Perpetual Trustees Australia Ltd v Gonfanon Pty Ltd [2008] NSWSC 1422

New South Wales Supreme Court

CITATION : Perpetual Trustees Australia Ltd v Gonfanon Pty Ltd [2008] NSWSC 1422

HEARING DATE(S) : 19/12/08 JURISDICTION : Common Law Division Possession List

JUDGMENT OF : Young CJ in Eq

EX TEMPORE JUDGMENT DATE : 19 December 2008

DECISION : Denial of application by mortgagor to postpone a mortagee sale by auction.

CATCHWORDS : MORTGAGES [60]- Application for injunction to prevent mortgagee sale at auction where applicant suggests his plans for refinancing would discharge all the debts- Mortgagee has possession and statutory right to sell- Mortgagee owes equitable duties not to sacrific the interests of the mortgagor- Relevance of arrangements for the auction including sufficient advertisement of sale- Reserve placed on the property by the mortgagee indicates mortgagor's interest has not been sacrificed.

LEGISLATION CITED : Real Property Act 1900, s 58

Perpetual Trustees Australia Ltd (P) PARTIES : Gonfanon Pty Ltd (D1) Achilles Constantinidis (D2)

FILE NUMBER(S) : SC 16126/07

COUNSEL : C Hudson (S) (P) A Constantinidis (D/Applicant in person)

SOLICITORS : Gadens Lawyers (P) Applicant in person

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST

YOUNG CJ in EQ

Friday 19 December 2008

16126/07 – PERPETUAL TRUSTEES AUSTRALIA LTD v GONFANON PTY LTD

JUDGMENT 1 HIS HONOUR: Shortly before 4 pm this afternoon Mr Achilles Constantinidis, a director of the defendant company, applied for an injunction to prevent the plaintiff and a mortgagee of another lot, Burrawong Investments Pty Ltd, selling the defendant's property at Lower Portland by auction which auction is scheduled for tomorrow. 2 I gave instructions for the mortgagees to be contacted. Burrawong did not reply. However, Mr Hudson of Gadens, solicitors, appeared at 5.15pm for the plaintiff in the present proceedings. 3 It seemed that the key point in the case was whether the property had been sufficiently advertised. This required a short adjournment for papers to be faxed from the estate agents concerned and the hearing got under way shortly after 6.30pm. 4 Because of the time of day, the proceedings were relatively informal. Mr Constantinidis said that he had arranged to refinance, not only this property, but a whole series of other properties which he owned and that Westpac had agreed in principle to refinance in such a way that the plaintiff and other persons to whom his company owed money, would all be paid out in full. 5 Mr Hudson made it quite clear that he did not believe this. He pointed out that according to the certificate of title, there were a series of caveats on the property and the property must be encumbered to over a million dollars and it was only worth, according to his valuations, something like $600,000. In riposte Mr Constantinidis said that some of the caveats on the property were nothing to do with him as some liquidator had put caveats on properties owned by any Achilles Constantinidis in the Commonwealth and he said that the refinancing of all his properties would discharge all the debts. He also said that he could discharge the mortgage forthwith and said that Gadens were just not interested in giving a transfer of the mortgage. 6 Mr Hudson replied again that he did not believe what was being said and that the mortgagee being in possession had no obligation at all to transfer the mortgage. 7 Mr Constantinidis said that if an injunction was granted, no-one would be hurt but he himself would be badly hurt if the auction proceeded. Mr Hudson said that there was a falling property market, people were put off if the initial auction was abandoned and that his client had the right to be repaid its debt. I virtually had to accept what was said by both sides as there was no time to go into the evidence or even have the evidence produced. 8 Mr Hudson said that his client had got possession of the land, there had been applications to stay the execution of those orders all of which were unsuccessful and that his client was now entitled to proceed without further delay. Obtaining possession of land at law is only a side issue when one is considering the rights and obligations of a mortgagee sale. 9 Although a mortgagee has a statutory right to sell under s 58 of the Real Property Act 1900 if certain preconditions are met, it still owes equitable duties because the origin of the power of sale is in equity. However, the obligation in equity is not as strict as under statutes such as apply in Queensland (vide s 85 of the Law of Property Act 1974): all that a mortgagee must do in New South Wales is not to sacrifice the interests of the mortgagor when selling. 10 Experience in these sort of cases tends to show that it is the arrangements for the auction that need to be examined when considering whether the mortgagee has performed its duty. 11 In this case, the material produced by Mr Hudson shows that the mortgagee obtained an appraisal from a practitioner in that market in July 2008 and that its reserve is fixed at higher than that valuation. The reserve is [confidential figure given to the Judge]. The estate agent reports that the property has been advertised in three periodicals since 25 November and also there were a thousand brochures distributed locally. 12 In argument I said that I thought the advertisements were "iffy". Mr Hudson took great umbrage at that comment and said that they were superb and in accordance with the standards of the industry. If that is so, then unfortunately this Court can look forward to a great increase in the number of applications to set aside mortgagee sales. 13 The only material available shows that the advertisement appeared twice in a publication called Homes Pictorial. What its circulation is is at the moment undisclosed, but one wonders why one would advertise what is essentially a hobby farm in a publication focusing on homes. 14 It was also advertised in "Property Showcase", whether that is merely the local free magazine issued by the Estate Agents Co-operative or something more substantial is not known. It was also printed in the Hawkesbury Gazette which appears to be the free local paper. 15 Mr Hudson says, however, that the property is featured on Raine & Horne's website and that it is well known that what is shown on a website is well advertised. Mr Constantinidis points out that the viewing of material on computers or even mobile phones in the Hawkesbury Valley area is virtually nil because of the topography. That may well be right, but the website would be available to people outside the Hawkesbury Valley. 16 The agent's sheet shows that there has been very little interest in inspecting the property on Open Days. Those who have inspected appear to be people who are relatively local, though there was one from Seven Hills which I suppose might be thought by a Melburnian to be on the border of the Hawkesbury Valley. 17 The advertising appears to be relatively perfunctory. However, I do not consider on the material before me that the advertising is so bad that the mortgagee could be said, on a prima facie basis, to have acted so as to sacrifice the mortgagor's interest. It has obtained an appraisal, it has advertised, it has held open houses. However, the thing that really persuades me is the reserve. It does not seem to me that a mortgagee who has placed such a reserve on the property can be said to have sacrificed the mortgagor's interest. 18 Accordingly, although the Court feels a great deal of sympathy for Mr Constantinidis and it may well be that his proposals would have been commercially better for everybody, I am not to be the judge of that; the mortgagee has made its own commercial decision and I must decline the application to postpone the auction.

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