DTT Group Pty Ltd v The Trust Company (PTAL) Ltd

HIS HONOUR: This morning I was approached by the plaintiff for urgent orders to restrain an auction of a property at Clovelly Road, Coogee then said to take place at about 10am. Subsequent communication suggested that the auction may take place at 10.30am.

Mr McDonald of counsel appeared before me urgently this morning from approximately 9.48am with a form of summons and Short Minutes of Order and affidavits of Danny Mikhail and Jayden Mikhail both dated today. There is an exhibit to the affidavit of Danny Mikhail. The defendant is the lender mortgagee of moneys to the plaintiff.

On 2 August 2022 a Deed of Forbearance (Deed) was entered into. The Deed is in the exhibit. The forbearance purpose was to allow the borrower further time to pay what is described as the secured moneys. The relevant breach is described as failure to pay the secured moneys when due. The amount said to be owing as at 15 July 2022 is $12.177 million approximately.

The lender support conditions are set out on page 2 and 3 of the Deed, the “provisions” of the Deed contain a clause 4 headed "Lender may terminate lender support":

It is said that on 13 October 2022 there was correspondence between Danny Mikhail (general manager of plaintiff) and Tim Stoyles relevantly on the part of the mortgagee which gave rise to an arrangement to vary the Deed. An email was sent on 13 October 2022 at 7.20am in the following terms:

It is not entirely clear from the evidence what happened between that time and 25 October 2022. Nonetheless, on 25 October 2022 at 8.20am it seems that Danny Mikhail sent a further email to Mr Stoyles making reference to a number of investors who had asked if the arrears payment is made and a debt reduction is made, whether the mortgagee would give consideration to extending the facility. The email stated:

The response of Mr Stoyles on 25 October 2022 at 8.33am indicated that he would need to get investor approval for any extension. The email indicated the auction campaign seemed to be going well so (at that stage) all he could commit to is that if there was payment of the full arrears, the loan would no longer be in default and then the auction would be withdrawn. The response was as follows:

On 3 November 2022 at 11.02am Stephanie Jin, on the part of the defendant, a special counsel with Summer Lawyers, sent an email to Patrick Yazbeck, the solicitor for the plaintiff as follows:

The email asserted that there had been breaches of the Deed and that the full amount owing, which I understand to be at least a sum of $12 million or more, was due for payment. The email made reference to clause 4 of the Deed, asserted a termination event had occurred, being the failure to list and sell the Coogee property by the stipulated time and indicated that should the termination event not be remedied by the payment of the secured money in full within seven days, the lender's support would be terminated.

Following Mr McDonald appearing before me this morning, I requested an email be sent to Ms Jin to have some input from the defendant in relation to the matter. Ms Jin engaged Mr Martin of counsel. Mr Martin has appeared before me by audio-visual link. He has had an opportunity to place submissions before the Court in relation to the matter.

An affidavit of Ms Jin sworn during today’s hearing has been provided to me.

Without being critical, I note that apart from referring to the possibility of phone conversations, neither party is really able to assist me as to what, if any, correspondence took place between 25 October 2022 and 3 November which prompted the email of Ms Jin.

Mr Yazbeck responded to Ms Jin's email at 1.05pm on 3 November:

There was further correspondence on 4 November in which Mr Yazbeck emailed Ms Jin at 11.14am as follows:

Mr Yazbeck argued a position in relation to what he described as the purported termination notice. Ms Jin responded on 4 November at 11.31am indicating that her client's position had not changed. Mr Yazbeck, on 9 November, sent an email to Ms Jin putting the plaintiff on notice of certain matters stating:

It is not clear to me what, if any, communications there were between 4 and 9 November.

On 9 November at 12.59pm Ms Jin responded by email to Mr Yazbeck in the following terms.

The email rejected the claims of the invalidity of the notice, but asserted that unless a payment of $593,258.66 was made to the Summer Lawyer's Trust Account before 10am in the morning, the auction would proceed with a reserve determined by the defendant.

There was further correspondence between Mr Yazbeck and Ms Jin yesterday afternoon. At 3.26pm Mr Yazbeck wrote:

Ms Jin replied at 4.51pm as follows:

Mr Yazbeck replied at 5.24pm stating:

Mr McDonald argues that the email of Ms Jin on 3 November 2022 was essentially invalid. He says that the asserted breach in the email, being the failure to list and sell the Coogee property by the stipulated times, is not a failure and that the stipulated time for the sale of the Coogee property in context must have been today, 10 November. He asserts that the effect of Ms Jin’s email was that in a context where the plaintiff was seeking funding from a number of people, the plaintiff was obliged to disclose to some of the potential funders that a breach notice had issued.

The affidavit of Danny Mikhail sets out that he called a number of people being Rahni Inaty, Tony Antonios and Benjamin Lin, and had a conversation with them. Details of the conversations are set out in Mr Mikhail's affidavit as follows.

Mr Martin, who has only had a very brief opportunity this morning to be instructed and consider the matter says that irrespective of the variation arrangement, the arrears of $593,000 was in any event required to be paid by this morning.

During discussions with Mr McDonald, it became clear that amount would not be able to be paid prior to the auction and indeed the inherent likelihood is also that it would not be able to be paid for at least another three to four weeks.

Ordinarily, to restrain a mortgagee sale there is a requirement for moneys to be paid into Court. The principles are addressed in a number of decisions including a decision of E & P Developers Pty Ltd v DJ Capital Solutions Ltd [2005] NSWSC 1110; (2005) 12 BPR 23,193 by Brereton J, as his Honour then was, and a decision of White J, as his Honour then was, in Starceavich v Swart & Associates Pty Ltd [2006] NSWSC 960; (2006) 12 BPR 23,639. Both decisions refer to the judgment of Sugarman J in Harvey v McWatters (1948) 49 SR (NSW) 173.

In an “ordinary case” if a mortgagor is to restrain a mortgagee's power of sale, the mortgagor must pay into Court the amount sworn to by the mortgagee as the amount owing or a lesser amount if it appears from the terms of the mortgage instrument that a lesser amount is due.

There is some discussion in the decisions of White J and Brereton J about what is an ordinary case and what is a case out of the ordinary. There appears to be no hard and fast rule that the entirety of the amount due must be paid. However, ordinarily it is a very powerful consideration that the amount that is said to be in arrears be paid.

I did wonder whether there was an issue regarding service of a notice under s 57(2)(b) Real Property Act 1900 (NSW). However, Mr McDonald indicated to me earlier in the hearing that such a notice had been issued.

It seems to me that conceptually there is some dispute over the interpretation of what arrangements there were between the parties.

It is regrettable for such large sums of money, being the sum of $12 million or more, that is said to be the extent of the facility and the sum of almost $600,000, being the amount of default, that the parties appear to have left it to e-mail correspondence to formalise their arrangements with one another.

There is certainly one of view of the e-mail of Ms Jin sent on 3 November 2022 at 11.02am that it was not a termination in and of itself but a form of notice of what might happen if moneys were not paid by this morning.

The plaintiff had an opportunity up to 25 October 2022 to arrange for payment of moneys.

It seems uncontested that at least by that time no such arrangements had been effected.

I am not strongly persuaded by the argument that the defendant has engaged in any misleading conduct as alleged or asserted by Mr McDonald.

I can accept for the moment that relief might be given if, rather than requiring payment of the full amount of the secured moneys, being the figure of $12 million, at least two conditions were imposed, first, an undertaking as to damages in relation to the proposed injunctive relief and secondly, a payment to the defendant of the $593,000 amount.

Mr McDonald has indicated to me that there is no prospect that such moneys would be paid prior to the auction.

During the course of the debate this morning in Court, I was informed by Mr Martin that the auction would be deferred until 11.30am and I had the opportunity of engaging Mr Martin and Mr McDonald in debate about the above matters.

By 11.30am I was informed, through Mr McDonald, that the auction had in fact started to commence.

I have found the matter troubling to deal with. It is regrettable that in circumstances where the e-mail that is the subject of dispute was sent on 3 November, and even as late as last night there was correspondence between the parties about the matter, it was not until just before Court would ordinarily start this morning that I was approached to deal with the matter.

Nonetheless, it seems to me in attempting to fairly balance the interests between the parties, and having regard to the balance of convenience, that at the very least it is appropriate if any injunctive relief is to be granted, to require that payment of the arrears be made and an undertaking as to damages be given.

In light of the indication that no such payment is be able to be made, I decline to give the relief sought by the plaintiff.