Federal Court Rejects Injunction to Prevent Property Sale

OUTCOME: Dismissed

FEDERAL COURT OF AUSTRALIA

[APPELLANT] v [APPELLANT[COMPANY] [2009] FCA 1004

[APPELLANT] v [APPELLANT[COMPANY], [APPELLANT], ST [APPELLANT] and [APPELLANT] 147 of 2009

SIOPIS J

27 AUGUST 2009

[APPELLANT]

IN THE FEDERAL COURT OF AUSTRALIA

[APPELLANT]

general division WAD 147 of 2009

BETWEEN: [APPELLANT]

Applicant

[APPELLANT] OF ORDER: 27 AUGUST 2009

[APPELLANT]

THE COURT ORDERS THAT:

1. The applicant's claim for interlocutory relief is dismissed. 2. Costs are reserved. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

[APPELLANT]

general division WAD 147 of 2009

[APPELLANT]

Applicant

[APPELLANT] [APPELLANT] [APPELLANT]

ST [APPELLANT] [APPELLANT] [APPELLANT]

JUDGE: SIOPIS J

DATE: 27 AUGUST 2009

PLACE: [APPELLANT] FOR

JUDGMENT 1 This is an application for an urgent injunction brought by the applicant, Ms [APPELLANT], a property investor, to enjoin the sale of a property at [ADDRESS], Scarborough, which is due to take place at 1 pm on 29 August 2009. The [APPELLANT] to this interlocutory application is the [APPELLANT[COMPANY]. Ms [APPELLANT] is the owner of the property. The [APPELLANT[COMPANY] has a mortgage over the property and has given instructions to a real estate agent to sell the property pursuant to its power of sale under the mortgage. 2 The originating application dated 25 August 2008, which has been filed by Ms [APPELLANT] has only, at this stage, been served on the [APPELLANT], the [APPELLANT[COMPANY]. I take it, although I do not have any evidence to that effect, that the other four respondents to the originating application have mortgages over one or more of the other properties identified by Ms [APPELLANT] as being owned by her, and that these four respondents are also threatening to exercise their rights as mortgagees (but not imminently) in respect of the properties owned by Ms [APPELLANT]. 3 The grounds of Ms [APPELLANT]'s claims against the five respondents are set out in her originating application. They are the following:

1. Since 2001, the conduct of banking in Australia has been regulated by the Australian Securities and Exchange Commission Act 2001, (CTH).

2. Although a Mortgage contains an attornment clause, and the Mortgage purports to grant the right to take possession of land and sell it quickly, this is State legislation, and where it is in conflict with the provisions of a Federal Act to a State Act must give way to that relevant Act.

3. An Equity of Redemption was accepted as existing in the case Barns V the Queensland National Bank (1906) 3 CLR 925, and it is beyond the competence after 1900 of a State Government to legislate to abolish that equity given the nature of a federated State.

4. The Provisions of 12CA (Appendix B1) and 12CB (Appendix B2) of the Australian Securities and Exchange Commission Act 2001, (CTH) make unconscionable conduct by a financial corporation illegal, and to use a State Act to defeat an equity owned by the applicant in Commonwealth property, owned in root or radical title by The Commonwealth Sovereign, is unconscionable conduct. 5. [ADDRESS] has power under S 12GD Australian Securities and Exchange Commission Act 2001, (Cth) to issue an injunction. 4 Ms [APPELLANT] seeks in the originating application an order restraining the named respondents from taking possession and selling the mortgaged properties for 12 months, "but securing the proceeds of any sale effected within that time, to pay the secured amounts to the Mortgagee". 5 The interlocutory relief sought in this application is for an interlocutory injunction restraining the [APPELLANT[COMPANY] "from taking possession, until 12 months have elapsed, and then only if they have not been paid in full or other arrangements made". 6 When the matter came before me yesterday for the first hearing, I adjourned the matter to give Ms [APPELLANT] an opportunity to put evidence before me in support of her application. I also asked Ms [APPELLANT] to notify the [APPELLANT[COMPANY] of the adjourned hearing. 7 Ms [APPELLANT] has today filed a document headed "statement of facts". The statement of facts was witnessed by a justice of the peace. The statement of facts states that Ms [APPELLANT] has assets which exceed her liabilities by $1.2 million. She also says that she had a disagreement with the Stirling City Council that prevented her from conducting her business without interference. As a result, her name entered the list of defaulters maintained by the [NAME]. As a direct result of the disagreement, Ms [APPELLANT] says that her cash‑flow regime was disrupted and she fell behind in repayments. 8 Ms [APPELLANT] then says that without personal service upon her of any court process whatsoever, the [APPELLANT[COMPANY] proceeded to appoint an agent and "wants to proceed and sell the properties the subject of a Mortgage to them, on…29 August 2009". This, says Ms [APPELLANT], will cause her great distress unless at least $1.045 million is realised at the auction. Ms [APPELLANT] says that she has good reason to believe that within a reasonable time she can achieve that price. Ms [APPELLANT] says that her repayments are in arrears and that she needs time to reorganise her portfolio of properties. 9 Ms [APPELLANT] goes on to say that the rights of the [APPELLANT[COMPANY] were being "exercised subject to some State law of which I have had no notice", and that she acted with due diligence at the first opportunity to do so upon becoming aware of the [APPELLANT[COMPANY]'s intention to sell her property, without further reference to her or an opportunity for her to set a reserve price. This, says Ms [APPELLANT], is unconscionable conduct under s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (the [NAME]). 10 Aside from a letter to the [APPELLANT[COMPANY] and advertisements for the sale of two properties, there was no other documentary evidence which was provided by Ms [APPELLANT] in support of her application. Thus, I do not have a copy of the mortgage in front of me. 11 At the hearing today before me, Mr [RESPONDENT] appeared for the [APPELLANT[COMPANY]. 12 Mr [RESPONDENT] gave viva voce evidence from the witness box. He deposed that he is a solicitor who was instructed by the [APPELLANT[COMPANY] to issue a default notice under the mortgage in respect of each of the Scarborough property and another property. He said that he had drafted default notices under the Transfer of Land Act 1893 (WA) (the TLA) and sent them by registered mail to [NAME], Ms [APPELLANT]'s agent, in accordance with a written authority executed by Ms [APPELLANT] appointing Mr [APPELLANT] her agent. Mr [RESPONDENT] said that he had examined the written authority from Ms [APPELLANT] appointing [NAME] the agent, before sending the notices of default. Mr [RESPONDENT] went on to say that there had been no payments made in response to the notices of default. Ms [APPELLANT] agreed in evidence that she had appointed an agent before the notices of default were issued by Mr [RESPONDENT] on behalf the [APPELLANT[COMPANY]. 13 Ms [APPELLANT] also gave viva voce evidence. However, there was no affidavit before the Court from Ms [APPELLANT]'s agent, [NAME]. 14 Mr [RESPONDENT]'s evidence is quite consistent with the evidence of Ms [APPELLANT] that she did not receive any notice, but that is because she had appointed an agent for that purpose. 15 The principles to be applied are those which are set out in the following observations of [NAME] and [NAME] JJ in Australian Broadcasting Commission v [NAME] (2006) 227 CLR 57 at 81-82, at [65]: The relevant principles in Australia are those explained in [COMPANY] v [COMPANY]. [ADDRESS] ([NAME], Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued: The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief…The second inquiry is…whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted. By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by [NAME] J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal: How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks. (Footnotes omitted.) 16 It is now necessary to consider Ms [APPELLANT]'s prospects of succeeding at trial in respect of the three causes of action which I have discerned from the submissions and statements which Ms [APPELLANT] has made to me. I have sought to articulate these causes of action as best I can. 17 The first cause of action which I understand Ms [APPELLANT] to raise, is founded on a constitutional argument. I construe Ms [APPELLANT] to contend that the powers which are given to mortgagees under the TLA and the Property Law Act 1969 (WA) are inconsistent with the provisions of s 12CA and s 12CB of the ASICAct. The consequence, as I understand Ms [APPELLANT]'s argument, is that by reason of s 109 of the Constitution, the State legislation, pursuant to which the [APPELLANT[COMPANY] has acted, is invalid, with further consequence that it has no entitlement to sell the property. 18 In my view, Ms [APPELLANT]'s contention is weak. The provisions of the State Acts do not engage at all with the unconscionability provisions of the [NAME]. Each State Act, if valid, would not alter, impair or detract from the operation of the Commonwealth Act because it is quite possible for the provisions of the Commonwealth Act to have effect in circumstances where a mortgagee exercises the various powers provided for in the State Acts, when the circumstances warrant it. 19 It follows that the prospects of success of Ms [APPELLANT]'s claim on the constitutional contention are not sufficiently strong to warrant the grant of the interlocutory injunction sought. 20 The second cause of action appears to be founded on the contention that the [APPELLANT[COMPANY] has acted unconscionably in contravention of the [NAME] in taking possession of the property and purporting to exercise its power of sale. 21 In oral evidence, Ms [APPELLANT] says that she had tried to make some alternative arrangements to sell the property in order to discharge the debt due to the [APPELLANT[COMPANY] but was unable to do so. 22 Further, Ms [APPELLANT] says that she would suffer distress if the [APPELLANT[COMPANY] sold the property now rather than in 12 months time, because she believed she could obtain a better price for the property within that period. It was accepted by Ms [APPELLANT] that the mortgage has been in default for some time. In my view, the evidence does not make out even an arguable case that the [APPELLANT[COMPANY] in seeking to exercise its rights under its mortgage, has acted, or threatens to act, unconscionably. 23 On that basis, I find that there is an insufficiently strong case to support the giving of any injunctive relief on the basis of this cause of action. 24 I note that during argument Mr [RESPONDENT] observed that the provisions of the [NAME] referred to by Ms [APPELLANT], might not actually even apply to the [APPELLANT[COMPANY] in the circumstances of this case. However, in light of my findings I do not need to make findings on that contention. 25 The last cause of action is founded on Ms [APPELLANT]'s contention that the [APPELLANT[COMPANY] did not give Ms [APPELLANT] notice or obtain an order for possession. As I have said, Mr [RESPONDENT] who was not cross‑examined by Ms [APPELLANT], deposed that a default notice under the TLA was mailed to Ms [APPELLANT]'s agent. Ms [APPELLANT]'s evidence that she did not receive the default notice is consistent with the evidence of Mr [RESPONDENT], in that she accepts that she appointed the agent before the notice of default was issued. There was, as I have also said, no evidence from [NAME], Ms [APPELLANT]'s agent. 26 Ms [APPELLANT] has failed to put any evidence before me which supports a contention that the [APPELLANT[COMPANY] has failed to comply with the terms of the mortgage or the statutory provisions, or otherwise acted unlawfully, in seeking to exercise its power of sale. Such evidence as there is, is from Mr [RESPONDENT], and is to the contrary effect. 27 In those circumstances, Ms [APPELLANT]'s contention in support of the third cause of action does not, in my view, raise a sufficiently strong case to justify the granting of the interlocutory injunction sought. 28 In light of my findings that Ms [APPELLANT] has not made out a case which has sufficiently strong prospects of succeeding at trial to justify the making of the interlocutory injunction sought, there is no need to consider the balance of convenience. 29 However, the balance of convenience would, in any event, not have favoured Ms [APPELLANT]. 30 First, the undertaking for damages given by Ms [APPELLANT] is not in a proper form and does not undertake to compensate the [APPELLANT[COMPANY] and any party for losses which might be incurred if the [APPELLANT[COMPANY] was enjoined from selling the property, and Ms [APPELLANT] was to lose at trial. Further, it is accepted that Ms [APPELLANT] is in default on a number of mortgages and, therefore, there is a serious question as to whether she would be able to meet an undertaking for damages if she was to prevent the sale from proceeding and an aggrieved party was to claim on the undertaking, if she was to lose at trial. 31 Secondly, the property is an investment property and is vacant land. Ms [APPELLANT] would be able to recover compensation if she was able to establish that the property was sold unlawfully by the [APPELLANT[COMPANY] and she has thereby suffered a loss. I note, however, that Ms [APPELLANT] would need to give consideration to amending her application to formulate her claims with greater precision. 32 For those reasons, I dismiss Ms [APPELLANT]'s application for interlocutory relief. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.

Associate: Dated: 3 September 2009 Counsel for the Applicant: [redacted]

Counsel for the [APPELLANT]: [[APPELLANT]]

Solicitor for the [APPELLANT]: [[APPELLANT]]

Date of Hearing: 27 August 2009

Date of Judgment: 27 August 2009