This week's TGIF considers CME Properties (Australia) Pty Ltd v Prime Capital Securities Pty Ltd  WASC 231 which concerns a mortgagor's application for an interim injunction to restrain a mortgagee from exercising its power of sale.
The plaintiff, CME Properties (CME), mortgaged various parcels of land to the defendant, Prime Capital (Prime). Following CME's default under the mortgage, Prime exercised its power of sale and entered into a contract to sell the land to Trilink Skyline (Trilink).
One business day before the sale was due to settle, CME applied for an interim injunction to restrain the sale under section 1324 of the Corporations Act 2001 (Cth) (Act). CME's application was principally brought on the basis that Prime had breached the duty imposed by section 420A of the Act on a controller exercising a power of sale in respect of property of a corporation to take reasonable care in selling the property.
At the hearing before Le Miere J, there was also a dispute as to whether equitable considerations apply to injunctions brought under section 1324 of the Act.
DO EQUITABLE CONSIDERATIONS APPLY TO INJUNCTIONS BROUGHT UNDER SECTION 1324 THE ACT?
In short, section 1324 of the Act empowers the Court to grant an injunction to restrain conduct that contravenes, or would contravene, the Act (among other things).
Following a review of the competing authorities, his Honour held that, while traditional equitable principles do not circumscribe the Court's consideration of an application for an interim injunction under section 1324 of the Act, the Court will always examine whether there is a serious question to be tried and determine where the balance of convenience lies. Le Miere J held further that the Court will not grant an injunction where it would not have done so if it were exercising its traditional equitable jurisdiction unless it is in the public interest to do so or there are matters relating to the statutory obligation sought to be enforced which require the grant of the injunction. His Honour held these considerations did not apply in the present case.
As an aside, it is also interesting to note Le Miere J's comments in relation to the "rule" in Inglis v Commonwealth Trading Bank of Australia  HCA 72, and its application on section 1324 of the Act. The rule provides, in relation to applications to restrain a mortgagee's power of sale, that an injunction will not be granted unless the amount of the mortgaged debt is first paid into court. His Honour, in acknowledging the controversy as to whether the "rule" is one of universal application, held that payment of the outstanding mortgage debt into court is a significant consideration on the question of the balance of convenience in determining applications under section 1324 of the Act.
DID PRIME BREACH ITS DUTIES UNDER SECTION 420A OF THE ACT OR IN EQUITY?
CME's principal argument was that Prime breached the duty imposed on it by section 420A of the Act, which required Prime to take all reasonable care to sell the land at "not less than market value". That allegation was made on the basis that Trilink's offer of $4 million was less than the CME's most recent valuation of $7.1 million.
In dismissing CME's application for an interim injunction, Le Miere J held that CME had failed to establish a prima facie case that Prime breached the Act as alleged. In coming to the conclusion that Prime had taken reasonable care to sell the land, his Honour had regard to the following facts:
- Prime had obtained three valuations of the land when the property market was at its peak, which ranged from $4.02 million to $5 million;
- Prime had engaged a competent selling agent to market and sell the land, which included newspaper and internet advertisements, on site signage and direct client approaches; and
- Trilink's offer was the highest offer received over the course of the sale period, and was not significantly less than the lower end valuations obtained by Prime.
In those circumstances, Le Miere J held that CME's valuation of $7.1 million did not give rise to an inference that Prime had not taken all reasonable care to sell the land for not less than its market value.
Le Miere J also held the balance of convenience and the usual discretionary considerations weighed against the grant of the interim injunction, including that damages would be an adequate remedy for CME.
This decision provides useful guidance to mortgagees exercising their power of sale. Even though each case will turn on its own facts, the decision nonetheless provides guidance as to the types of steps mortgagees should take when discharging their duty under section 420A of the Act, namely, in this case, a comprehensive marketing campaign undertaken by a competent selling agent. Further, as demonstrated by the case, parties seeking to obtain an injunction under section 1324 of the Act must be mindful of traditional equitable considerations, which may weigh against awarding an injunction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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