AFI Management Pty Limited v Lepionka & Company Investments Limited [2018] NZHC 586

AFI Management Pty Limited v Lepionka & Company Investments Limited [2018] NZHC 586 [29 March 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2015-404-2836[2018] NZHC 586IN THE MATTER of the Property Law Act 2007BETWEEN AFI MANAGEMENT PTY LIMITEDPlaintiffAND LEPIONKA & COMPANYINVESTMENTS LIMITEDDefendant /continuedHearing: 28 March 2018Counsel: DW Grove for plaintiffs in CIV-2015-404-2168MD O'Brien QC and MG Colson for defendantsNo appearance for plaintiff in CIV-2015-404-2836Judgment: 29 March 2018JUDGMENT OF FITZGERALD J[As to application for redemption statement to permit redemption on a"without prejudice" basis]This judgment was delivered by me on 29 March 2018 at 3 pm],pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateSolicitors: Downie Stewart, Dunedin (P Hubbard)Foy Halse, Auckland (G Halse)Bell Gully, Wellington (J Stevens)CIV-2015-404-2168BETWEEN GLW GROUP LIMITEDFirst PlaintiffGARTH BOWKETT PATERSONSecond PlaintiffAND LEPIONKA & COMPANYINVESTMENTS LIMITEDFirst DefendantLEPIONKA & COMPANY LIMITEDSecond DefendantSTEFAN JOZEF JOHN LEPIONKA andNIGEL WARREN HUGHES as trustees ofthe SJ Lepionka Family TrustThird DefendantsSTEFAN JOZEF JOHN LEPIONKAFourth DefendantIntroduction[1] In December 2017, I issued a substantive judgment in these proceedings.1 Asnoted in the introduction to that judgment, the proceedings concern what has now beena protracted battle for control of a 24-hectare block of land on the banks of the TukiTuki River in the Hawkes Bay region (the "Property"). GLW Group Ltd ("GLW") isthe registered proprietor of the Property. Lepionka & Company Investments Ltd("LCIL") is the first mortgagee, and since April 2015, has been a mortgagee inpossession. AFI Management Pty Ltd ("AFI") is second mortgagee.[2] My substantive judgment sets out the factual background to the proceedings,which, given the urgency with which this judgment is being delivered, is not repeatedhere.2[3] The substantive proceedings gave rise to a plethora of factual and legal issues.Central to those issues, and my findings in relation to them, were the following:(a) Having entered into possession of the mortgaged Property, but prior toexercising its power of sale, did LCIL wrongfully refuse to permit GLWto redeem the LCIL mortgage? I answered that question "no".(b) Having entered into possession of the mortgaged Property, did LCIL'sadoption on 7 April 2015 of existing agreements for sale and purchaseof the Property, pursuant to s 179 of the Property Law Act 2007("PLA"), amount to an exercise of LCIL's power of sale? I answeredthat question "yes".(c) Was GLW's right to redeem the LCIL mortgage extinguished on theexercise of LCIL's power of sale? I answered that question "yes".31 AFI Management Pty Ltd v Lepionka & Company Investments Ltd [2017] NZHC 3116.2 See [25]–[134].3 Section 97 of the PLA.(d) In exercising its power of sale, did LCIL breach either its equitable dutyor its duty under s 176 of the PLA?4 I found that LCIL breached itsequitable duty, though I was not in a position to determine whether italso breached its statutory duty, given breach of that duty turns onwhether that mortgagor has suffered damage (which is yet to beresolved).(e) Given my finding that LCIL breached its equitable duty, what was theappropriate remedy, and in particular, should the exercise of LCIL'spower of sale be set aside, thus restoring GLW's right to redeem, orshould GLW's remedy be confined to damages? I considered it wouldbe inequitable to set aside the exercise of LCIL's power of sale and thusconfined GLW's remedy to damages.[4] GLW has appealed my substantive judgment, including the key findings set outabove. By application dated 12 February 2018, it also applied for orders staying myjudgment, and for orders granting associated interim relief, pending determination ofthe appeal (the "stay application"). The stay application is set down for a one-dayhearing before me on 21 May 2018.[5] On 20 March 2018, GLW applied for two of the orders sought in its stayapplication to be heard on an urgent basis. This led to the urgent hearing before meyesterday, resulting in this judgment.[6] Finally, by way of introduction, GLW's notice of appeal was filed on 2February 2018. As at yesterday's hearing, and other than filing the appeal, GLW hasnot taken any steps to progress it. At yesterday's hearing, Mr Grove assured me thatGLW's appeal would now be pursued with urgency.Background — some further detail[7] The need for urgency in relation to some of the orders sought in GLW's stayapplication is said to arise from the fact that AFI has recently served a statutory4 Namely a duty of reasonable care to obtain the best price reasonably obtainable at the time of sale.demand on GLW. As I understand matters, the statutory demand requires payment ofAUD 4,109,480.00, being the total amount owed by GLW to AFI and secured by AFI'smortgage over the Property.5 That total amount is not in dispute. Mr Paterson, onbehalf of GLW, says in an affidavit filed in support of GLW's present application, thathe has reached an agreement with AFI that it will accept $1.6 million to redeem AFI'smortgage over the Property.[8] GLW does not itself have sufficient funds to pay what is owing under that AFImortgage, or the LCIL mortgage. However, Mr Paterson says he has secured funding(from Mr Warren Ladbrook, or an entity associated with Mr Ladbrook, the BambooTrust) to pay AFI $1.6 million. However, Mr Paterson says that a condition of thatfunding is that the LCIL security "is secured by funds paid into Court or a solicitor'strust account".[9] Mr Ladbrook also provided an affidavit in support of GLW's application. MrLadbrook says that, as of 2016 (that is, well after the date on which I determined LCILhad exercised its power of sale), he has had an agreement with GLW to purchase theProperty. Mr Ladbrook says that "in order to preserve the Bamboo Trust's and myinterest in the Property, it has become apparent that the Bamboo Trust, or its nominee,will have to obtain both the [LCIL] and [AFI] mortgages". He says he has agreed withAFI that it will accept $1.6 million for Mr Ladbrook, or one of his entities, to purchasethe AFI mortgage. Mr Ladbrook goes on to say that:The Bamboo Trust will be in a position to pay that sum of $1.6 million toacquire the Second Mortgage. However, should the Bamboo Trust only obtainthe Second Mortgage it will not have control over the sums which remainowing under the First Mortgage, and will remain in a compromised positionwith respect to the Property.[10] Mr Ladbrook concludes that:The Bamboo Trust will be in a position to pay up to a total of $4.5 million (ormore by agreement) to or on behalf of GLW for the First and Secondmortgages, redeeming those Mortgages, any additional development costs and(if necessary) the Lepionka Deposit[6] in consideration for a first mortgageover the Property on appropriate commercial terms.5 AFI also has security over property owned by GLW in Australia.6 Paid to GLW under the Lepionka Purchase Contracts (as referred to in my substantive judgment),being the agreements for sale and purchase which LCIL adopted on 7 April 2015.[11] Thus, as Mr Grove, counsel for GLW, stated in his written submissions, anorder is sought "allowing the [LCIL] mortgage to be redeemed and secured pendingconclusion of the appeal". In his oral submissions, and in response to questions fromme as to what the practical consequence of this would be, Mr Grove explained that theLCIL mortgage would be redeemed, such that LCIL would relinquish its security, andMr Ladbrook, or an entity associated with him, would become first mortgagee overthe Property. Despite further questioning from me, it remains unclear how the LCILmortgage would be redeemed "without prejudice", or on an interim basis in suchcircumstances, given LCIL will have been replaced as first mortgagee by Mr Ladbrookor the Bamboo Trust.[12] Mr David Johnson of AFI filed an affidavit in response to Mr Paterson and MrLadbrook's affidavits. He confirmed that he has had discussions with Mr Ladbrook,but says AFI "does not currently have an agreement" to sell the GLW debt andassociated security to Mr Ladbrook for $1.6 million. He also states that AFI does notcurrently have an agreement with GLW or Mr Ladbrook to restrict the amount owingunder the AFI mortgage to $1.6 million.[13] In support of its opposition to GLW's application, LCIL filed an affidavit ofMr Matthew Holder. Mr Holder's firm is presently contracted to LCIL to manage thecompletion of the Property's development.7 Mr Holder has had a long involvement inthe Property dating back several years, including prior to LCIL becoming a mortgageein possession. His affidavit explains the current status of the Property's development,the work carried out by LCIL since delivery of my substantive judgment and what isrequired to complete the development.8 In summary, he states that for a number of7 Completion of the development is required in order for existing agreements for sale and purchaseof the Property, including those entered into by GLW, to settle.8 The development had been "on hold" from approximately December 2015, first, as a result of MrPaterson seeking to retake possession of the Property at that time; and second, from February2017, pursuant to an interim order made by Peters J on 17 March 2017 (pending determination ofthe substantive claims). Peters J's order was only made in March 2017 as, from thecommencement of the proceedings in September 2015 until its second amended statement of claimin February 2017, GLW's remedy was limited to damages. However, in its amended claim ofFebruary 2017, GLW amended its prayer for relief to include, in addition to damages, an ordersetting aside or "declaring void" the exercise of LCIL's power of sale; an order "cancelling ordeclaring unenforceable the agreement for sale and purchase adopted by LCIL" and an order"fixing the amount due, if anything, to LCIL" under the mortgage.reasons, it would be detrimental to the Property's development if it were put on holdagain.Jurisdiction to grant to the type of relief sought by GLW[14] There was some confusion in the papers as to the source of my jurisdiction togrant the orders sought by GLW. GLW initially relied on r 20.10(3)(d) of the HighCourt Rules 2016, a rule which does not exist. Putting that issue aside, pt 20 of theRules deals with appeals to the High Court. The appropriate rule is r 12(3) of the Courtof Appeal (Civil) Rules 2005. That rule provides the Court of Appeal and the HighCourt with concurrent jurisdiction as follows:12 Stay of proceedings and execution(3) Pending the determination of an application for leave to appeal or anappeal, the court appealed from or the Court may, on application,—(a) order a stay of the proceeding in which the decision was givenor a stay of the execution of the decision; or(b) grant any interim relief.(4) An order or a grant under subclause (3) may—(a) relate to execution of the whole or part of the decision or to aparticular form of execution:(b) be subject to any conditions that the court appealed from orthe Court thinks fit, including conditions relating to securityfor costs.(5) If the court appealed from refuses to make an order under subclause(3), the Court may, on application, make an order under thatsubclause.(6) If the court appealed from makes an order under subclause (3), theCourt may, on application, vary or rescind that order.(7) The Court may, at any time, vary or rescind an order made by it underthis rule.[15] In considering whether to grant relief under r 12(3), a court must balance thecompeting rights of the party who obtained the judgment under appeal "against theneed to preserve the appellant's position against the event of the appeal succeeding".9Factors to be taken into account in the balancing exercise include:10(a) Whether the appeal may be rendered nugatory by the lack of a stay;(b) The bona fides of the applicant as to the prosecution of the appeal;(c) Whether the successful party will be injuriously affected by the stay;(d) The effect on third parties;(e) The novelty and importance of the questions involved;(f) The public interest in the proceeding; and(g) The overall balance of convenience.[16] Interim relief sought pursuant to r 12(3)(b) must be sought to protect theposition that will be ruled on in the appeal. This is because the interim relief is grantedpending the determination of an appeal and, as such, is designed to preserve thepending appeal, so that the Court of Appeal can do justice between the parties,irrespective of the outcome of the appeal. As Asher J explained in Fullers Bay ofIslands Ltd v Otehei Bay Holdings Ltd:11[T]he discretion [under r 12(3)] cannot be treated as unlimited. It is for "relief"presumably from the effects of the judgment. The relief is stated to be"[p]ending the determination of an appeal. So it is "interim"; that is, to lastonly until the appeal is determined. Its purpose is to provide a mechanism toensure that there will be no developments following the judgment that preventjustice ultimately being done between the parties when the appeal is heard.[17] I agree with and respectfully endorse his Honour's comments.9 Andrew Beck (ed) McGechan on Procedure (looseleaf ed, Thomson Reuters) at [CR12.01(1)(a)],citing Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA) at 87.10 Andrew Beck (ed) McGechan on Procedure (looseleaf ed, Thomson Reuters) at [CR12.01(1)(c)].11 Fullers Bay of Islands Ltd v Otehei Bay Holdings Ltd HC Auckland CIV-2009-404-7207, 23February 2011 at [14].[18] The relief sought must also have a direct connection to the proceedings or theexecution of the judgment. In other words, relief ought not to be granted if it were togo further than the relief sought at trial or on appeal.12 In the absence of such aconnection, an appeal will be unlikely to be rendered nugatory by a refusal to grantthe interim relief sought.13[19] For completeness, Mr Grove also relied on the Court's inherent jurisdiction togrant the orders now sought. In this context, he points to the Privy Council's decisionin Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 5), and theBoard's observation that it had jurisdiction to grant interim relief "in order to ensurethat any other order which it makes on the eventual hearing of the appeal should notbe rendered nugatory".14 However, in this case, there is no dispute that this Court, andif required, the Court of Appeal, has such jurisdiction pursuant to r 12(3) in any event.SubmissionsGLW's submissions[20] As noted, Mr Grove submits the relief sought is necessary to guard againstGLW's appeal being rendered nugatory. A statutory demand has been issued againstGLW, though an application to set aside the statutory demand has been filed andserved, and has a first call on 20 April 2018.[21] GLW's present application hinges on the proposition that GLW's ability torepay AFI (and thus satisfy the statutory demand) is contingent on its ability also toredeem the LCIL mortgage. This is because of the terms of the funding that it is beingoffered. Absent being able to redeem the LCIL mortgage, and thus the AFI mortgage,Mr Grove submits there is a real prospect of GLW being put into liquidation and thuslosing the ability to pursue its appeal.[22] Mr Grove acknowledges that in my substantive judgment, I found that GLW'sright to redeem the LCIL mortgage had been extinguished upon the exercise of LCIL's12 At [18] and [22]. This was referred to at the hearing before me as "the pleadings point".13 At [22].14 Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 5) [2013] UKPC 25, [2016]AC 1023 at [17].power of sale. Given this, the exercise of LCIL's power of sale would need to be setaside in order to restore GLW's right to redeem. As noted, I found that it would beinequitable to set aside the exercise of LCIL's power of sale, and thus confined GLW'sremedy to that originally sought, namely damages. Mr Grove submits, and I of courserecognise, that those findings have been appealed and it is currently not known whatthe Court of Appeal's conclusions might be. On that basis, Mr Grove submits thepresent relief is necessary to ensure GLW's ability to redeem the LCIL mortgage, ifGLW's appeal on these points is upheld, is preserved.[23] In this context, Mr Grove referred to several authorities, on the basis of whichhe submits GLW retains the right to redeem the LCIL mortgage. I address thoseauthorities later in this judgment. However, based on these authorities, Mr Grovesubmits GLW ought to be permitted to redeem the LCIL mortgage now (albeit on a"without prejudice" basis, pending the appeal). Mr Grove further submits there canbe no prejudice to LCIL from the proposed course of action, as its interest can only bein recovering the sums due to it and secured by its mortgage. He submits that LCIL'sinterests will fully be met by, in essence, "substituting" its current security withpayment into a trust account or into Court of the amount LCIL estimates is presentlyowing under the mortgage.[24] Mr Grove also referred to recent negotiations between LCIL and AFI, by whichLCIL would purchase or take an assignment of AFI's mortgage, as a further reasonwhy the interim relief is required on an urgent basis. By way of background to thisissue, on 20 March 2018, GLW sought urgent interim, interim relief, to prohibit anysuch agreement between LCIL and AFI being concluded. I declined to grant thatinterim, interim relief for the reasons set out in my (second) minute dated 20 March2018. I do not repeat that reasoning here. However, I note that no application topursue that relief has been filed, and I presently have real doubts as to the basis uponwhich I could grant such relief in any event. No legal basis was advanced as to whyLCIL and AFI ought to be prevented from entering into such an agreement. And anysuch agreement would not, in and of itself, render GLW's appeal nugatory. Forexample, if the Court of Appeal were to conclude that the exercise of LCIL's power ofsale ought to be set aside, such that GLW's equity of redemption was restored, it wouldremain open to GLW to exercise its right to redeem the LCIL mortgage. Given this, Ihave considered GLW's current application, and the stated need for urgency, primarilyin the context of AFI's recent service of a statutory demand.LCIL submissions[25] LCIL says the present application is an attempt by GLW to relitigate matterswhich were the subject of the hearing before me last year, and finally determined inmy substantive judgment of December 2017. Mr O'Brien QC for LCIL submits thatthe relief sought by GLW goes further than preserving the status quo pending theappeal, and has the effect of asking this Court to "unwind", or overturn, its ownfindings — that the right to redeem was extinguished on the exercise of LCIL's powerof sale and that the exercise of the power of sale ought not to be set aside. Mr O'Brienqueries how the relief sought can be said to be "interim", when it would have the effectof ordering LCIL to relinquish its security. Mr O'Brien says the relief goes furtherthan any relief GLW sought at trial in any event.15[26] Mr O'Brien accordingly submits the Court has no jurisdiction to grant the reliefsought, even pursuant to r 12(3). He further submits the authorities relied on by GLWrelate to quite different factual scenarios and do not advance GLW's position.Moreover, he submits there is simply no need to grant the relief in any event given,absent the relief, GLW will remain able to pursue its appeal.[27] Mr O'Brien further says that a factor against exercising my discretion to grantthe relief sought is that GLW comes to the Court seeking urgent relief , said to benecessary to preserve its position pending the appeal, when other than filing the appeal,it has taken no steps to progress it. He accordingly submits that the Court should viewGLW's application for what in substance it is, namely, an attempt to relitigate mattersalready determined and to enable GLW's apparent funder to obtain control of theProperty at what it presumably considers to be an advantageous price.15 This is the "pleading point" referred to earlier (see above n 12). However, Mr Grove referred meto commentary which suggests that proceedings may be treated as a "redemption suit" althoughthey involve a claim to set aside a sale by the mortgagee; ELG Tyler, PW Young and CE CroftFisher and Lightwood's Law of Mortgage (3rd, Australian ed, LexisNexis Butterworths,Chatswood, NSW, 2014) at [33.10]. As neither party addressed me further on this issue, I proceedon the assumption that it is arguable that, as GLW's claim sought an order setting aside the exerciseof LCIL's power of sale, the claim included a claim for redemption.Analysis[28] My primary concern is to preserve the status quo pending GLW's appeal beingdetermined.[29] I am not satisfied the relief GLW seeks is necessary for this purpose. Indeed,the relief sought goes some way further. It would alter the status quo which existed atthe time the proceedings were commenced, at the time of my judgment and now; byremoving LCIL as first mortgagee and replacing it with an entity associated with MrLadbrook.[30] As noted, Mr Grove submits there can be no prejudice to LCIL in suchcircumstances, as its only interest is to recover the moneys due to it and secured by itsmortgage. But even putting aside for present purposes the issues raised in Mr Holder'saffidavit, the fact remains that I have already determined, on a final basis, that GLW'sright to redeem has been extinguished. Further, it is not at all clear to me howredemption of LCIL's mortgage on a "without prejudice" basis pending the appealwould work in practice. Mr Ladbrook, or an entity associated with him, would beregistered as first mortgagee, with the full powers available to a party in thosecircumstances. Mr Grove was not able to articulate how, if the Court of Appeal wereto uphold my key findings as summarised at the outset of this judgment, the "interim"relief GLW seeks would be unwound. Equally, if the Court of Appeal were to overturnmy key findings set out above, and absent the relief being granted, GLW would stillbe able to redeem the LCIL mortgage. In that way, the relief is not required to preserveGLW's position.[31] Turning to the authorities relied on by GLW, Mr Grove first referred to thePrivy Council's judgments in Cukurova Finance International Ltd v Alfa TelecomTurkey Ltd (No 5)16 and Cukurova Finance International Ltd v Alfa Telecom TurkeyLtd (No 3).17 However, I do not consider they advance GLW's present application. InCukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 3), the Board16 Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 5) [2013] UKPC 25, [2016]AC 1023.17 Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 3) [2013] UKPC 2, [2016] AC923.considered (on a final basis) whether the appellant ought to be granted relief againstforfeiture of shares, which had been given by it as security for a substantial loan, butwhich had been appropriated by the respondent upon the appellant's default under theloan. The Board noted that:18The equitable relief sought is either (i) relief pursuant to the general equitablejurisdiction to relieve from forfeiture or (ii) relief pursuant to the particularequitable jurisdiction to revive a mortgagor's equity of redemption after it hasbeen destroyed, and to give the mortgagor a further opportunity to pay the debtand recover its property. The Board agrees with Mr MacLean that, whetherthese two jurisdictions are separate, or whether the latter is merely a particularapplication of the former, is open to question, but this is of academic interestonly in the present case.[32] The Board concluded that it was appropriate to grant relief against forfeiturein that case, with the result that the appellant was given the opportunity to redeem thecharge over the shares. The Board ordered that relief on strict terms, including as toprecisely how and when the redemption was to be carried out.[33] This aspect of the Board's decision was not concerned with granting interimrelief pending an appeal. The factual scenario before the Board was accordingly verydifferent to this case, particularly as I have already determined that GLW's equity ofredemption was extinguished on LCIL's exercise of its power of sale; that LCILbreached its equitable duties in exercising its power of sale; but that in thecircumstances of this case, it would be inequitable to set aside the sale and restore theright to redeem.[34] Mr Grove is correct that in Cukurova Finance International Ltd v Alfa TelecomTurkey Ltd (No 3), the Board observed that:19[A]ny act by way of enforcement of the security (at least if it is purely) for acollateral purpose will be ineffective, at any rate as between the mortgagorand mortgagee".[35] However, I do not read this passage as purporting to overturn or alter leadingauthorities on the remedies available to a mortgagor in the event of a mortgagee'sbreach of its equitable duty when exercising its power of sale. Those authorities (none18 At [83].19 At [73].of which are cited in Board's judgment) are summarised by the authors of Land Lawin New Zealand as follows:20There are three remedies potentially available to a mortgagor in respect of abreach by the mortgagee of the equitable duty of good faith in exercising thepower of sale. The first two are equitable remedies that render ineffective thesale by the mortgagee. Thus, the mortgagor may obtain (1) an injunctionrestraining the mortgagee from exercising the power of sale in a manner thatwould constitute a breach of the equitable duty; or (2) an order setting asidethe sale by the mortgagee. The third remedy available to a mortgagee isdamages.A mortgagee is, subject to two qualifications, generally free to choose betweenthese three remedies. The first qualification is that the mortgagor will beconfined to a remedy in damages where, on ordinary equitable principles, itwould be inequitable to grant an injunction or set aside the sale.The secondqualification is that setting aside is likely to be unavailable if the purchasefrom the mortgagee has become the registered proprietor. The purchaserwould then have an indefeasible title. The sale could be set aside only if oneof the exceptions to the concept of indefeasibility could be raised against thepurchaser.[36] Mr Grove emphasises the orders sought do not themselves seek to set asidethe Lepionka Purchase Contracts, correctly noting that that issue is a matter for theCourt of Appeal. But so too is the issue of whether, pursuant to s 97 of the PLA, GLW'sequity of redemption was extinguished by the exercise of LCIL's power of sale; and ifthe exercise of the power of sale was in breach of LCIL's equitable duty, what theappropriate remedy ought to be. It is not open to GLW to seek to relitigate thosematters on this interim application.[37] Other aspects of the decision in Cukurova Finance International Ltd v AlfaTelecom Turkey Ltd (No 5) upon which GLW relies, such as the Board's comment that"this is not a case where the mortgagee is simply wrongly refusing repayment; it is acase where the mortgagee is doing its level best to thwart repayment of a debt owedto it for collateral reasons of its own," are not relevant in the present context.21 Thosecomments were made in the context of the Board's earlier orders that the appellantwas entitled to relief from forfeiture; but where the respondent was deliberately20 DW McMorland and others Hinde McMorland and Sim Land Law in New Zealand (onlinelooseleaf ed, LexisNexis) at [15.135], footnotes omitted. See also Brendan Edgeworth Butt's LandLaw (7th ed, Thomson Reuters, Sydney, 2017) at [11.1480].21 Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 5) [2013] UKPC 25, [2016]AC 1023 at [36].obstructing the appellant from complying with the Board's orders as to how and whenthe redemption was to occur.[38] Mr Grove also referred to Latec Investments Ltd v Hotel Terrigal Pty Ltd (inliq), a 1965 decision of the High Court of Australia.22 In that case, the High Courtupheld the trial Court's findings that a mortgagee, in exercising its power of sale, hadcommitted fraud (in the sense of embarking on a "dishonest course") in the exerciseof its power of sale. The Court stated that in those circumstances, and as between themortgagor and mortgagee, the sale would have been set aside. However, given themortgagor's significant delay in seeking relief, and intervening sales to third parties,the application to set aside was declined.[39] Again, this case does not address granting interim relief to maintain the statusquo pending an appeal. Rather, GLW deploys this decision in support of its argumentthat if a mortgagee breaches its equitable duty to exercise its power of sale for a properpurpose, the exercise of the power of sale will be ineffective to extinguish the right toredeem. I repeat that engaging on these issues seeks to relitigate matters which weredetermined at trial. Further, and in any event, the High Court of Australia's decisionpredated the leading authorities summarised in the extract from Land Law in NewZealand set out at [35] above. The Court's observations were also confined tocircumstances when fraud, in the land transfer sense, has been established, a pointnoted by Randerson J in Ruawai Properties Ltd v Black Developments Ltd.23Randerson J went on to observe that even where fraud in the land transfer sense isestablished, any competing equities must still be weighed.24 I note that fraud in theland transfer sense was not raised as a specific issue at trial in any event.[40] Mr Grove also submits that "the provision of security by way of a cash depositto replace security documents" pending determination of accounts is not unusual, atleast in Australia. He refers in this regard to Equus Financial Services Limited vRMBL Investments Pty Ltd.25 However, although not expressly stated in the judgment,it seems clear that that practice occurs when a mortgagee is in possession, but prior to22 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265.23 Ruawai Properties Ltd v Black Developments Ltd (2008) 9 NZCPR 483 (HC) at [51].24 At [53].25 Equus Financial Services Ltd v RMBL Investments Pty Ltd (1996) 22 ACSC 744 (NSWSC).the exercise of its power of sale; for example, in the context of an action to restrain theexercise of the power of sale where the amount necessary to redeem the mortgage isin dispute.26[41] In that context, there is no dispute as to the mortgagor's right to redeem, butthe taking of an account is required to settle the amount to redeem. In thosecircumstances, interlocutory orders may be made that require the mortgagor to payinto court a (clearly) sufficient amount to meet any amount necessary to redeem themortgage, upon which the mortgage is discharged in advance of the taking of theaccount. In Equus Financial Services Limited v RMBL Investments Pty Ltd, the Courtstated:27In my view it has been established that the court has power by an interlocutoryorder to require the mortgagee to give up the security while the accounts havenot been settled, the amount payable to the mortgagee has not been ascertainedand there is still a difficult course to follow before these things happen. Itshould be clear before the court does so that reasonable protection is availableand that a fund of money sufficient to pay any amount likely to be found to bedue is under the control of the court. What the court is asked to do is requirean unwilling mortgagee to accept a sort of security, namely a fund of money,different to the security which it has bargained for and wishes to have, andwhile the court does have that power, it should only do so where it is satisfiedthat the interests of justice require an interlocutory order to that effect.[42] Again, that is a scenario quite different to the present, where the Court isconcerned only with any interim relief required to ensure GLW's appeal is notrendered nugatory. Moreover, while requiring LCIL to give up its security now (andbe replaced as first mortgagee by Mr Ladbrook or an entity associated with him) mayserve GLW and Mr Ladbrook's interests, it is not necessary to serve the interests ofjustice, namely to preserve GLW's position pending the appeal.[43] As I noted with the parties at the hearing, the key concern is not the need toredeem the mortgage now, but GLW's desire to preserve its ability to pursue its appealin the face of AFI's statutory demand. Mr O'Brien submits that even if the statutorydemand process were to result in GLW being placed in liquidation, that does not meanGLW as an entity will be unable to progress the appeal. Rather, a liquidator will beable to take a measured and commercial view as to whether pursuing the appeal is in26 Brendan Edgeworth Butt's Land Law (7th ed, Thomson Reuters, Sydney, 2017) at 11.144027 Equus Financial Services Ltd v RMBL Investments Pty Ltd (1996) 22 ACSC 744 (NSWSC) at 747.GLW's best interests. While I accept those propositions, if the Court of Appeal wereto find, for example, that the exercise of LCIL's power of sale ought to have been setaside and restores GLW's right to redeem, then it is arguable GLW will have lost itspresent ability to control its own decision-making around redemption of the LCILmortgage. That is arguably a different proposition to GLW's position in liquidation.It is not appropriate to consider these matters further, however, as AFI (understandably,and with leave of the Court) did not participate in yesterday's hearing.[44] Mr O'Brien agreed at the hearing yesterday that LCIL would prepare and serveon GLW a statement setting out its estimate of what is presently owing by GLW toLCIL and secured by the LCIL mortgage. This would obviously be without prejudiceto LCIL's position (based on my findings) that GLW's right to redeem wasextinguished on the exercise of LCIL's power of sale. Mr Grove, for his part, acceptedit would need to be an estimate only, as there are several issues yet to be determinedbefore an account of the amounts due and secured by the mortgage can be finalised.[45] Mr O'Brien estimated that it could take two to three weeks to prepare such astatement. I agree with Mr Grove that that seems a relatively long time, particularlygiven a full schedule of the sums due under the mortgage was presented at thesubstantive hearing. I accordingly consider LCIL ought to produce such a statementwithin two weeks, namely on or before 12 April 2018. I do not consider it necessaryor appropriate to make any further orders. What GLW and/or Mr Ladbrook choose todo in light of that statement is a matter for them.Evidential matters[46] Finally, Mr O'Brien referred me to aspects of Mr Paterson's affidavit filed insupport of GLW's application, submitting that they amounted to objectionable andinadmissible hearsay and inviting me to strike them out or not take those aspects ofthe affidavit onto the file. Those aspects are Mr Paterson's recount of a telephone callbetween himself and Mr Johnson of AFI, and certain statements made by Mr Lepionkawhich Mr Paterson says Mr Johnson relayed to him. Mr Johnson has provided anaffidavit in which he does not comment in detail on Mr Paterson's account of thediscussion, but says it differs from Mr Paterson's account. I do not propose to makeany orders in this regard. Hearsay is permissible on interlocutory applications. But inany event, Mr Grove accepted that the passages objected to are not material to theissues I must determine. Moreover, Mr Johnson has indicated that the discussion asrecounted by Mr Paterson does not accord with his recollection of the discussion. Ihave already made findings in my substantive judgment as to Mr Paterson and MrJohnson's respective credibility and reliability. The passages from Mr Paterson'saffidavit to which LCIL objects have not played any part in my decision-making onthis application.Result[47] I accordingly make the following orders:(a) On or before 12 April 2018, LCIL is to provide GLW with a statementof what it estimates to be currently owing by GLW and secured by theLCIL mortgage.(b) The file for GLW's application to set aside AFI's statutory demand isto be referred to me. That application is to be relisted before me at 9amon 20 April 2018.[48] The order at [47](a) above effectively grants the order sought at paragraph 1(b)of GLW's application dated 12 February 2018 (though on the basis all parties acceptthe statement will need to reflect LCIL's present best estimate of the amounts securedby the LCIL mortgage).[49] I dismiss GLW's application for an order "allowing [GLW] to redeem themortgage on a without prejudice basis" (paragraph 1(c) of GLW's application).Paragraph 1(a) of GLW's application will be the subject of the hearing before me on21 May 2018.[50] Mr O'Brien sought LCIL's costs on this application on an indemnity basis. Itis appropriate the parties have an opportunity to file memoranda addressing costs inlight of the outcome of this judgment. LCIL's memorandum is to be filed and servedwithin 10 working days of the date of this judgment; GLW's memorandum inresponse is to be filed and served within a further 5 working days. Each memorandumis to be no longer than five pages in length. I will thereafter determine costs on thepapers.____________________Fitzgerald J