the orders should have been limited to the amount claimed so that any surplus from sales of units should have been payable to the plaintiff.
54 The usual rule where there is a dispute as to the amount owing under the mortgage is that the mortgagee can require as the price of a discharge that the mortgagor pay the amount reasonably demanded for principal, interest and costs to date plus a reasonable sum to cover the costs of taking the accounts: Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225.
55 We were informed that approximately $1,700,000 had been paid into the mortgagee's solicitor's trust account under Hamilton J's orders. At the end of the oral hearing we ordered that $519,000 be paid out to the mortgagee, the balance over $1,194,000 be paid out to the mortgagor, and that the remaining sum of $675,000 and the accrued interest be retained pending our further reasons.
56 On 22 August 2002, by consent, the orders were varied to substitute $1,294,000 for $1,194,000 which had the effect of increasing the remaining sum to $775,000.
57 Accounts will have to be taken between mortgagor and mortgagee. These may be taken as an adjunct in the proceedings in which Constructions is also a defendant, or they may be taken separately before the other issues are determined. Although the mortgage has been discharged, accounts can still be taken between mortgagor and mortgagee: Adams v Bank of New South Wales [1984] 1 NSWLR 285, 295.
58 There is a suggestion in some texts that, in lieu of account, a mortgagor, after discharge, may sue the mortgagee at law under the indebitatus count of money had and received. I do not consider that such an action lies, at least unless there are accounts stated. A mortgagee holds any surplus on trust for subsequent mortgagees and the mortgagor. In Rajah Kishendatt Ram v Rajah Mumtaz Ali Khan (1879) LR 6 Ind App 145, 160, Sir Robert Colville, in giving the reasons of the Privy Council said:
"The effect of a sale under a power of sale is to destroy the equity of redemption in the land, and to constitute the mortgagee exercising the power a trustee of the surplus proceeds, after satisfying his own charge, first for subsequent incumbrancers, and ultimately for the mortgagor."