Globe Capital Administration Pty Ltd v Cecil Developments Pty Ltd atf the Cecil Developments Unit Trust (Receivers and Managers appointed)

The point at issue in these proceedings is whether an applicant, an unregistered second mortgagee of certain development property, should have an order for preliminary discovery against a first mortgagee of the property. The mortgagor is in default to the first mortgagee and to the applicant. The applicant suspects the first mortgagee has been promoting its own financial advantage by dragging its feet in selling the mortgaged property for over 18 months, whilst default interest accrues on the first mortgage at more than $35,000 a day. The first mortgagee denies any such misconduct.

The Court here makes amended preliminary discovery orders in favour of the applicant against the first mortgagee and reserves the question of costs. But the Court doubts that this preliminary discovery contest and consequent litigation will quell this dispute either quickly or efficiently. To further the objects of Civil Procedure Act 2005, ss 56, 57 and 58, the Court invites the parties to consider the remedy of the judicial sale of the mortgaged property and gives liberty to the applicant to amend its Summons.

These proceedings were heard on 15 May 2023. Mr M. Thompson of Counsel instructed by Marcus Law Firm appeared for the applicant. Mr Somerville and Mr D. Meyerowitz-Katz of counsel instructed by Herbert Geer appeared for the respondents.

The applicant executed a form of second mortgagee and will from time to time be referred to as the second mortgagee in these reasons. But describing the applicant this way is without prejudice to the respondents’ contention that the applicant has elected not to pursue its remedies as will a second mortgagee and is merely an unsecured creditor.

The applicant, Globe Capital Administration Pty Limited ("Globe") is in the business of property development and related investment lending. The first respondent, Cecil Developments Pty Limited as trustee for the Cecil Developments Unit Trust ("Cecil") is the registered proprietor of nine parcels of land in the north-western Sydney suburb of Castle Hill, "the Castle Hill properties"). Gemi 168 Pty Ltd (“Gemi”), the second respondent, advanced loan funds to Cecil on security to aid its development of the Castle Hill properties and became the first mortgagee of that land. Gemi’s loan agreement with Cecil is not presently available to Globe or to the Court. Globe does not know the exact amount owing on Cecil's first mortgage to Gemi.

Globe advanced funds to Cecil, initially on an unsecured basis. But Cecil defaulted on Globe’s unsecured loan. As a result of Cecil’s default, in October 2020 Globe and other parties commenced proceedings in this Court against Cecil (“the 2020 proceedings”).

The 2020 proceedings settled by a Deed of Release ("the Deed") on 14 May 2021. In the Deed Cecil covenanted to grant Globe a second mortgage over the Castle Hill properties, and to do all things reasonably necessary to facilitate registration of Globe’s second mortgage, and to agree to the entry of judgment upon any further default by Cecil. Initially Gemi and Cecil disputed that Cecil had signed the second mortgage to Globe. But execution was conceded later during argument. Globe’s second mortgage from Cecil remains unregistered.

The Deed provided for a settlement sum of $17,500,000 plus GST. The Deed contained the following other relevant clauses. Clause 4 of the Deed provides as follows:

Clause 6 of the Deed provides as follows:

Clause 7 of the Deed provides as follows:

Clause 9 of the Deed provides as follows:

Globe lodged a caveat to protect its second mortgage interest in May 2021.

Cecil defaulted on its obligations to Globe again. Consequent upon Cecil’s further default on 18 August 2021 Globe took advantage of its entitlement under the Deed, clause 9 to enter judgment against Cecil for $19.25 million in the 2020 proceedings. On 18 October 2021 Globe exercised its rights under the second mortgage upon Cecil’s default, to appoint Mr Simon Cathro as a receiver and manager over the Castle Hill properties. Mr Cathro took steps to sell the Castle Hill properties to recover the debt Cecil owed by procuring marketing proposals from real estate agents and engaging a valuer to prepare a valuation of the Castle Hill properties.

A month after Globe appointed Mr Cathro, Gemi appointed receivers and managers to the Castle Hill properties under its first mortgage. On 12 November 2021 Mr David Hurst, the third respondent, and Mr David Sampson, the fourth respondent, who are from time to time referred to in these reasons as “the receivers”. Soon after Mr Hurst and Mr Sampson were appointed they informed Mr Cathero that Cecil was indebted to Gemi in the sum of $62,780,104.70.

The same day, 12 November 2021, Cecil’s sole director, Mr Marles Zhu appointed Mitchell Ball and Dominic Calabretta as voluntary administrators of Cecil. Also on the same day a company related to Gemi, GI 291 Pty Limited (“GI 291”), lodged a caveat on the title of the Castle Hill properties. Mr Zhu was the director of Cecil until 2 September 2022, when a sequestration order was made against his estate.

The voluntary administrators of Cecil held several meetings of creditors between 24 November 2021 and 2 Februay 2022. In the last meeting of creditors held on 2 Februay 2022, against the recommendation of the voluntary administrators the majority of creditors (some of whom Globe says are related to Cecil) passed a resolution to bring the administration of Cecil to an end. Gemi and GI 129 abstaining from voting.

The receivers obtained appraisals from real estate agents in about December 2021. They entered into an agency agreement with a real estate agent, Colliers, six months later, on 11 April 2022. The Castle Hill properties have not yet been publicly marketed for sale.

Globe claims Cecil and other defendants to the 2020 proceedings are presently indebted to it and other plaintiffs in the 2020 proceedings in the sum of $19.25 million plus post judgment interest pursuant to the judgment of this Court entered on 18 August 2021 in the 2020 proceedings.

Globe through Mr Cathro and its solicitors has sought multiple updates regarding the sale process in relation to the Castle Hill properties. Globe has initiated almost monthly correspondence from February 2022 seeking such information and has only received perfunctory responses at a high level of generality that give Globe little information as to what has really been going on in the sale process. The receivers declined to provide information on the basis of its confidentiality. In response Globe offered confidentiality undertakings but the solicitors for the receivers refused to agree to a confidentiality regime.

But one part of what the receivers did disclose about the sale process through their proxy later turned out to be inaccurate. The receivers indicated in February 2022 that a decision would be made about the appointment of a real estate agent to conduct the sale process prior no later than 7 February 2022. Later materials disclose that the agents, Colliers were not appointed to manage the sale process until April 2022, some five months after the receivers were appointed. The delay of five months and the incorrect information about the appointment of Colliers have not been explained. No significant public marketing campaigns of the Castle Hill properties have been identified.

Globe has also made demands for registration of its mortgage. Cecil has not facilitated its registration. Globe has sought the consent for its registration from both Gemi, the first mortgagee, and GI 291. Despite many requests neither Gemi nor the caveator GI 291 have consented to the registration of Globe’s second mortgage. It emerged in these proceedings that the respondents dispute Globe’s right of enforcement of its second mortgage because Globe has entered judgment for $19.25 million in the 2020 proceedings pursuant to the Deed. And despite many requests Gemi has failed to provide Globe with a current payout figure on the first mortgage or any information about efforts to sell the Castle Hill properties.

The proceedings started with Gemi and Cecil putting in issue of whether Cecil had executed Globe’s second mortgage. But using its powers under Civil Procedure Act s 70 the Court required the respondents to indicate whether execution of the second mortgage was genuinely in dispute. Execution was admitted in the course of argument, eliminating that issue.

Globe commence these proceedings in November 2022 and filed an Amended Summons on 27 February 2023, which sought the following relief by way of preliminary discovery:

The respondents dispute that they should give any preliminary discovery of this type to Globe.

The commencement of these proceedings has thrown up an incidental argument raised by the respondents that Globe elected to abandon its right to enforce its second mortgage, given that it has entered judgment for $19.25 million under the deed. The Court does not have to resolve this question now. The case law discussed below cautions against using a preliminary discovery application to advance to a final determinations of issues between the parties.

But Civil Procedure Act s 56, 57 and 58 require the Court to be vigilant to use Court procedures to reduce issues and address the real issues between the parties if that can be done cost effectively.

The respondents’ argument on this matter does not appear to be complex. The respondents argue that the Deed, clause 9.5 means what it says and that by entering judgment for $19.25 million in the 2020 proceedings that Globe has by reason of the Deed, clause 9.5 elected only to pursue its unsecured rights of recovery from Cecil and has disentitled itself from pursuing its other rights as a second mortgagee. The respondents argue that the words of the Deed, clause 9.5 that “the Plaintiffs undertake only to enforce the judgment contained therein”, mean what they appear to say and that that Globe and the other plaintiffs cannot enforce any remedy other than its unsecured rights on the judgment it had entered.

Globe foreshadows contesting this construction. Globe can field arguments such as that the Deed, clause 9.5 is designed to prevent Globe from pursuing any more than the money sum which with accrued interest at Court prescribed rates to which it would become entitled under the judgment and it could not continue calculate what would otherwise be due to it under the second mortgage itself. Globe would submit that far clearer words than clause 9.5 would be required for it to be held to have abandoned enforcement of all its non-pecuniary remedies under its second mortgage, which was attached to the Deed.

The issue is clearly contestable but does not appear to be more than a matter of construction of the terms of the Deed.

The applicant invite the Court to exercise its power under UCPR, r 5.3 to order a prospective respondent to give preliminary discovery. That rule provides as follows:

UCPR, r 5.3 has been extensively analysed by appellate Courts. In Hatfield v TCN Channel Nine Pty Ltd (2010) 77 NSWLR 506; [2010] NSWCA 69 at [47] – [52] (“Hatfield”), McColl JA collected the following “key principles” that govern applications under UCPR, r 5.3 for preliminary discovery:

In O’Connor v O’Connor [2018] NSWCA 214 (“O’Connor”) the Court of Appeal applied Hatfield but emphasising (at [28]) that r 5.3 imposes a lower threshold test than the Federal Court counterpart. In O’Connor (at [21]) Simpson AJA identified that five matters should appear to the Court before an order may be made against a prospective defendant under the rule. These are that:

Stevenson J applied these five criteria in Tabcorp Holdings Ltd v Entain Group Pty Ltd [2023] NSWSC 220 (“Tabcorp”) pointing out that to order preliminary discovery against a prospective defendant, all five circumstances set out in UCPR, r 5.3(1) must exist: O’Connor at [21]; Tabcorp at [35]).

As Simpson AJA identified in O’Connor at [86] – [90], r 5.3(1) presents a difficulty of construction which is resolved by taking a broad view of the operation of the section:

Once these preconditions are met, the Court has a discretion whether or not to order the respondents to provide discovery of the documents in question that are or have been in the respondents’ possession. In the exercise of this discretion the applicant’s prospects of success can be relevant and the operation of the discretion operates as a brake on any excesses that may flow from a beneficial construction of the rule: St George Bank Limited v Rabo Australia Ltd (2004) 211 ALR 147; [2004] FCA 1360 at 154 [26].

The Court of Appeal in The Age Company Ltd & Ors v Liu (2013) 82 NSWLR 268; (2013) 296 ALR 186; [2013] NSWCA 26 (“Liu”) made clear the limited procedural scope of proceedings such as this. Bathurst CJ commented in Liu that applications for preliminary discovery should not be treated as a dress rehearsal for the proceedings, and did not entitle litigants to findings on matters which would ultimately depend upon the assessment of the whole of evidence and that contested issues of fact between the parties should not be either litigated much less decided upon: Liu at [102], [104], [107] and [108].

The second requirement of making reasonable enquiries raises its own special issues. It does not follow from the mere fact that further enquiries could have been made, and would have been helpful, that the omission to make those inquiries is a failure to make reasonable inquiries: Steffen v ANZ Banking Group [2009] NSWSC 666 at [87].

The third requirement of inability to obtain sufficient information to make a decision, has not uncommonly lead to a misunderstanding on the part of the applicants. White J had to deal with just such a problem on an applicant’s application for preliminary discovery under UCPR, r 5.3 in Morton v Nylex Ltd [2007] NSWSC 562 (“Nylex”). There White J concluded that the applicant had failed to prove why the applicant was unable to obtain sufficient information to decide whether or not to commence proceedings, which led his Honour to dismiss the application. His Honour addressed the question of sufficiency of information at [33] – [34] (emphasis added):

Aspects of the argument advanced on behalf of the respondents in the present case drew upon issues of a similar character to those discussed by White J in Nylex.

Other cases are referred to in the course of the Court’s analysis of the parties’ submissions.

It is convenient to set out the applicant’s submissions in some detail in this section. The Court then deals with the respondents’ submissions in the course of its consideration and analysis of the parties’ contentions in the next section of these reasons.

Globe emphasises in its written submissions the following salient facts as founding its potential causes of action against the respondents:

Globe submitted that based on the respondent’s conduct, it had the following potential general law and statutory claims available to it.

Globe submits that it has made reasonable enquiries. It says it has made numerous attempts over 12 months to enquire into the conduct of the receivers in conducting the sale and has had no adequate response. Globe says it cannot obtain the documents it wants by other means. It says that it “cannot make an informed decision about whether or not to bring claims for relief against any of the respondents” without the documents. And it submits the prospective respondents will have the documents as the documents are documents of Gemi, the receivers or Cecil.

Globe then submits the documents it seeks are crucial to its ability to decide whether to commence proceedings against any of the respondents. It submits as follows:

The respondents answered these submissions as follows.

The respondents’ written and oral submission contend that the applicant does not meet the five indicia contained within UCPR, r 5.3 in this section. The Court considers the issue that the respondents’ contentions in relation to each of these five indicia followed by the Court’s analysis.

(1) May Be Entitled to Make a Claim for Relief. The first indicium is that the applicant may be entitled to make a claim for relief against the prospective respondent. Based on statements by Simpson AJA in O’Connor (at [30] and [70]), the respondents submit that although this indicium does not mandate the demonstration of a pleadable case, an applicant for preliminary discovery must nevertheless provide a rational basis for an entitlement to the postulated claim and some particularisation of the nature of the relief in contemplation and that an application for a preliminary discovery should be refused where the asserted entitlement to relief is so weak as to be unarguable.

Globe meets this standard here. The respondents advanced a range of arguments why a Corporations Act, s 420A case advanced on behalf Globe would not succeed. They may be right. But such a claim is not unarguable. Globe has profiled the nature of the claim sufficiently well to satisfy this first indicium.

The respondents put their argument on this first indicium another way. They submit that because UCPR, r 5.3 does not extend to obtaining documents from persons other than the prospective defendant “care must be taken to consider whether documents sought from a particular party are relevant to a claimed entitlement against that person, or whether documents are instead sought which go to claims against a different person, the latter being impermissible”. The respondents complain that no attempt has been made in the Amended Summons to draw any distinctions among the prospective defendants, and to identify which of the documents sought are relevant to which prospective defendant and why they are relevant.

This argument is not persuasive. The causes of action that Globe describes in its submissions may, if made out, create joint and several liability in the respondents or liability predicated upon one of the respondents being “knowingly concerned in” contraventions of the Corporations Act by other respondents: Corporations Act s 1324(1). The documents sought against each respondent would arguably be admissible against all respondents. It is therefore not necessary for Globe to make the kind of distinctions, which the respondents seek to draw here among respondents in preliminary discovery.

The respondents then put more specific submissions about the lack of a arguable case against each of the four respondents, Cecil, Gemi and the receivers, Mr Hurst and Mr Sampson. The arguments advanced in respect of each of those is now considered.

As to Cecil, the respondents submit that Globe does not identify any claim against Cecil and the Amended Summons should be dismissed. But to the extent there may be a claim against the receivers, there may be a claim against Cecil. The receivers were appointed out of Court pursuant to Gemi’s first mortgage. Ordinarily receivers appointed in those circumstances are the agents of the mortgagor, not the mortgagee by whom they were appointed: Conveyancing Act 1919, s 115(2) and Australian Mutual Provident Society v Geo Myers & Co Ltd (1932) 47 CLR 65. But cases such as State Bank of New South Wales v Chia (2000) 50 NSWLR 587 at [868] – [870] (“Chia”) and Bank of Western Australia v Abdul [2012] VSC 222 (“Abdul”) recognise the reality that this particular species of agency is something of a contrivance for the benefit of the mortgagee to allow it to escape liability and that notwithstanding the formal agency Courts can look at the substance of the relationships to determine what duties the mortgagee owes.

As to Gemi, the respondents say that Globe’s claims can best be described “as a conspiracy theory” postulated from “an unsubstantiated hypothesis, based on a suspicion that Gemi is conspiring with the receivers to deprive Globe of any remaining equity” in the Castle Hill properties. The “suspicion” is said to have arisen primarily by reason of “the effluxion of time”.

The respondents are advancing a straw man argument here, raising the bar for Globe’s case higher than it needs to be set. Globe does not have to establish that Gemi and the receivers have engaged in a conspiracy to injure it or that the receivers have acted in breach of their professional duty. All that Globe must establish is a failure to take “all reasonable care to sell the property” either for its market value or the best price that is reasonably obtainable: Corporations Act, s 420A.

The respondents submit that Globe does not have any claim for relief under Corporations Act, s 420A until Gemi sells the property in a manner or with an outcome that breaches the standards set by the section. But this is not correct. The authorities clearly contemplate that this duty is enforceable by injunction under Corporations Act, s 1324, if a breach of the duty is threatened: Bayblu Holdings Pty Limited v Capital Finance Australia Limited [2011] NSWCA 39 at [69]. And on terms equity will restrain an improper exercise of a power of sale before it has occurred: Artistic Builders Proprietor Limited v Elliot & Tuthill (Mortgages) Pty Ltd [2002] NSWSC at [105] et seq.

Moreover, Globe relies not just upon “the effluxion of time”, as the respondents characterise it. Globe relies on the following further matters against Gemi and the receivers: misleading Globe about the appointment of agents, excessive delay, no external evidence of the marketing of the Castle Hill properties, and failure to provide basic information about the sale process on request from a subsequent mortgagee. These matters could be the external evidence of a breach of Corporations Act, s 420A by those in control of the sale of the Castle Hill properties. Far more would need to be established to make out such a case but those identified factors are a reasonable start for preliminary discovery purposes.

There “may be” a cause of action against Gemi within the first indicium based on this material but it would be necessary for Globe to prove a degree of control of the sale on Gemi’s part to raise a case of Gemi’s participation in a breach of s 420A or as a principal of the receivers in the conduct of the sale, notwithstanding the formal agency that exists between the receivers and Cecil. The determination of this question is ultimately a matter of fact, which will be based upon the range and intensity of the actual communications that took place between Gemi and the receivers in relation to the conduct of the sale. Einstein J in Chia, at [885] and Croft J in Abdul, at [41] explained that the communications between the mortgagee and the receiver may show the mortgagee was in fact “heavily involved” in the sale process and was “so intimately involved in the performance of the receivers’ activities as to transform the character of the relationship between the mortgagee… and the receiver into one of principal and agent”.

As to the receivers, the respondents submit that any case against the receivers must be speculative because it is highly unlikely that independent professionals such as the receivers would have engaged in conspiratorial conduct of the kind alleged. But the Court does not need to dwell upon the probabilities or improbabilities of such professional misconduct. In deciding whether to grant relief based upon a mortgagee such as Gemi taking control of the sale process, the Court only needs to look at the degree of Gemi’s actual control over the sale process. And that will be evidenced from the communications between Gemi and the receivers. It is quite plausible that without any professional misconduct on their part the receivers may in fact submit to degree of practical direction from the mortgagee in conducting the sale process.

Globe does not have to prove some “direction” to “go slow” from Gemi to make out this kind of case. An accumulation of poorly grounded prompts by Gemi, to the effect that the receivers could take a longer route to sale rather than a shorter route, may be enough to establish the case that Globe seeks to make out. An invitation to the receivers to take their time may be far more nuanced than a “direction” in the context of a commercial structure in which default interest runs at 21.5% per annum into ample equity.

The respondents submit that this “statutory claim is entirely speculative and prospective” and relies upon “cascading contingencies” which do not rise higher than “mere suspicion”.

The respondents describe Globe’s complaints of slowness as Globe imposing a “unilateral time frame” on the sale process, which it has not defined or disclosed. It can be accepted that the Castle Hill properties are likely to attract a limited number of interested commercial buyers capable of acquiring them. But the lack of evidence of external marketing for 18 months nevertheless requires explanation and cannot be characterised merely as “Globe’s unilateral time frame”.

On the known facts it takes little to infer, if there is substantial equity in the Castle Hill properties, that Gemi will benefit from doing little or nothing. Some available evidence suggests that the Castle Hill properties had a valuation of $197 million in February 2020. Cecil’s indebtedness to Gemi in November 2021 was $62,780,140.70. Counsel for the respondents submitted the applicable default interest rate under the first mortgage was 21.5 per cent, meaning that if simple interest that annual rests accrued the annual interest bill would be $13,499,872 or a daily interest accrual of $36,985.95. Globe argues that this is a handsome reward for Gemi beingf a slow moving first mortgagee.

The respondents submit that Globe’s contentions “exemplify the type of speculative approach expressly disavowed at well-established authority” citing O’Connor at [27] – [30]. But the Globe’s particularisation of this claim does not warrant criticism on the basis of the application of O’Connor. Simpson AJA said in O’Connor at [30] the following:

Here Globe has provided some particularisation of the nature of the relief in contemplation. In the Court’s view it is sufficient to form a view about whether Globe may be entitled to make a claim for relief.

(2) Has made Reasonable Enquiries. The respondents admit that at least two of the categories of documents being sought should be available on public records or through a public process in which the applicant has participated. These two categories are the terms of Gemi’s first mortgage and the Cecil DOCA.

Preliminary discovery should not place the cost burden on a respondent of searching for, identifying, copying, and transmitting to the applicant, documents which are readily searchable on public records or through public processes. The fact that the documents are likely to be findable through public sources or processes but have not been obtained before the preliminary discovery application was made, suggests at least to a prima facie level that reasonable enquiries have not been made in respect of the documents in question.

All the other documents sought in the summons are now in the possession of Cecil, Gemi or the receivers and are not publicly available. Globe has made ample enquiries of the respondents for access to these documents and has done so on many occasions in a reasonable fashion and describing the documents sought with sufficient particularity.

(3) Unable to Obtain Sufficient Information to Decide. There are many elements to making out an action under Corporations Act, s 420 A. The discussion above in relation to indicium (1) covers the range of issues over which documents would need to be examined to decide whether to commence proceedings. Globe has not been able to obtain or inspect most of these documents which are critical to any decision about whether to commence proceedings. The range of documents is discussed in more detail below in relation to indicium (5) and the form of the prayers for relief.

(4) The Respective Respondent May have Possession of a Document. The respondents have not denied they have documents of the kind requested. Moreover, it is apt for the Court to infer from the nature of the categories requested that the documents are likely to be in the possession of the respondents.

The respondents also argued that Globe cannot complain that Gemi has not given it commercially sensitive information regarding the progress of the sale process, because there is no obligation on a first ranking secured creditor to provide such information to the documents and other information requested.

This contention is correct as far as it goes. It is true that there is no such obligation. But some of what Globe has requested of Gemi could have been provided in summary form or in a manner that minimised the disclosure of confidential information.

The Court can make orders about the handling of commercially sensitive information, including offers made in the past for the acquisition of the Castle Hill properties. Although perhaps the most commercially sensitive information in question here would be in relation to existing offers in relation to the Castle Hill properties. All of these may be able to be disclosed under specific protocols to preserve necessary confidentiality. The Court will provide an opportunity the parties to agree upon such protocols before preliminary discovery takes place.

The respondents can rely upon the implied obligation that strictly limits the use that Globe can make of information obtained through compulsory processes of Court, which include preliminary discovery: Hearne v Street (2008) 235 CLR 125, [2008] HCA 36, Hayne, Heydon & Crennan JJ [96]. If the respondents wish to propose a reasonable regime for quarantining that information then the Court will consider it. Directions have been made to this effect in the orders today.

(5) Inspection of such a document would assist deciding whether to commence proceedings. This indicium is best addressed by reference to the precise form of the prayers for relief seeking different categories of documents. The respondents take issue with the form of the Amended Summons, contending that its prayers for relief are too wide. There is merit in this argument. The relief sought needs to be modified in several respects.

The introductory words to the relief sought in the Amended Summons are far too wide. They have been a major stumbling block for the respondents in resisting the present claim and with good reason. However beneficially UCPR r 5.3 is construed, applicants for preliminary discovery are seeking an exercise of judicial discretion and must always seek to limit unnecessary oppression to respondents in what can be an intrusive remedy if not limited. The introductory words that “the defendants give discovery to the plaintiff of any document or thing in their possession, custody or power relating to or concerning any of the following matters” transfers to the respondents the burden of working out which documents concern the various subject matters. That may be an appropriate formula when issues have been joined on pleadings.

But this formula can place an unfair burden upon respondents in preliminary discovery applications, when something less intrusive is available. The formula that the Court has therefore used in the orders below is to delete from the introductory words the words “relating to or concerning any of the following matters” and only to require the production of documents that record activities that can be defined with some precision. In the Court’s view the respondents were entitled to resist the orders sought in their original unamended form, a matter which may well go to the consideration of issues of costs.

As to prayer for relief 1(a) the respondents submit that this category calls for documents which could not sensibly be suggested as necessary to determine whether to bring proceedings.

This criticism is valid. This prayer for relief will need to be read down. All Globe needs to decide about commencing proceedings is the full terms of the primary loan agreement founding Cecil’s liability to Gemi. But if this is available by a public search of the Register maintained under the Real Property Act 1900, Gemi, which would otherwise be the primary party required to produce it, will not be required to do so.

As to prayer for relief 1(b), the claim for production of all valuation reports is too wide. The respondents correctly point out that the applicant could easily obtain information as to the valuation of the property without resorting to preliminary discovery, by commissioning its own valuations and indeed Mr Cathro appears to have engaged a valuer during his appointment. In the absence of more detailed evidence the Court will assume that valuation is already available to Globe.

Globe seeks to decide now whether to commence proceedings. The economics of the decision to do so are likely to be driven by the current valuation of the property. For that purpose, all Globe needs is the most current valuation of the Castle Hill properties available to the respondents. Each of the respondents may have obtained recent valuations and they should all be subject to this order.

The respondents other answer to this category is not compelling. It is not enough to say that Globe is a property developer and can obtain its own valuations to make its decision to commence proceedings. The respondents will have information relevant to and insights into valuation issues that are not presently available to Globe. If for example the respondents become aware that there is some undisclosed and not readily ascertainable impediment to the development of the Castle Hill properties which depresses their valuations, the respondents valuations will be useful guide to commencing proceedings than Globe’s valuations.

The respondents cannot plead that they are being treated oppressively or unfairly by being required to disclose their own valuations in this way. As the discussion in the next section of these reasons shows, Globe would be entitled to subpoena these valuations on an application for judicial sale of the Castle Hill properties.

Whilst it is true that earlier valuations may be relevant to assessing Gemi’s conduct and the receivers’ conduct of the sale, even when considering the past, the more relevant information to have available to decide whether or not to commence proceedings now is correspondence referring to and showing the respondents’ knowledge of the valuations.

As to prayers for relief 1(c) and 1(d), in relation to the engagement of Colliers and the receiver’s appointment of real estate agents and other efforts to market and sell the Castle Hill properties, including through Colliers is an important part of the request and is reasonable and will be permitted. The respondents argued that these requests represent a “Trojan horse” for Globe’s wider unsubstantiated conspiracy allegations. But the Court has already rejected the respondents’ contentions about conspiracy allegations when dealing with indicium (1) above.

As to prayer for relief 1(e), the respondents object to these documents being made available based on their commercial sensitivity. That invites examination of their necessity for the applicants’ decision to commence proceedings. And if they are disclosed whether they should be subject to a non-publication order or a confidentiality regime to cure any issues of commercial sensitivity.

It is not difficult to understand the relevance of these documents, as indicative offers or expressions of interest which were not followed up by the receivers may be an indication of an attitude on the part of the receivers towards their task. Similarly, it can be seen that “instructions and directions provided to Colliers” if they exist, may be relevant to a kind of possible claim that Globe foreshadows, which is discussed in indicium (1) above. These documents could not be obtained by reasonable inquiry because of the position that has been taken by the respondents.

As to prayer for relief 1(f), the respondents complain that there is no evidence that enquiries have been made in the voluntary administration of Cecil regarding the DOCAs. It is noted that Globe is a creditor of Cecil and has attended each of the creditor’s meetings during the voluntary administration and is likely to have received the DOCAs proposed.

The respondents have a point here. The position is much the same as in relation to the terms of Gemi’s first mortgage and the Court will not order the DOCAs be disclosed, if they are available through any public process. Again, as with the terms of Gemi’s second mortgage, if Globe has already received or the opportunity to receive a DOCA from the voluntary administrator by means of a generally available right such as is conferred under the Insolvency Practice Rules (Corporations) (Cth) 2016, r 70-10, the court will not impose the burden on the respondents of having to produce such a document at their expense.

The Civil Procedure Act, ss 56, 57 and 58 affirm the public interest in bringing civil litigation to an end justly, quickly and cheaply. This was once commonly expressed in a latin maxim, interest rei publicae ut sit finis litium. The public interest behind these statutory provisions is multifaceted. It includes aspects of the public interest such as the reduction of social tension that might otherwise lead to violence due to unresolved disputes and the opportunity for resolving disputes when memories are fresh and material evidence is available. This public interest also informs the doctrine of estoppel and the judicial doctrine of stare decisis and the passing of limitation acts.

But where, as here, land is the central subject of the dispute, an aspect of the relevant public interest can also be the advantage of releasing land from sterile disputes to promote its development to the advantage of the public. Civil Procedure Act 2005, ss 56, 57 and 58 prompt the Court to consider this aspect of the public interest in this dispute.

Provided Globe can establish that it holds an enforceable charge over the Castle Hill properties. The use of the remedy of judicial sale may bring the real issues in dispute between these parties to a conclusion more quickly than the kind of legal action contemplated by this preliminary discovery application. Globe’s discernible objective is to conserve and realise the equity in the Castle Hill properties as soon as it can. If there is a deficiency in that equity, that may involve bringing action against Gemi for its alleged misconduct through the remedies that were being posited as the basis of the present preliminary discovery application. Realising Globe’s equity would be incidental to those remedies.

But judicial sale may be a faster remedy. Judicial sale would aim directly at realising Globe’s equity, and would not require Globe to prove misconduct by Gemi or other respondents. If Globe further amends its Amended Summons and establishes that it holds a second unregistered charge over the Castle Hill properties, Globe can apply for the discretionary remedy of judicial sale. Incidental to Globe’s exercise of that right it is entitled to know the available equity in the Castle Hill properties.

The essential features of remedy of judicial sale at the suit of an unregistered second mortgagee were comprehensively described by Campbell J, as His Honour then was, in King Investment Solutions v Hussain (2005) 64 NSWLR 441; [2005] NSWSC 1076 (“King”). Some of these features that are relevant to the present case may be summarised as follows:

A disadvantage of judicial sale from Globe’s perspective is that unless the first mortgagee, Gemi, consents a sale must take place subject to Gemi’s mortgage which is likely to be an unattractive commercial real estate offering. But once an order for judicial sale is in contemplation and where the Court may place the conduct of the sale in the hands of a second mortgagee, a first mortgagee can be motivated to give consent to the sale of the whole property, or be galvanised into the more rapid exercise of its own power of sale to keep control of the sale process: see for example, Sood v Christianos [2008] NSWSC 1087.

The Court will provide an opportunity to the parties to consider the possible advantages of this remedy more closely before finalising these proceedings. The Court will therefore grant leave to Globe to further amend its Amended Summons within 7 days to seek judicial sale of the Castle Hill properties, if it is so advised.

If the amendment is made the Court may perhaps first determine, the limited issue arising from the proper construction of the Deed: whether Globe’s second charge over the Castle Hill properties is not enforceable because Globe has elected to enter judgment against Cecil for $19.25 million pursuant to the Deed.

The issue of the proper construction of the Deed and Globe’s entitlement to enforce a second mortgage should be resolved in less than two hours of argument, or perhaps even on written submissions. In making this estimate the Court assumes this issue is one of construction only and does not involve any contested questions of fact.

If that issue is resolved in Globe’s favour, then the Court can consider the parties’ respective submissions in relation to judicial sale, including any ancillary orders for production of valuations and the ascertainment of the amount currently outstanding on the mortgage. And if Globe does not wish to pursue judicial sale remedies, the issue of the enforceability of Globe second mortgage will nevertheless be resolved before other proceedings are commenced.

If that issue were to be resolved against Globe, then the proceedings can be dismissed and Globe will be left to pursue any remedies as an unsecured creditor it can discern, arising out of the documents obtained from this preliminary discovery application.

Finally, in the light of the respondent’s admission that Globe’s second mortgage was validly executed by Cecil, once the argument that Globe has elected to pursue its unsecured rights rather than its second mortgagee is resolved, there seems to be no good reason also why Globe’s second mortgage should not also be registered.

Therefore in the interests of reducing issues and determining the real issues in dispute between these parties there seems to be good reason why upon an appropriate amendment to the Amended Summons, the Court should now make an order for the registration of Globe’s second mortgage. Apart from the construction issue, why there should be any other delay in registration of Globe’s second mortgage is not presently obvious to the Court. Globe’s interest in maintaining a second mortgage was protected by a caveat lodged in May 2021. This caveat would appear to have priority over GI 129’s caveat. If the respondents dissent from that course being taken the parties should have an opportunity to put short arguments on the issue.

The question of who will pay the costs of these proceedings will be reserved until Globe decides whether or not it wishes to further amend its Amended Summons. The parties are encouraged to agree upon an appropriate costs outcome in relation to the preliminary discovery application. The parties should be mindful that neither party has had complete success and that costs orders in preliminary discovery cases often need to take account of what happens in any later proceedings that may be commenced as result of the preliminary discovery: BCG Securities (Australia) Pty Ltd v Shillington (No. 2) [2022] SWSC 807 and Gooley & Ors v Breda Pty Ltd [2017] NSWSC 1505.

The Court will appoint a date for further directions and any costs argument on Friday, 9 June 2023. If the applicant does not further amend the Amended Summons pursuant to the liberty granted, and if the parties cannot agree upon costs, then the parties should provide a written outline of submissions about costs at least the day before the appointed directions hearing on 9 June 2023. If that date is not suitable then the legal representatives of the parties should contact my associate with a view to fixing an alternative convenient date.

For these reasons the Court makes the following orders and directions: