AustLII Home | Databases | WorldLII | Search | Feedback

Supreme Court of Victoria

You are here: 
AustLII >> Databases >> Supreme Court of Victoria >> 2022 >> [2022] VSC 347

Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Context | No Context | Help

Atanasovski & Anor v Qi Yong 7 Pty Ltd & Ors [2022] VSC 347 (22 June 2022)

Last Updated: 22 June 2022

IN THE SUPREME COURT OF VICTORIA
Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S ECI 2021 03427

BRANKO ATANASOVSKI & ANOTHER (according to the attached Schedule)
Plaintiffs


v



QI YONG 7 PTY LTD (ACN 619 702 848)
& ORS (according to the attached Schedule)
Defendants

---

JUDGE:
McDonald J
WHERE HELD:
Melbourne
DATE OF HEARING:
15 & 16 June 2022
DATE OF JUDGMENT:
22 June 2022
CASE MAY BE CITED AS:
Atanasovski & Anor v Qi Yong 7 Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:

---

PRACTICE AND PROCEDURE – Application to vary undertakings – Whether changed circumstances justify variation of undertakings – Whether the interests of justice favour variation of undertakings.

INJUNCTIONS – Application for injunction to restrain mortgagee sale of land by private contract – Whether mortgagee acting in good faith – Whether mortgagee having regard to the interests of mortgagor – Whether mortgagee should be ordered to sell land by competitive sale process – s 77 Transfer of Land Act 1958.

---

APPEARANCES:
Counsel
Solicitors
For the Plaintiffs
Mr P Bick QC with
Mr W Rimmer
Tisher Liner FC Law



For the First Defendant
Mr T Mitchell
United Associates Barristers & Solicitors



For the Second Defendant
No Appearance




For the Third Defendant
Mr S Hay QC with
Mr J McKay
Jem Lawyers Pty Ltd

HIS HONOUR:

Introduction

1 The primary issue in dispute between the parties is whether the first defendant, Qi Yong 7 Pty Ltd (‘QY7’), is permitted to enter into a contract (‘proposed contract’) for the sale of the land at 328–338 McKimmies Road, Mill Park (‘Land’) with the second plaintiff, Belmont Collection Lo Pty Ltd (‘Belmont’). Belmont is a company owned and controlled by the first plaintiff, Mr Branko Atanasovski (together ‘the Atanasovski parties’). QY7 is the holder of the first registered mortgage over the Land and seeks to exercise its power of sale under s 77(1) of the Transfer of Land Act 1958 (‘the Act’). The third defendant, Bundoora Park Estate Holdings (‘Bundoora’), is the current registered proprietor of the Land and resists QY7’s sale of the Land to the Atanasovski parties.
2 Two principal issues for determination are as follows. First, whether the Atanasovski parties and QY7 should be released from the undertaking proffered to the Court by its counsel on 29 September 2021, as varied by the Court on 28 April 2022 (‘Undertaking’). The Undertaking prevents QY7 from taking any step to sell or buy the Land or alter Bundoora’s registered proprietorship of the Land. QY7’s entry into the proposed contract is therefore prevented by the Undertaking it has proffered.
3 Second, in the event that QY7 and the Atanasovski parties are released from the Undertaking, Bundoora, by summons dated 2 June 2022, seeks an interlocutory injunction to restrain QY7 from exercising its power of sale on the grounds that the proposed sale constitutes a breach of QY7’s duties under s 77(1) of the Act.
4 I have concluded that it is in the interests of justice for the Atansovski parties and QY7 to be released from the Undertaking. Bundoora’s application for an injunction to restrain the Atanasovski parties from purchasing the Land from QY7 for $14.75 million is rejected. Bundoora has established a serious question to be tried that the proposed sale is not a lawful exercise of the power conferred by s 77 of the Act. However, the balance of convenience strongly favours the refusal of the injunction application. The undertaking as to damages proffered in support of the application for an injunction is not an undertaking of substance. Damages are an adequate alternative remedy. The $14.75 million which the Atanasovski parties will pay QY7 has the advantage of being certain and timely satisfaction of the debt currently owed to QY7 by Bundoora.

Background

5 Prior to 18 July 2019, the Land was owned by 328–338 McKimmies Road Pty Ltd (‘McKimmies’), a company controlled by Mr Atanasovski. In September 2018, Mr Nhut Quang Dai Huynh, the sole director of Bundoora made an offer to purchase the Land from the Atanasovski parties for $16.8 million.0F[1] Settlement was to occur on 18 July 2019.
6 Bundoora was unable to secure finance by the date of settlement. In order to avoid the settlement not going ahead, the Atanasovski parties advanced $1.18 million in vendor finance to Bundoora, securing the loan in the name of McKimmies. McKimmies was granted a third registered mortgage over the Land. Mr Huynh acted as guarantor for Bundoora.
7 In order to finance the purchase of the Land, Bundoora had previously secured two other mortgages. QY7 held the first mortgage over the Land valued at $10.269 million (‘QY7 Mortgage’). A related entity, Qi Yong 8 Pty Ltd (‘QY8’), held the second mortgage over the Land valued at $2 million.
8 The QY7 Mortgage commenced on 18 July 2019. Under the mortgage, the $10.269 million was to be repaid within twelve months of the commencement date. Interest was fixed at a rate of between 9.00–14.00%, with payments to be made monthly.1F[2] It is common ground between the parties that interest accrued under the three mortgages at a rate of approximately $200,000 per month.2F[3]
9 On 25 July 2019, Havenport Fixed Maturity Fund SPC (‘Havenport’) lodged a caveat over the Land pursuant to an agreement between Havenport and Bundoora under which Havenport had loaned monies to enable the payment of the deposit on the Land.
10 On 14 October 2019, Bundoora entered into a contract to sell the Land to a related entity, Bundoora Park Estate Development Pty Ltd (‘BPED’) for $14.7 million, with settlement due on 10 January 2021 (‘BPED Contract’).3F[4] Toorak Property Holding Pty Ltd, a company under the control of Mr Huynh was nominated as transferee under the BPED Contract. Bundoora had earlier entered into an agreement with BPED on 12 December 2018, under which BPED would develop the Land.4F[5] That contract did not proceed to settlement because as at the proposed settlement date of 10 January 2021 QY7 was mortgagee in possession of the Land.
11 On 28 February 2020, Havenport appointed Ms Leanne Chesser and Mr Craig Shepard of KordaMentha as receivers and managers of Bundoora, who subsequently took steps to sell the Land. In his affidavit dated 7 March 2022, Mr Huynh deposed that the Receivers were unable to obtain a price better than $14.7 million:

As I understand it, the Receivers then attempted to market and sell the Land through the estate agent JLL International. However, I was informed by Ms Dai that the Receivers could not obtain an offer that exceeded the BPED Contract price, and had declined to sell the Land.5F[6]

12 The receivers resigned on 29 May 2020, having incurred fees of $236,249.46 in attempting to sell the Land (‘Havenport Receivers’ Fees’). A caveat in respect of these fees was subsequently lodged on the Land on 6 October 2020.
13 On 2 March 2020, QY7 issued a default notice to Bundoora claiming repayment of unpaid interest accruing from 17 November 2019 (‘First Default Notice’).6F[7] The notice gave Bundoora 14 days to repay interest payments due under the mortgage, which were specified in the notice as amounting to $236,610. Upon failure to comply with the First Default Notice, QY7 took possession as mortgagee of the Land on 17 March 2020.
14 Following the Receivers’ failed sale campaign, QY7 undertook a further expression of interest campaign in June 2020 through real estate agents Knight Frank.7F[8] QY7 sought to obtain a price better than the $14.7 million under the BPED Contract.8F[9]
15 On 23 June 2020, QY7 entered into a contract of sale to sell the Land to the Atanasovski parties, with the second plaintiff, Belmont, nominated as the transferee of the Land (‘first contract’). Under the contract, the Land was to be sold to the Atanasovski parties for $12.5 million with settlement to occur on 1 September 2021.
16 On 27 July 2020, Mr Atanasovski lodged a caveat on the title (AT462476G) to protect his interest as purchaser of the Land.

Proceedings in the Supreme Court

17 On 30 August 2021, two days prior to the proposed settlement of the first contract, Huu Loi Yarra Valley Pty Ltd (‘Huu Loi’) lodged a caveat on the Land, claiming that it was a creditor of Bundoora and that it held an interest in the nature of an implied, resulting or constructive trust in the Land. On 3 September 2021, the Atanasovski parties commenced a proceeding in this court (S ECI 2021 03232) seeking to remove the caveat. The Atanasovski parties’ claims against Huu Loi were resolved on 8 September 2021 with Huu Loi agreeing to remove its caveat upon settlement of the sale to the Atanasovski parties.
18 Havenport and the Atanasovski parties entered into an agreement for the Havenport Receivers’ Fees to be paid out of the sale of the Land. Havenport was subsequently joined to the proceeding against Huu Loi. Justice Croucher made orders on 10 September 2021 reflecting the agreement reached between Havenport and the Atanasovski parties.
19 On 13 September 2021, Bundoora commenced proceedings (S ECI 2021 03338) against QY7, QY8, and the Atanasovski parties seeking injunctions to restrain QY7 from completing the first contract. The proceedings were withdrawn and subsequently dismissed on 17 September 2021.
20 On 20 September 2021, following QY7’s failure to proceed to settlement, the Atanasovski parties commenced proceedings (S ECI 2021 03427) against QY7 and its solicitors, the second defendant in this proceeding, United Associates Barristers and Solicitors (‘UABS’) seeking specific performance of the first contract.
21 On 23 September 2021, Bundoora commenced a further proceeding (S ECI 2021 03485) against QY7 and the Atanasovski parties seeking an order to set aside the first contract. A directions hearing in this matter was held on 29 September 2021 before Cavanough J. As recorded in the ‘Other Matters’ section of the orders by his Honour of that day, the defendants gave an undertaking to the Court that:

The defendants, by their counsel, undertake to the Court that, until the hearing and determination of this proceeding or further order, the defendants will not, whether by themselves, their officers, servants or agents:
...
b. take any step to:
i. sell or buy (as the case may be) the Land; or
ii. alter the plaintiff’s registered proprietorship of the Land.9F[10]

This is the Undertaking sought to be varied by QY7 and the Atanasovski parties.
22 On 1 October 2021, QY7 commenced proceedings (S ECI 2021 03591) against the Atanasovski parties, seeking a declaration from the Court that it was not obliged to complete the first contract and that the contract was voidable.
23 Subsequently, on 12 October 2021, Matthews AsJ made orders consolidating the various proceedings commenced on 12, 20 and 23 September into a single proceeding. While the proceeding was originally listed for trial on 19 October 2021, the Associate Judge granted leave for the Atanasovski parties to file an amended originating motion. The 19 October 2021 trial date was vacated and the proceeding was set down for trial on 3 May 2022.
24 By their statement of claim, as amended on 6 April 2022, the Atanasovski parties make various claims against QY7 and Bundoora. They seek specific performance of the first contract as against QY7. In the alternative, the Atanasovski parties seek damages from QY7 under various heads of damages (‘Atanasovski Damages Claim’). They claim for the difference between the price payable under the first contract and the value of the Land as at 1 September 2021. The Atanasovski parties also seek damages for wasted costs relating to a proposed development plan, as well as damages for lost profits arising from the proposed development of the Land.
25 As against Bundoora, the Atanasovski parties claim that Bundoora has, by its conduct, represented to the Atanasovski parties that QY7 had a valid power of sale and that the first contract is enforceable. On that basis, the Atanasovski parties make claims against Bundoora under the Australian Consumer Law or alternatively in equitable estoppel, seeking damages at law and in equity, respectively.
26 By its defence, QY7 admits that it did not have the power to enter into first contract. It is admitted by QY7 that the notice of default served on Bundoora on 2 March 2020 did not, by reason of incorrectly stating the amount owing under the QY7 Mortgage, comply with the requirements of s 76(1) of the Act. It claims that the contract cannot be specifically performed.
27 By its counterclaim, Bundoora seeks declarations that the contract is unenforceable as the power of sale either did not properly arise, or that QY7’s exercise thereof did not comply with s 77(1) of the Act.
28 Between October 2021 and March 2022 the parties filed material in preparation for the trial that was to commence on 3 May 2022. This material included an expert valuation report dated 16 February 2022 filed by the plaintiff and authored by Ms Luana Kenny of m3 Property.

Proceedings in the County Court and Statutory Demand Proceeding

29 On 9 November 2021, McKimmies initiated proceedings against Bundoora and Mr Huynh in the County Court of Victoria to recover the amount owing under the mortgage. The amount claimed by McKimmies totalled $1,808,145.40.10F[11]
30 On 30 November 2021, McKimmies was successful in obtaining judgment in default of appearance in the County Court proceeding.11F[12]
31 Following non-payment of the default judgment, McKimmies served a creditor’s statutory demand on Bundoora on 7 December 2021. On 21 December, Bundoora initiated proceedings in this Court (S ECI 2021 04862) seeking orders under ss 459G and 459J(1)(b) of the Corporations Act to set aside the statutory demand on the grounds of abuse of process (‘Statutory Demand Proceeding’). The matter was set down for hearing before Efthim AsJ on 11 April 2022.
32 Prior to the hearing before the Associate Judge, on 29 March 2022, Bundoora filed a summons seeking an order pursuant to r 9.06 of the Supreme Court (General Civil Procedure) Rules 2015 that McKimmies be joined to the present proceeding as the Fourth Defendant by counterclaim.12F[13] Bundoora also sought leave to file an amended defence and counterclaim which included, amongst other amendments, the addition of a collateral abuse of process claim.13F[14] Bundoora contended that the statutory demand had been initiated by McKimmies for the collateral purpose of winding up Bundoora in order to preclude it from successfully pursuing its defence and counterclaim in the present proceeding.14F[15] The prayer for relief in the proposed amended defence and counterclaim included an injunction to restrain McKimmies from prosecuting proceedings to wind up Bundoora until the hearing and determination of the present proceeding.
33 In my ruling dated 31 March 2022, I refused the joinder of McKimmies and the amendment to include a collateral abuse of process claim in the proposed amended defence and counterclaim. No satisfactory explanation had been provided as to why Bundoora did not apply for joinder of McKimmies and amendment to its pleadings at or about the time it was served with the statutory demand on 7 December 2021.15F[16] Further, no sound reason was advanced as to why the Associate Judge should not hear and determine the collateral abuse argument in the context of the application to set aside the statutory demand.16F[17]
34 The hearing before Efthim AsJ proceeded on 11 April 2022. As his Honour’s judgment records, Bundoora contended that McKimmies

issued the statutory demand in order to wind up the plaintiff not in order to recover a debt but, rather, to prevent the plaintiff from obtaining finance and placing it in the hands of a liquidator who, with regard to the Consolidated Proceedings, would either not oppose Mr Atanasovski’s claim or, being unable to make a decision prior to the trial date, would not be able to provide effective opposition to Mr Atanasovski’s claim for specific performance.17F[18]

35 In his judgment delivered on 19 May 2022, his Honour determined that the issuing of the statutory demand did not constitute an abuse of process.18F[19] His Honour found that owing to the failure to comply with the statutory demand, Bundoora was presumed to be insolvent.19F[20]

The Deed of Settlement and Proposed Contract

36 On 22 April 2022, the Atanasovski parties and QY7, QY8 and UABS entered into a deed of settlement. The deed annexed the proposed contract for sale of the Land, under which the Atanasovski parties will purchase the Land for $14.75 million.20F[21] Clause 2 of the deed of settlement set out a number of conditions precedent before the proposed contract could be entered into:

(a) Each of QY7 and the Atanasovski Parties making an application to the Supreme Court of Victoria, in the case of QY7 by no later than the next business day after entering into this deed and in the case of the Atanasovski Parties by no later than seven days before the hearing of that part of QY7’s application that relates to the entry into the New Contract of Sale, to be released from or to vary the undertakings they each gave to the Court on 29 September 2021, through their respective Counsel, and recorded in the Orders made on that date by The Honourable Justice Cavanough in the Fourth Proceeding (Undertaking);
(b) The Supreme Court of Victoria releasing or varying each of QY7 and the Atanasovski Parties from the Undertaking sufficiently to enable the parties to give effect to this Deed and the New Contract Sale;
(c) QY7 serving a fresh Default Notice complying with the requirements of the first mortgage and ss 76 and 77(1) of the Transfer of Land Act 1958 (Vic.), on Bundoora, each other person who appears by the Registrar to be affected by those notices and any guarantors to those loans, in accordance with the terms of the applicable loan agreements and mortgages;
(d) Bundoora and any guarantors failing to comply with the Default Notice referred to in clause 2(c); and
(e) The expiry of the Default Notice referred in clause 2(c) above.21F[22]

37 Pursuant to the deed of settlement, the Atanasovski parties are to pay $14.75 million to QY7, which is to be partially set off by payment of $3,377,610 by QY7 to Belmont in settlement of the Atanasovski Damages Claim made in these proceedings. Importantly, both QY8 and McKimmies, the holders of the other registered mortgages over the Land, consent to the sale price.22F[23]
38 On 26 April 2022, QY7 applied to vary the Undertaking so as to allow it to serve a fresh notice of default on Bundoora pursuant to s 76 of the Act (‘Second Notice of Default’). By that point, the principal sum of $10.269 million had not been repaid and $2,374,467.61 of unpaid interest had accrued over the course of the mortgage. QY7 had not received an interest payment since 18 January 2021.23F[24]
39 In the event of non-compliance with the Second Notice of Default, QY7 applied to vary the Undertaking to permit QY7 and Belmont to enter into and settle the proposed contract on terms substantially the same as those proposed in the 22 April 2022 deed of settlement. The relief sought necessitated vacation of the trial scheduled to commence on 3 May 2022.24F[25]
40 At the hearing of the application by summons on 28 April 2022, Bundoora requested that service of the Second Notice of Default be delayed to allow Bundoora additional time in which to obtain finance in order to redeem the mortgage.25F[26]
41 On 28 April 2022, I ruled that in circumstances where QY7 sought a significant indulgence, it was fair and reasonable that Bundoora should be afforded a realistic opportunity to raise the funds necessary to redeem the mortgage.26F[27] I ordered that the Undertaking be varied to permit a Second Notice of Default to be served on Bundoora under the mortgage, not to be served before 13 May 2022.27F[28] The ‘Other Matters’ of that order record that Bundoora did not consent to the proposed sale of the Land by the 22 April 2022 deed of settlement. Furthermore Bundoora reserved its right to oppose any application to vary the Undertaking to effectuate the sale.
42 On 13 May 2022, QY7 issued the Second Notice of Default requiring the default in the payment of principal and interest to be remedied within 14 days.28F[29] Neither Bundoora nor the guarantors listed on the default notice remedied the default.29F[30]
43 On 13 June 2022, Bundoora filed and served a summons returnable 15 June 2022. Bundoora sought the following orders:

1. An order pursuant to Rule 36.04 of the Rules that the Third Defendant have leave to file a further amended defence and counterclaim in the form exhibited to the affidavit in support of this application.
2. An order that the First Defendant be restrained from exercising its power of sale for the land in Certificate of Title Volume 1062 Folio 392 (Land) by executing the proposed contract of sale annexed to the deed of settlement dated 22 April 2022 (or any similar contract) until the hearing and determination of the proceeding, or further order.
3. An order under s.62 of the Civil Procedure Act 2010 (Vic), and/or Rules 22.16 and/or 23.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), dismissing the Plaintiffs’ claims at paragraphs 12, 26(a), 31(a), and A of the prayer for relief contained in the Plaintiffs’ amended statement of claim filed 6 April 2022.
4. Alternatively to paragraph 3, orders that the Court determine the following questions in the proceeding as soon as reasonably practicable:
(a) Whether the Second Plaintiff and First Defendant are entitled under s.77(1) of the Transfer of Land Act 1958 (Vic) to enter into the proposed contract of sale annexed to the deed of settlement entered by them on 22 April 2022.
(b) Whether the First Defendant is obliged under s.77(1) of the Transfer of Land Act 1958 (Vic) to market and sell the Land by expression of interest (or by some other competitive process as the Court may determine).
(c) Whether the Plaintiffs (or either of them) can maintain their claim for performance of the contract between the First Plaintiff and First Defendant made (or purportedly made) on or about 23 June 2020 given the service and expiry of the notice of default of 13 May 2022.
5. Orders under s.90(3) of the Transfer of Land Act 1958 (Vic) (or by mandatory injunction) for the removal of the First Plaintiff’s caveat from the title to the Land.
6. Alternatively to paragraphs 2 to 5, orders under Order 37A of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) freezing a portion of the proceeds of sale received by the First Defendant upon the completion of the contract of sale annexed to the deed of settlement dated 22 April 2022, in the amount of $6,000,000.00, such other amount as the Court may determine.30F[31]

44 On 15 and 16 June 2022, the Court heard Bundoora’s 13 June 2022 summons and QY7’s 26 April 2022 summons seeking to further vary the Undertaking.

Issues for determination

45 There are four issues for determination:

(i) Whether the Atanasovski parties and QY7 should be released from the Undertaking, as varied on 28 April 2022, to permit them to enter into a proposed contract for the sale of the Land for $14.75 million;
(ii) If yes to (i), should injunctions nevertheless be granted:

(a) restraining the Atanasovski parties and QY7 from entering into the proposed contract; and
(b) requiring QY7 to offer the Land for sale via a competitive sale process;

(iii) Should Bundoora be granted leave to file and serve an amended defence and counterclaim?
(iv) Should the Atanasovski parties be ordered to take steps to remove the caveat lodged on the title of the Land?

46 In addition, Bundoora has foreshadowed its intention, in the event that the Undertaking is varied to permit the Atanasovski parties and QY7 to enter into the proposed contract and Bundoora’s injunction application is refused, to apply for a freezing order preventing QY7 from disposing or dealing with assets in Australia up to the unencumbered value $12,796,335, or alternatively, $3,250,000.31F[32] Bundoora submitted that consideration of its application for a freezing order should be deferred until the Court has addressed the issues set out in (i) to (iv) above.32F[33]

Variation of the Undertaking

47 It is common ground that the test for whether a party should be released from an undertaking is whether the interests of justice favour the party being released from the undertaking.33F[34]
48 The Undertaking proffered by the Atanasovski parties and QY7 was given in circumstances where a trial of the proceeding was listed for hearing on 19 October 2021. That trial date was vacated shortly prior to 19 October 2021.
49 It is common ground that since September 2021, Bundoora’s indebtedness to QY7 has increased significantly and continues to increase at in excess of $120,000 per month.34F[35] On 22 April 2022, the Atanasovski parties and QY7 entered into a deed of settlement pursuant to which QY7 will sell the Land to the plaintiff for $14.75 million,35F[36] which is $2.25 million more than the sale price under the first contract for the sale of the Land entered into between the plaintiff and QY7 on 23 June 2020.36F[37]
50 On 28 April 2022, the Court granted an application by the Atanasovski parties and QY7 to vary the Undertaking to permit QY7 to serve a fresh notice of default upon Bundoora.37F[38] The service of this fresh notice of default provided Bundoora with a further opportunity to redeem the mortgage which it granted to QY7 and to regain possession of the Land. The notice was served on Bundoora on 13 May 2022.38F[39] However, Bundoora’s default has not been remedied.39F[40]
51 I accept the submission of the Atanasovski parties and QY7 that circumstances have changed since the Undertaking was proffered to the Court on 29 September 2021. I consider that it is in the interests of justice that the Atanasovski parties and QY7 should be released from the Undertaking. However, such release is subject to Bundoora’s application for an injunction to restrain the Atanasovski parties and QY7 from proceeding with the proposed sale, together with its application for an order that the Land be subject to a competitive sale process.

Is there a serious issue to be tried?

52 Bundoora contends that there is a serious question to be tried that the sale of the Land under the proposed contract is not a lawful exercise of the power of sale conferred by s 77 of the Act.40F[41] It submits that the proposed sale would neither be in good faith nor have regard to the interests of Bundoora as mortgagor.
53 Before addressing the question of whether Bundoora has established that there is a serious question to be tried, it is necessary to address a preliminary issue. On 15 June 2022, on the first day of the hearing of the application Mr Hay QC, who appeared with Mr McKay on behalf of Bundoora, applied for leave to cross-examine Ms Luana Kenny, the author of an expert report filed on behalf of the plaintiff for the purpose of the trial which had been scheduled to commence on 3 May 2022.41F[42] Ms Kenny’s report is dated 14 February 2022.42F[43] Ms Kenny valued the Land at $14.7 million on an ‘as is’ basis.43F[44] This valuation is to be contrasted with a valuation in a report dated 22 May 2022 prepared by Mr Joshua Johnston relied upon by Bundoora. This report values the Land at $15.9 million on an ‘as is’ basis, and $18 million on a hypothetical development basis.44F[45] Mr Hay QC submitted that he wished to cross-examine Ms Kenny in aid of his submission that the proposed sale price of $14.75 million is not a lawful exercise of the power of sale under s 77 of the Act.
54 I rejected Mr Hay QC’s application to cross-examine Ms Kenny.45F[46] When doing so I provided brief oral reasons.46F[47] I stated that I would expand on those reasons when I published my judgment.47F[48]
55 Bundoora sought leave to cross-examine Ms Kenny in aid of its application for an injunction to restrain QY7 from proceeding with the sale of the Land to the Atanasovski parties. In the ordinary course, witnesses are not subject to cross-examination during an application for an interlocutory injunction. However, there is no prohibition upon evidence being elicited by way of cross-examination. In the circumstances of the present case, I considered it inappropriate to permit cross-examination of Ms Kenny for the following reasons.48F[49]
56 Ms Kenny is one of four valuers who have provided a report in respect of the Land. In addition to Ms Kenny’s report, QY7 filed two reports for the purposes of the trial which had been scheduled to commence on 3 May 2022: first, a report by Quadrin Valuations dated 24 March 2022 which valued the Land at $14 million;49F[50] second, a report by First Valuation Group dated 4 April 2022 which valued the Land at $9,630,000.50F[51]
57 On an interlocutory application for an injunction the Court is not in a position to express any concluded view as to which of the four valuations should be preferred. No party suggested that the authors of the respective reports are not qualified to express the valuation opinions contained therein. Absent cross-examination of all four valuers, each of the parties had the opportunity to make submissions regarding any perceived deficiencies apparent on the face of the reports. There was limited utility in Ms Kenny being subject to cross-examination in circumstances where the other three valuers were not also being cross-examined.
58 On 3 June 2022, the parties attended a directions hearing in relation to the applications which were to be heard on 15 and 16 June 2022. When the applications were set down for hearing I advised the parties that I was only available on 15 and 16 June because I was otherwise sitting in the Practice Court for the remainder of the week commencing 14 June 2022. The parties filed a considerable amount of material in advance of the hearing on 15 June 2022. The Court Book comprises in excess of 2,300 pages. Further, at the commencement of his submissions on 15 June 2022, Mr Hay QC handed up a 25-page written submission. If Mr Hay QC had been permitted to cross-examine Ms Kenny there was a real possibility that the hearing would not have been completed within the two days. This would not have been consistent with the just, efficient, timely and cost effective resolution of the issues in dispute between the parties.

The mortgagee’s duty of good faith under s 77 of the Transfer of Land Act

59 Section 77 of the Act provides as follows:

77 Power of sale under a mortgage or charge
(1) If within one month after the service of such notice or demand or such other period as is fixed in such mortgage or charge the mortgagor grantor or other persons do not comply with the notice or demand the mortgagee or annuitant may, in good faith and having regard to the interests of the mortgagor grantor or other persons, sell or concur with any other person in selling the mortgaged or charged land or any part thereof, together or in lots, by public auction or by private contract, at one or several times, and for a sum payable in one amount or by instalments, subject to such terms and conditions as the mortgagee or annuitant thinks fit, with power to vary any contract for sale and to buy in at any auction or to rescind any contract for sale and to resell without being answerable for any loss occasioned thereby and with power to make such roads streets and passages and grant and reserve such easements as the circumstances of the case require and the mortgagee or annuitant thinks fit, and may make and sign such transfers and do such acts and things as are necessary for effectuating any such sale.

60 Section 77 expressly provides that the power of sale conferred on a mortgagee may be exercised by private contract. The fact that the proposed sale is by way of private contract does not, of itself, render the proposed sale unlawful. Nevertheless, Bundoora submits that the sale of the Land by private contract would contravene s 77. In its written submissions, Bundoora summarised its position as follows:

2. Bundoora contends that the entry into the Proposed New Contract would contravene the requirements imposed on Qi Yong 7 under s.77(1) of the TLA for the following reasons:
(a) It is common ground that Qi Yong 7 has a duty under s.77(1) of the TLA to obtain the best price consistent with the realisation of its security.
(b) There are two matters which suggest that this duty would be contravened by the proposed sale. First, Qi Yong 7 has not advertised the Land for sale in order to attract rival offers. Second, Qi Yong 7’s controllers have had no proper regard to the most recent valuation evidence before the Court which suggests that the Land is worth at least $1,150,000.00 more than the price stated in the Proposed New Contract.
(c) Bundoora submits that in circumstances where a mortgagee proposes to sell without advertising and without going to market, and there is cogent evidence before the mortgagee that the proposed sale price would be below the price achievable at market, the mortgagee should not be permitted to sell without testing the market. The authorities support this proposition, and there is no authority that stands against it.
(d) Even assuming that the case sits at the borderline, there are two further circumstances which suggest a want of good faith. First, Qi Yong 7 has a collateral purpose in seeking to exercise the power of sale in accordance with the Settlement Deed, as this would allow the mortgagee to compromise a substantial damages claim for which it has no genuine defence on terms that are very favourable to its interests. That purpose stands at odds with Qi Yong 7’s statutory duty to obtain the best price consistent with the realisation of its security, having regard to the interests of the mortgagor.
(e) Second, Qi Yong 7’s proposed ‘off-market’ sale is the latest move in a pattern of very poor conduct that has prevented Bundoora from paying out the mortgage debt, and has greatly increased the quantum of that debt (and the debt owed under the puisne mortgages). The Court is entitled to have regard to the mortgagee’s conduct preceding the proposed sale to determine whether a want of good faith is evident. As a matter of practical justice, if the mortgagee’s conduct has greatly increased the mortgage debt and prevented its repayment, the mortgagor should be given a just opportunity to have its land sold at market in order to ameliorate the damage it has suffered.51F[52]

61 In MBF Investments Pty Ltd v Nolan52F[53] the Court of Appeal cited with approval the following passage from the judgment of Buchanan JA in Kravchenko v The Rock Building Society:53F[54]

Generally, the interests of the mortgagee and the mortgagor are best served by obtaining the best price that is available, and that should be the mortgagee’s aim. Nevertheless, as the mortgagee is entitled to prefer his own interests while taking reasonable care to protect the interests of others, in certain circumstances it may be that a mortgagor will be justified in accepting a price that is less than the best price that could be reasonably be obtained, but is a price that can be described as proper. In Vasiliou v Westpac Banking Corporation, Maxwell P, Neave and Kellam JJA said of a mortgagee to whom s 77 of the Act applied:
‘... The mortgagee is obliged to obtain the best price consistent with its entitlement to realise its security.’54F[55]

62 In MBF, the Court of Appeal summarised its position in respect of the nature of a mortgagee’s duty under s 77 as follows:

To summarise our position:
(a) a mortgagee is not a trustee of the power of sale, which is given to the mortgagee to enable the realisation of the security interest;
(b) a mortgagee must act in good faith, that is conscionably, and cannot sell for a purpose other than that for which the power of sale is conferred;
(c) a mortgagee is not required to place the interests of the mortgagor above the mortgagee’s interests in recovering the debt. For example, the mortgagee can sell the property at a time of the mortgagee’s choice, even though the property might realise a higher price if the sale were postponed;
(d) the mortgagee cannot disregard the interests of the mortgagor by simply selling for a price which will cover the amount of the loan. The mortgagee must take reasonable steps to obtain the best price consistently with its right to enforce its security interest. This requires the mortgagee to consider how the property should be advertised and to allow an appropriate time between the advertisement and the sale;
(e) the mortgagee must also have regard to the interests of subsequent security holders; and
(f) if there is no doubt that the sale of the lots preferred by the mortgagor would be sufficient to discharge the debt owed to the relevant mortgage and of any other security holders whose interest the mortgagee is required to consider, a failure to sell the preferred lots may breach the mortgagee’s duty to sell in good faith.55F[56]

63 At point (b), the Court of Appeal describes the obligation to act in good faith as requiring the mortgagee to act ‘conscionably’. The judgment of Young CJ in Ultimate Property Group Pty Ltd v Lord56F[57] is cited in support of this proposition. Earlier in the Court of Appeal’s judgment, when discussing the duty to act conscionably, the Court stated:

The concept of ‘unconscionability’ was also applied in Adamse v Broadway Credit Union Ltd, which concerned the sale of mortgaged property by private treaty rather than by auction. The decision to sell by private treaty was made after the mortgagor made numerous successful attempts at delaying the sale and unsuccessful attempts to refinance the loan. On the facts it was held that the mortgagee had not failed to act in good faith and in wilful disregard of the interests of the mortgagor. Cohen J referred to the statement of McLelland CJ in Eq in Hawkesbury Valley, and said that:
As McLelland CJ in Eq pointed out, however, there can be circumstances where failing to obtain a proper price could be regarded as unconscionable conduct ... It may well be that a failure to consider what is a proper price or a disregard of advice to that effect may in appropriate circumstances amount to a lack of good faith.
The underlying equitable principle was explored more recently in Ultimate Property Group Pty Ltd v Lord, where Young CJ in Eq held:
The duty is a duty to act conscionably towards the mortgagor and persons under the mortgagor. The duty is not to be considered in some mechanical way, but the whole of the mortgagee’s conduct with respect to the sale is to be considered. The mortgagee may, up to a point, act solely in its own interests, but it must also act conscionably towards the mortgagor and those claiming under the mortgagor.
...
Indeed, it is a fundamental principle in the textbooks that mere inadequacy in the price obtained and the value will not normally of itself be sufficient for a mortgagor to upset a purported sale ...57F[58]

64 Prior to entering into the deed of settlement, QY7 had obtained two valuations. The First Valuation Group report valued the Land at $9,630,000.58F[59] The Quadrin valuation report valued the Land at $14 million.59F[60] Prior to entering the deed, the plaintiff obtained Ms Kenny’s report which valued the Land at $14.7 million.60F[61] Notwithstanding these valuations, Bundoora submits that the price of $14.75 million under the proposed contract is not a proper price.61F[62] It places significant weight on Mr Johnston’s report of 22 May 2022. Bundoora submits that although this report post-dates the date the settlement deed was executed, QY7 is now apprised of its contents.62F[63] It submits that the Land, valued by Mr Johnston at $15.9 million, is worth at least $1,150,000 more than the $14.75 million sale price under the proposed contract.
65 Bundoora submits that QY7 should be ordered to sell the Land via a ‘competitive process’ to allow for the possibility that the Land will be sold at a higher price than $14.75 million.63F[64] Insofar as Bundoora submits that the Land should be sold via a competitive process, it is relevant to note that in 2020 the Land was subject to an unsuccessful competitive sale process. That process was initiated by receivers appointed by Havenport. On 28 February 2020, Havenport appointed Ms Chesser and Mr Shepard of KordaMentha as receivers of the Land.64F[65] Following their appointment, the receivers attempted to market and sell the Land through JLL International but could not exceed the $14.7 million price at which Bundoora had previously agreed to sell the Land to a related entity.65F[66] Subsequently, in late May or early June 2020, QY7 engaged in an expression of interest campaign in relation to the Land.66F[67] Following this campaign, the Land was sold to the Atanasovski parties for $12.5 million.
66 Absent the report of Mr Johnston, Bundoora’s contention that the proposed sale price of $14.75 million is not a proper price borders on untenable. First, there has previously been an unsuccessful attempt to sell the Land via a competitive process. Second, the proposed price is $2.25 million more than the agreed price under the contract entered into between the plaintiff and QY7 in June 2020. Third, the proposed price is higher than three valuations obtained by QY7 and the Atanasovski parties. Fourth, the proposed price is more than the price at which Bundoora had agreed to sell the property to a related entity in October 2019. Further, in considering whether the proposed sale is a lawful exercise of the power of sale under s 77 of the Act, it is necessary to have regard to the interests of other persons. Relevantly, the second and third mortgagees both consent to the proposed sale.67F[68]
67 It is legitimate for QY7 to have regard to its own interests. QY7 is not required to place Bundoora’s interests above its own interests in recovering its debt.68F[69] The mortgage which Bundoora granted QY7 secures a loan of $10.269 million which was advanced on 18 July 2019.69F[70] Bundoora has been in default since May 2020.70F[71] Bundoora has not made any repayments of the loan since 18 January 2021.71F[72] As at 13 May 2022 the unpaid interest owing on the loan was $2,374,467.72F[73] It is common ground that interest on the three mortgages granted by Bundoora is currently accruing at the rate of approximately $200,000 per month. The majority of this interest is attributable to the first mortgage granted by Bundoora to QY7 because the amount which was loaned to Bundoora by QY7 is significantly more than the loan secured by the second and third mortgages.73F[74] The proposed sale to the Atanasovski parties has the advantage of certainty and speed compared to the competitive sale process sought by Bundoora.
68 Contrary to Bundoora’s submission, Mr Johnston’s report does not support a finding that the Land is worth at least $1,150,000 more than the proposed sale price of $14.75 million. First, the figure of $1,150,000 has no regard to the costs involved in selling Land via a competitive process.74F[75] Assuming a sale price of $15,900,000, an agent’s commission of 2% would reduce the return on sale by $318,000. It is also necessary to take account of the potential delay involved in a competitive sale process. Mr Johnston’s report includes the following under the heading ‘selling period’:

6.11. Selling Period
A reasonable selling period for the site at the value assessed herein is within approximately six months, assuming a professional marketing campaign by a recognised national selling agent experienced in selling residential development sites of this nature, subject to a professional and substantial marketing campaign. Should a faster realisation or a Mortgagee in Possession sale be required, then a suitable discount on the ascribed value may be necessary to achieve a sale.
This valuation is subject to all intellectual property including, but not limited to; plans, professional reports, planning documents and pre-sale contracts which may form part of any contract for sale of the property being assigned to an incoming purchaser without penalty or additional cost. It is also subject to pre-sale contracts remaining enforceable following transfer, assignment or novation and should this not be available there may be a material adverse change to the site value. In such circumstance the report should be returned to the valuer for comment.75F[76]

69 Assuming a selling period of six months Bundoora would accrue a further $1.2 million in interest in respect of the three mortgages over the Land. A substantial component of this interest is payable to QY7 which has the largest debt.
70 Mr Johnston states that his valuation is subject to all intellectual property, including planning contracts and pre-sale contracts being assigned to an incoming purchaser without penalty or additional cost.76F[77] This qualification is significant. Mr Johnston’s report notes that 104 of the 107 townhouses for which a planning permit has already been obtained have been sold.77F[78] It is common ground that the planning permit in respect of these townhouses was obtained by an entity controlled by Mr Atanasovski. It is also common ground that the townhouses have been sold by an entity controlled by Mr Atanasovski. Mr Johnston’s valuation assumes that if another purchaser acquired the Land pursuant to a competitive sale process that the Atanasovski parties would be prepared to assign to that purchaser the rights he presently holds in relation to the pre-sale contracts.
71 Mr Johnston’s ‘as is’ valuation of $15.9 million is based on a valuation of $975 per square metre of the site area. This valuation represents an approximate midpoint of the per metre valuation of six developments which were identified as providing ‘a good cross-section of the local market’.78F[79] Two of the six developments are in Mill Park with a per square metre site valuation of $507 and $690. The other four developments are in South Morang ($464 per square metre), Thomastown ($732 per square metre), Epping ($496 per square metre) and Coburg ($1,751 per square metre).79F[80] The $1,751 per square metre for the Coburg development is more than $1,000 per square metre more than any other development which is being used for valuation purposes. Mr Johnston has used this figure as the upper end of the valuation range. The land in question is also in Mill Park. The $975 per square metre valuation is significantly higher than the two other developments in Mill Park valued at $507 per square metre and $690 per square metre. A relatively small decrease in the per square metre valuation of the Land below $975 per square metre would bring Mr Johnston’s valuation in line with that of Ms Kenny ($14.7 million) and the Quadrin valuation report ($14 million).
72 Mr Johnston also undertook a project related site assessment resulting in a valuation of $18 million. For the purposes of his report Mr Johnston defines project related site assessment as:

2.6. Definition of ‘Project Related Site Assessment’
While not defined by the IVSC, API nor PINZ, for the purpose of this assessment, we define the ‘Project Related Site Assessment’ as follows:
‘An assessment of the site based upon the proposed development in line with the existing planning permit, building contract and other estimated costs, and presales achieved at the date of valuation. It does not represent the value of the land in isolation, but is an assessment derived using a residual cash flow analysis in relation to the particular proposal for the land’.80F[81]

73 Mr Johnston’s residual cash flow analysis assumes construction costs of $26,833,416 (excluding GST) in accordance with a tender dated 22 December 2022 provided by Evo Homes. This equates to a cost of construction per unit of $250,780.81F[82] There is a real question as to whether Mr Johnston’s assumption regarding construction costs based on the 22 December 2020 Evo Homes tender is valid. On 22 May 2022 Pasquale Garofalo, a director of Evo Homes, wrote to Mr Huynh, the director of Bundoora, as follows:

Thank you for your ongoing business and for reaching out regarding the Bundoora Park Estate Project.
We refer to our quote provided to you on 22 December 2020 for Bundoora Park Estate.
We have examined the new drawing set you have provided us (DKO revision TP03). Compared to the old set of 2020 (Truesource Revision A), all 4-bedroom homes have been reduced to 3-bedrooms on the new drawings. Likewise, all three bedrooms have been reduced to two-bedrooms. The overall gross area has been reduced in most homes.
The construction cost has risen considerably over the last 15 months. We are unable to reduce the price in lieu of the area and bedroom reduction. Nonetheless we are able to apply the previous price to the new set of drawing [sic] provided.82F[83]

74 The construction costs of $26,833,416 which underpin Mr Johnston’s valuation do not correspond with the cost of construction of the 104 townhouses which have been pre-sold. Rather, Evo Homes is only prepared to apply the December 2020 construction tender to the construction of smaller townhouses.
75 It is neither possible nor appropriate at an interlocutory stage of proceeding to express any concluded view about the competing valuation evidence. Nevertheless, the report of Mr Johnston does not provide a firm foundation for concluding that the Land is worth at least $1,150,000 more than the proposed sale price. In addition to the matters referred to above, Mr Johnston has quite properly noted that his valuations may be affected by changing market conditions:

Interest rates are currently at historical lows, with many market economists forecasting multiple rises in the second half of 2022, and into 2023. This will increase the cost of borrowing and is likely to create volatility in property markets going forward.
Future increases in the cost of borrowing are forecast to place pressure on the residential property market, with many lenders, including the major banks predicting price declines of up to 15% over the next two to three years. While any forecasting of property markets is difficult, there is considered to be a high risk of price declines over the next 12-24 months.83F[84]

76 Bundoora submits that there are two matters in addition to the valuation evidence which suggest a want of good faith. First, it submits that QY7 has a collateral purpose in seeking to exercise the power of sale in accordance with the settlement deed, as this will allow it to compromise a substantial damages claim brought by the plaintiff. I accept that if Bundoora can establish at trial that QY7 was actuated by a collateral purposes that this would be a relevant matter in determining whether QY7 has acted in good faith. However, the primary consideration for the determination of whether QY7 is acting in good faith is whether the price of $14.75 million is a proper price. There is a real prospect at trial that when all valuation evidence has been tested, QY7 will establish that $14.75 million is a proper price for the Land.
77 Second, Bundoora submits that the proposed off-market sale is the latest move in a pattern of very poor conduct that has prevented Bundoora from paying out the mortgage debt, and has greatly increased the quantum of that debt.84F[85] Bundoora submits that as a matter of ‘practical justice’ it should be given an opportunity to have the Land sold at market to ameliorate the damage it has suffered.85F[86]
78 At an interlocutory stage of proceeding where the evidence of the parties has not been tested it is not possible to make a finding that the proposed off-market sale is the latest move in a pattern of very poor conduct by QY7. However, the following matters are not contentious. First, Bundoora has been in default under the loan since May 2020 and has not paid any interest since February 2021. Second, Bundoora has accrued an interest debt in excess of $2.3 million which it has not paid. Third, the proceeds of the sale at $14.75 million will enable QY7 to clear Bundoora’s debt. Fourth, if the sale of the Land via a competitive process takes six months, Bundoora’s debt from the three mortgages over the Land will increase by $1.2 million. A significant proportion of this debt will arise under the first mortgage with QY7. If at trial the Court concludes that there has been poor conduct on the part of QY7, any such finding will have to be balanced against the fact that the wellspring of the disputation between QY7 and Bundoora has been the inability of Bundoora to pay its debt to QY7 resulting in Bundoora being in default from May 2020.

Conclusion on serious question to be tried

79 I accept that the valuation provided by Mr Johnston raises a serious issue to be tried that the sale of the Land to the Atanasovski parties for $14.75 million would not be a sale at a proper price. However, the serious issue to be tried is not a strong case. Mr Johnston’s report does not provide a firm foundation for concluding that if the Land was sold pursuant to a competitive sale process that the Land would be sold for more than $14.75 million. Rather, the report supports a finding that there is a possibility that after a marketing campaign of up to six months the Land might be sold for more than $14.75 million.

Balance of convenience

80 Having found that there is a serious issue to be tried that the proposed sale would not be a lawful exercise of the power of sale conferred by s 77 of the Act, it is necessary to consider whether the balance of convenience favours the grant of an injunction to restrain QY7 and the Atanasovski parties from proceeding with the sale.

Undertaking as to damages

81 Through its counsel Mr Hay QC, Bundoora proffered the usual undertaking as to damages on behalf of itself, Mr Huynh and Gordon Maribyrnong Holdings Pty Ltd (GMH Pty Ltd).86F[87] If QY7 is ordered to sell the Land via a competitive sale process such as by a public auction it is possible that this will result in a sale price of less than $14.75 million. The adequacy of any undertaking as to damages is therefore a matter which must be assessed when considering the balance of convenience.
82 On 19 May 2022, Efthim AsJ rejected an application to set aside a statutory demand by 328–338 McKimmies Road Pty Ltd for a judgment debt in the sum of $1,808,145.40.87F[88] As the statutory demand has not been set aside, Bundoora is presumed to be insolvent. Apart from this presumption, I agree with the observation of Efthim AsJ that Bundoora appears to be insolvent as it cannot pay its debts as and when they fall due.88F[89] I place very little weight upon the undertaking proffered by Bundoora. There is little, if any, basis for concluding that if the undertaking is called upon, Bundoora would be able to compensate QY7 for any loss resulting from the competitive sale process. I also place very little weight upon the undertaking proffered by Mr Huynh. There is no evidence as to any assets held by Mr Huynh which would support a finding that he could compensate QY7 for any losses arising from a competitive sale process. Mr Huynh has provided personal guarantees for the liability of Bundoora under the three mortgages in respect of the Land. As Bundoora appears to be and is presumed to be insolvent, there is a real prospect of Mr Huynh incurring very substantial personal liability under these guarantees.
83 Mr Huynh is the sole director and sole shareholder of GMH Pty Ltd. In an affidavit affirmed on 16 June 2022, Mr Huynh deposed that GMH Pty Ltd has completed a development at 429–431 Gordon Street, Maribyrnong. Mr Huynh deposes that GMH Pty Ltd is the registered proprietor of real property valued in August 2021 at $13.9 million and that GMH Pty Ltd has current liabilities of $10,459,226.64, leaving a total net equity of $3,440,773.54.89F[90]
84 GMH Pty Ltd is the registered proprietor of 429–431 Gordon Street, Maribyrnong and holds the property as trustee of the Gordon Maribyrnong Holding Unit Trust.90F[91] There is no evidence as to the identity of the unitholders and whether the unitholders have consented to GMH Pty Ltd proffering an undertaking to compensate QY7 for any losses for which Bundoora is held liable. Clause 20 of the trust deed prescribes the authorised investments of the trust.91F[92] I accept the submission of Mr Bick QC that the prescribed authorised investments of the trust do not confer a power on the trustee to proffer an undertaking as to damages on behalf of another company. Further, there is a significant question as to whether GMH Pty Ltd is acting in the interests of the unitholders in proffering the undertaking. In the absence of any evidence identifying the unitholders and confirming their consent, I place little weight upon the undertaking as to damages proffered by GMH Pty Ltd.
85 The undertakings proffered on behalf of Bundoora, Mr Huynh and GMH Pty Ltd are not undertakings of substance. The undertakings do not provide a basis for the Court to conclude that in the event that QY7 suffered financial loss as a consequence of the sale of the Land via a competitive sale process, it would be compensated for such loss.

Damages an adequate alternative remedy?

86 If QY7 proceeds with the proposed sale and the Court subsequently accepts the evidence of Mr Johnston, the quantum of Bundoora’s loss will be readily identifiable. Such loss will be the difference between $14.75 million and any valuation evidence of Mr Johnston which, after making allowance for the costs of a hypothetical competitive sale process, would have resulted in net receipts in excess of $14.75 million. For example, if the Court accepts that the Land is valued at $15.9 million and that the cost of a competitive sale process would be $300,000, Bundoora will have established a loss of $850,000.
87 Mr Hay QC accepts that Bundoora’s loss could be quantified if the proposed sale goes ahead. However, he submits that damages are not an adequate remedy because Bundoora does not have the funds to press its claim for damages.92F[93] Mr Hay QC submitted that the present proceeding is analogous to a claim for specific performance of contractual obligations where a court accepts that damages are not an adequate alternative remedy.93F[94]
88 It is well established that in some categories of claims for specific performance, injunctions will be granted to restrain a breach of contractual obligations, in part because damages are not an adequate alternative remedy. Claims for injunctions to restrain a breach of a contractual restraint of trade obligation between employer and employee illustrate this point.94F[95] However, in such cases courts have accepted that damages are not an adequate remedy because of the difficulty in quantifying loss if a former employee is not restrained from acting in breach of post termination employment restraints.95F[96]
89 Bundoora does not make any claim for specific performance of any contractual obligation alleged to be owing to it by QY7. If Bundoora suffers any loss as a consequence of the proposed sale, such loss will be able to be quantified if Bundoora’s valuation evidence is accepted at trial. Any practical financial difficulty which Bundoora may have in being able to pursue its claim for damages does not translate into a finding that damages are not an adequate alternative remedy.
90 Bundoora submits that in assessing the balance of convenience the Court should have regard to the opportunity to ameliorate financial damage it says it has suffered, if a better price than $14.75 million can be achieved via a competitive sale process.96F[97] If the sale process takes up to 6 months and sale costs are $300,000, the sale price would need to be in excess of $16.25 million before any net benefit will flow to Bundoora. It is common ground that Bundoora is currently incurring interest costs of approximately $200,000 per month, which means an additional $1.2 million of accrued debt if the sale process takes 6 months.
91 As against the doubts which attend the extent of any amelioration of Bundoora’s loss via a competitive sale process, the proposed sale has the benefit of providing a certain and timely outcome for QY7.
92 It is also appropriate, when weighing the balance of convenience, for the Court to have regard to the interests of third parties who are likely to be affected by the grant or refusal of an injunction. In addition to the mortgage to QY7, there are two other mortgagees in respect of the Land: QY8 (which loaned Bundoora $2 million) and McKimmies (which loaned Bundoora $1.18 million).97F[98] Both of these parties are affected by the proposed sale. Both parties consent to the proposed sale going ahead.98F[99] Further, although I do not accord this matter significant weight, it is also appropriate to have regard to the interests of the 104 purchasers who have entered into contracts with an entity controlled by Mr Atanasovski for the purchase of townhouses to be built on the Land. I infer that the interests of these purchasers will more likely be advanced if the proposed sale goes ahead compared to potential further significant delays if there is a competitive sale process.

Conclusion on balance of convenience

93 The balance of convenience strongly favours the refusal of Bundoora’s injunction application.

Application for leave to amend

94 Bundoora applies for leave to file and serve a proposed further amended defence and counterclaim. Although Mr Hay QC did not withdraw the application he accepts that there is substance in criticisms as to the form of the proposed pleading which were advanced by Mr Bick QC on behalf of the Atanasovski parties.99F[100] These criticisms were twofold. First, that the particulars to the proposed [65(d)] set out a narrative rather than pleading material facts. Second, that paragraph E of the prayer for relief which claims declarations, fails to set out the form of the declarations. Both of these criticisms have substance. Bundoora will not be granted leave to file and serve an amended defence and counterclaim in the form filed in advance of the hearing on 15 June 2022.

Application for removal of caveat

95 As a consequence of this judgment, the first plaintiff and QY7 will be free to enter the proposed contract. Immediately upon doing so the first plaintiff will have a caveatable interest as purchaser of the Land. In light of this conclusion, there is no utility in addressing Bundoora’s submission that the Atanasovski parties should be ordered to remove its extant caveat because it does not presently have a caveatable interest. Whatever the merits of this submission, the Atanasovski parties’ extant caveat will lapse upon the lodging of a new caveat arising from the proposed sale. There is no doubt that as the purchaser of the Land under the proposed contract the Atanasovski parties will have a valid caveatable interest.

Application to strike out parts of the amended statement of claim

96 By [3] of the summons filed 13 June 2022 Bundoora applies to strike out the following paragraphs of the amended statement of claim:100F[101]

12. Atanasovski and Belmont have not accepted Qi Yong’s repudiation of the contract and seeks specific performance...
26. By reason of paragraphs 21 to 25 (inclusive), Atanasovski and Belmont are entitled to orders:
(a) under s 237 of the ACL, directing Qi Yong 7 to do all things reasonably necessary to transfer the property to Belmont under s 77(4) of the TLA and to give possession of the property to Belmont, on payment of the amount properly due from Atanasovski and Belmont to Qi Yong 7 to complete the contract...
31. By reason of paragraph 30, Atanasovski and Belmont are entitled to equitable relief:
(a) in the event BPEH is also estopped from denying that Qi Yong 7 had no right or power to sell the property to Atanasovski at the time it entered into the contract, being an order directing Qi Yong 7 to do all things reasonably necessary to transfer the property to Belmont under s 77(4) of the TLA and to give possession of the property to Belmont, on payment of the amount properly due from Atanasovski to Qi Yong 7 to complete the contract.
AND THE PLAINTIFFS CLAIM:
A. An order for specific performance against the first defendant.101F[102]

97 There is no utility in addressing Bundoora’s submission that these parts of the amended statement of claim should be struck out. As a consequence of this judgment the claims against QY7 set out above will fall away.

Conclusion

98 The Court will make the following orders:

1. The plaintiffs and the first defendant are released from the Undertaking proffered to the Court on 29 September 2021 as varied on 28 April 2022.
2. The third defendant’s application for an injunction by summons filed 13 June 2022 is dismissed.
3. The third defendant’s application for an order that the first plaintiff be directed to remove the first plaintiff’s caveat from the Land is dismissed.

99 I shall provide the parties with an opportunity to make submissions on the costs of the hearing on 15 and 16 June 2022. My provisional view is that costs should follow the event and that the third defendant should pay the costs of the plaintiffs and the first defendant on a standard basis to be taxed in default of agreement.

99

SCHEDULE OF PARTIES

S ECI 2021 03427


BRANKO ATANASOVSKI

First Plaintiff
and First Defendant by Counterclaim


and


THE BELMONT COLLECTION LO PTY LTD (ACN 645 220 408) AS TRUSTEE FOR THE BELMONT COLLECTION LO TRUST

Second Plaintiff
and Second Defendant by Counterclaim


and


QI YONG 7 PTY LTD
ACN 619 702 484

First Defendant


and


LEO LEE & ASSOCIATES PTY LTD, AN INCORPORATED LEGAL PRACTICE ALSO KNOWN AS UNITED ASSOCIATES BARRISTERS AND SOLICITORS
(ABN 81 164 177 468)

Second Defendant


and


BUNDOORA PARK ESTATE HOLDINGS (ACN 630 535 385)

Third Defendant
and Plaintiff by Counterclaim



---


[1] Affidavit of Jonathan Tisher dated 17 September 2021, [10].

[2] CB760, ‘Mortgage Agreement dated 18 July 2019’.

[3] Transcript of Proceedings, T 205 L 27–8 (16 June 2022).

[4] CB1448, ‘Affidavit of Nhut Quang Dai Huynh dated 7 March 2022’, [53], [56].

[5] CB1440, ‘Affidavit of Nhut Quang Dai Huynh dated 7 March 2022’, [19].

[6] CB1451, ‘Affidavit of Nhut Quang Dai Huynh dated 7 March 2022’, [66].

[7] Affidavit of Nhut Quang Dai Huynh dated 22 September 2021, Exhibit ND-1, 48.

[8] Affidavit of Jonathan Tisher dated 17 September 2021, [13].

[9] CB1451, ‘Affidavit of Nhut Quang Dai Huynh dated 7 March 2022’, [67].

[10] Order of Cavanough J in Bundoora Park Estate Holding Pty Ltd v Qi Yong 7 Pty Ltd & Ors, (Supreme Court of Victoria, S ECI 2021 03485, 29 September 2021).

[11] Affidavit of Jennie Tu Tran dated 23 March 2022, Exhibit JT-1, 45.

[12] Affidavit of Jennie Tu Tran dated 23 March 2022, Exhibit JT-1, 44.

[13] Third Defendant, ‘Summons filed 29 March 2022’.

[14] Affidavit of Jennie Tu Tran dated 23 March 2022, Exhibit JT-1, 27–33.

[15] Transcript of Proceedings, T 12 L 21 – T 13 L 6 (30 March 2022).

[16] Ibid T 6 L 11-17 (30 March 2022).

[17] Ibid T 6 L 24-28 (30 March 2022).

[18] Re Bundoora Park Estate Holding Pty Ltd [2022] VSC 273, [18] (‘Statutory Demand Proceeding Judgment’).

[19] Ibid [50].

[20] Ibid [49]; see Corporations Act 2001 (Cth) s 459C(2)(a).

[21] CB776, ‘Deed of settlement dated 22 April 2022’.

[22] CB780-1, ‘Deed of settlement dated 22 April 2022’.

[23] Transcript of Proceedings, T 116 L 28–31 (15 June 2022).

[24] CB753, ‘Affidavit of Xing Li filed 26 April 2022’, [7].

[25] CB10–11, ‘First Defendant Summons filed 26 April 2022’.

[26] Transcript of Proceedings, T 9 L 26–8 (28 April 2022).

[27] Ibid T 20 L 14–8 (28 April 2022).

[28] CB1433, ‘Order of McDonald J dated 28 April 2022’.

[29] CB233–5, ‘Notice of Default dated 13 May 2022’.

[30] CB368–70, ‘Affidavit of Xing Li dated 1 June 2022’.

[31] CB6–8, ‘Third Defendant Summons filed 13 June 2022’.

[32] Third Defendant, ‘Proposed Freezing Order dated 16 June 2022’.

[33] Transcript of Proceedings, T 146 L 2‑–6 (16 June 2022).

[34] HJ (pseudonym)* v Independent Broad-Based Anti-Corruption Commission [2021] VSCA 200, [87].

[35] CB918, ‘Third Defendant’s Outline of Submissions dated 27 April 2022’, [11].

[36] CB776, ‘Deed of settlement dated 22 April 2022’.

[37] CB15‑–6, ‘Affidavit of Nhut Quang Dai Huynh dated 10 June 2022’, [6], [12].

[38] CB1433, ‘Order of McDonald J dated 28 April 2022’.

[39] CB233–5, ‘Notice of Default dated 13 May 2022’.

[40] CB368–70, ‘Affidavit of Xing Li dated 1 June 2022’.

[41] CB906–7, ‘Third Defendant’s Further Outline of Submissions dated 2 June 2022’, [12]–[13].

[42] Transcript of Proceedings, T 16 L 30‑–1 (15 June 2022).

[43] CB1967, ‘Expert Report of Ms Luana Kenny, m3 Property, dated 14 February 2022’.

[44] CB1970, ‘Expert Report of Ms Luana Kenny, m3 Property, dated 14 February 2022’.

[45] CB404, ‘Expert Report of Mr Joshua Johnson, Ray White, dated 2 May 2022’.

[46] Transcript of Proceedings, T 36 L 23‑–7 (15 June 2022).

[47] Ibid T 35–6 (15 June 2022).

[48] Ibid T 34 L 3–5 (15 June 2022).

[49] Ibid T 36 L 23–7 (15 June 2022).

[50] CB586, ‘Expert Report of Quadrin Valuations dated 24 March 2022’.

[51] CB626, ‘Expert Report of First Valuation Group dated 4 April 2022’.

[52] Third Defendant, ‘Submissions dated 15 June 2022’, [2(a)–(e)].

[53] [2011] VSCA 114; (2011) 37 VR 116 (‘MBF’).

[54] [2009] VSCA 292; (2009) 26 VR 400.

[55] MBF (n 53) 138–9 [74] (citations omitted).

[56] Ibid 144–5 [100] (citations omitted).

[57] [2004] NSWSC 114; (2004) 60 NSWLR 646.

[58] MBF (n 53) 141 [83]–[84] (citations omitted).

[59] CB626, ‘Expert Report of First Valuation Group dated 4 April 2022’.

[60] CB586, ‘Expert Report of Quadrin Valuations dated 24 March 2022’.

[61] CB1970, ‘Expert Report of Ms Luana Kenny, m3 Property, dated 14 February 2022’.

[62] CB881–2, ‘Third Defendant’s Submissions in Reply dated 3 June 2022’, [2]–[4].

[63] Transcript of Proceedings, T 17 L 15 – 27 (15 June 2022).

[64] CB7, ‘Third Defendant’s Summons filed 2 June 2022’, [4(b)].

[65] CB1449, ‘Affidavit of Nhut Quang Dai Huynh dated 7 March 2022’, [59].

[66] CB1451, ‘Affidavit of Nhut Quang Dai Huynh dated 7 March 2022’, [66].

[67] CB1451–2, ‘Affidavit of Nhut Quang Dai Huynh dated 7 March 2022’, [67], [71].

[68] Transcript of Proceedings, T 116 L 28–31 (15 June 2022).

[69] MBF (n 53) 144 [1(c)].

[70] CB234, ‘Notice of Default dated 13 May 2022’; CB760, ‘Mortgage Agreement dated 18 July 2019’.

[71] CB14, ‘Affidavit of Nhut Quang Dai Huynh dated 10 June 2022’, [5].

[72] CB753, ‘Affidavit of Xing Li dated 26 April 2022’, [7(b)].

[73] CB234, ‘Notice of Default dated 13 May 2022’.

[74] CB1439, ‘Affidavit of Nhut Quang Dai Huynh dated 7 March 2022’, [14].

[75] Transcript of Proceedings, T 207 L 20 – T 208 L 14 (16 June 2022).

[76] CB442, ‘Valuation Report of Mr Johnston, Ray White, dated 2 May 2022’ (emphasis in original).

[77] CB442, ‘Valuation Report of Mr Johnston, Ray White, dated 2 May 2022’.

[78] CB404, ‘Valuation Report of Mr Johnston, Ray White, dated 2 May 2022’. See also: Affidavit of Jonathan Tisher dated 5 October 2021, which was filed by the Atanasovski parties in S ECI 2021 03485 Bundoora Park Estate Holding Pty Ltd vs Qi Yong 7 Pty Ltd prior to the consolidation of several related proceedings into the present proceeding.

[79] CB439 ‘Valuation Report of Mr Johnston, Ray White, dated 2 May 2022’.

[80] CB439, ‘Valuation Report of Mr Johnston, Ray White, dated 2 May 2022’.

[81] CB413, ‘Valuation Report of Mr Johnston, Ray White, dated 2 May 2022’.

[82] CB498, ‘Valuation Report of Mr Johnston, Ray White, dated 2 May 2022’.

[83] CB91, ‘Letter from Pasquale Garofalo to Nhut Quang Dai Huynh dated 25 May 2022’.

[84] CB406, ‘Valuation Report of Mr Johnston, Ray White, dated 2 May 2022’.

[85] Third Defendant, ‘Submissions dated 15 June 2022’, [2(e)].

[86] Third Defendant, ‘Submissions dated 15 June 2022’, [2(e)].

[87] Transcript of Proceedings, T 149 L 17 – T 150 L 1 (16 June 2022).

[88] Statutory Demand Proceeding Judgment (n 18).

[89] Ibid [49].

[90] Affidavit of Nhut Quang Dai Huynh dated 16 June 2022, [8].

[91] Affidavit of Nhut Quang Dai Huynh dated 16 June 2022, [8].

[92] Affidavit of Nhut Quang Dai Huynh dated 16 June 2022, Exhibit NH3, 299–300.

[93] Transcript of Proceedings, T 105 L 8–13 (15 June 2022).

[94] Ibid T 201 L 31 – T 202 L 6 (16 June 2022).

[95] See, for example, Crowe Horwath Pty Ltd v Loone (2016) 263 IR 300, [26].

[96] See Willis Australia Group Services Pty Ltd v Griggs [2012] NSWSC 659; (2012) 222 IR 172, [129]-[132]; Cerilian Pty Ltd v Graham Fraser [2008] NSWSC 1016, [10]; Otis Elevator Company Pty Ltd v Nolan [2007] NSWSC 593, [17]-[30]; IceTV Pty Ltd v Ross [2007] NSWSC 635.

[97] Third Defendant, ‘Submissions dated 15 June 2022’, [2(e)].

[98] CB1439, ‘Affidavit of Nhut Quang Dai Huynh dated 7 March 2022’, [14].

[99] Transcript of Proceedings, T 116 L 28–31 (15 June 2022).

[100] Transcript of Proceedings, T 188 L 16–22 (16 June 2022).

[101] CB6–8, ‘Bundoora Summons filed 13 June 2022’.

[102] Plaintiffs’ Amended Statement of Claim filed 6 April 2022.


AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.austlii.edu.au/au/cases/vic/VSC/2022/347.html