Mainbanner Pty Ltd & Ors v. Dadincroft Pty Ltd & Ors [1988] FCA 149

TRADE PRACTICES - misleading or deceptive conduct - claim by mortgagor against mortgagee - application for interlocutory relief restraining mortgagee from exercising its security - payment into Court not possible - Court's discretion to relax that requirement - serious question to be tried - allegations

of misleading conduct not overwhelmingly strong - whether special principle where rescission sought.

BILL

Trad

No. \YA.L.BS-.

o— ~|

JUDGME?

CATCHWORDS

OF SALE - interlocutory application to restrain grantee from exercising security pending Trade Practices application.

e Practices Act 1974, s.52

Mainbanner Pty. Ltd. & Ors v. Dadincroft Pty. Ltd. & Ors Qld G55 of 1988 ere ONE pay Sou a fart ga 5 tte rS Ofer oiny \- . Gan, 99 fy PINCUS _J. a a ee ee BRISBANE aS oe rs 8 MARCH 1988 _ iy e A . aN

oe ce

IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G55 of 1988

GENERAL DIVISION )

BETWEEN: MAINBANNER PTY. LTD.

First Applicant

AND: ROBERT BERNARD LUBKE

Second Applicant AND: ANNETTE LUBKE

Third Applicant AND: DADINCROFT PTY. LTD.

First Respondent

AND: OSWALD HENRY BLACKER and DOROTHY CLAIRE BLACKER

Second Respondents

MINUTES OF ORDER

JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 8 MARCH 1988 WHERE MADE: BRISBANE

THE COURT ORDERS THAT:

1.

2.

the application for interlocutory relief be dismissed;

the costs of the application for interlocutory relief be the respondents' costs in any event.

Settlement and entry of orders is dealt with in Order 36 of the Federai Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G55 of 1988 GENERAL DIVISION )

BETWEEN: MAINBANNER PTY. LTD.

First Applicant AND: ROBERT BERNARD LUBKE

Second Applicant AND: ANNETTE LUBKE

Third Applicant AND: DADINCROFT PTY. LTD.

First Respondent AND: OSWALD HENRY BLACKER and DOROTHY CLATRE BLACKER

Second Respondents

PINCUS J. 8 MARCH 1988

EX TEMPORE REASONS FOR JUDGMENT

This is an application for an interlocutory injunction to restrain the exercise of rights under aie security. The principal application sought damages for breaches of s.52 of the

Trade Practices Act 1974 in relation to the purchase of a motor

cycle business and other relief. Counsel for the applicants, Mr Crowe, today sought and obtained leave to amend the application, s0 as to claim a declaration that certain documents relating to the transaction were void, an order for repayment of the purchase

moneys and other relief of that sort.

The sale in question took place pursuant to a' contract made on 25 May 1987 and was connected with other real estate transactions, into the details of which it is unnecessary to enter. The price was not wholly paid, anda bill of sale was given to secure a balance of $47,500. Under the terms of the bill of sale, that sum was to be repaid on or before 21 December 1987,

together with interest, but it has not been repaid.

The principal of the first applicant is the second applicant, Mr R.B. Lubke, who has given evidence that after he took over the business the takings appeared to him to be substantially under those represented. The applicants ultimately consulted their solicitors in November about that matter, and, on 18 February 1988, Messrs Mackenzie-Forbes & Partners wrote a letter to the solicitors for the respondents saying, among other

things:

"We refer to the above matter and note that there 15 an approximate amount of $50,000.00 owing to your client pursuant to the various agreements entered into between the parties.

Our client has taken advice from Counsel on the purchase of the business generally.

Our client is of the view that your client 1s in breach of Clause 10 of the agreement and that Clause 10 incorporates a false representation as to material facts which were relied upon by our client when deciding to enter into the contract.

Further, our client is of the view that Dadincroft Pty. Ltd.'s conduct in agreeing to the annexures to the contract being so annexed could amount to

misleading or deceptive conduct under Section 52 of the Trade Practices Act."

The provision in question, clause 10, was one under which the parties agreed upon the returns of the business for the previous financial year - that is, for the year ended 30 June 1986. That clause contains an acknowledgment that no representations in connection with the sale had been made by the vendor, and similar statements, and an undertaking to the effect

that the figures annexed in respect of the previous financial year

were correct.

In this application, as argued by Mr Crowe on behalf of the applicants, the focus of the attack is that the respondents (by Mr 0.H. Blacker, one of the second respondents) represented more than once before the sale that the figures of the business were being maintained - that is, that the returns which had been

represented in respect of the preceding year were being kept up.

There is evidence before the Court from an accountant who has looked at the books, and its general effect is that the turnover in respect of the whole 1986-87 year was only a little down on the 1985-86 year. In the five whole months preceding the

month in which the business was taken over, namely, June 1987, the

turnover was about 10 per cent down.

The argument advanced by Mr Crowe is, in effect, that there is nothing incredible about the assertion that Mr O.H. Blacker should have represented that the figures were being maintained and that there is a serious question to be tried, since the respondents' own figures show that the business was

somewhat down, shortly before the settlement of the transaction.

Mr Crowe relied particularly upon the decision in Glandore Pty.

Ltd. v. Elders Finance and Investment Co. Ltd. (1984) 57 A.L.R. 186. He contended that that decision is authority for the proposition that if relief 1s claimed under s.87 of the Trade

Practices Act, seeking, in effect, rescission of the whole

transaction, including the security, and if there is a serious question to be tried, then, prima facie, such an order should be

made as was there made.

He has called evidence which, if accepted, would found a view that the mortgagee, the grantee of the bill of sale, would have sufficient security for its debt of about $50,000, pending the resolution of this dispute, and he draws particular attention

to the statement in the Glandore case, at p.192 -

"Having regard to the fact that the value of the

security held by Eiders (at Elders' own valuation) 1s more than double the amount of the mortgage debt it 1s difficult to see how any prejudice will be suffered by Elders by the granting of interlocutory relief, provided the final hearing is not unduly delayed."

The facts of the Glandore case were not by any means identical with this one, but 1t must be conceded that one reading of the case enables one to extract from it the rule which Mr Crowe

mentions.

The fundamental principle, however, is that the mortgagee will not be restrained from exercising its security rights at the instance of the mortgagor unless the amount, if it

be disputed, is paid into court. Here, there is no possibility of

that being done, on the evidence of Mr Lubke.

I have noted that not only in the Glandore case, but in other decisions, such as that of the Full Court of the Supreme

Court of Queensland in Clarke v. Japan Machines (Australia) Pty.

Ltd. (No. 2) £19841 1 Qd.R. 421, there has been some tendency to relax the requirements of the rule I have mentioned, and I am prepared to assume the correctness of the contention advanced by Mr Crowe that I have some discretion to do so. In my opinion, it would, in general, not be correct to exercise that discretion in favour of an applicant in a case such as this, merely on its being shown that there is a prospect, however modest, of success on an allegation of oral misrepresentation. If that were so, the rule would be, ain effect, reversed, and would be that where misrepresentation 1S alleged in such a way that one could not deny the seriousness of the question to be tried, and the applicant claims rescission, prima fac1re the contract the mortgagor and

mortgagee have made must be suspended.

It seems to me that the adoption of any such principle would be, in the long run, pernicious, because it would tend to destroy or weaken people's confidence in such bargains and in the rights of holders of security. As Mr Lubke, who gave his evidence in a frank and impressive way, conceded, he has no expectation or hope that within some short time money will be advanced or obtained to pay out the mortgagee. He wants to carry om more or less indefinitely without discharging the debt, while the process which he hopes will result in the business' recovering is carried

out. Of course, he seeks an order permitting that to occur only

until the case is disposed of, and Mr Crowe says that the matter

does not seem to be very complicated, and could be dealt with

before too long, subject to the availability of a judge.

Looking at the matter as one of principle, it appears to

me that the essential elements of it are this:

1. there is some evidence that the mortgagee may have

adequate security, and I am inclined to think it will;

2. there is a serious question to be tried;

3. the allegations of misleading conduct are not overwhelmingly strong, but one could certainly not deny

the possibility of their succeeding.

The principal debt fell due last December, not by any process of acceleration, but simply under the parties' agreement; the applicants have no prospect, in the immediately foreseeable future, of paying the debt. I can see that 1t might be convenient if the courts had and freely exercised a general jurisdiction temporarily to reform the parties' bargain 1n such cases as these, but the general principle set out in Inglis v. Commonwealth

Trading Bank of Australia (1972) 126 C.L.R. at p.161 must be

respected, until it is changed by a Court whose decisions are binding on me, or by the legislature. It seems clear enough that there is no sufficient strength in the present circumstances to

justify departure from that principle. Since the applicants are

unable to offer the performance of the condition which the

principal requires, viz. payment into Court, the application for

interlocutory relief must be refused.

The costs of the application for interlocutory relief

will be the respondents' costs in any event.

} certify that this and the @_ preceding Pages are a true copy of the reasons for judgment herein of His Honour

Mr Justice Pincus fg tar Drupgioes tg Dated § Mach 1989

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