In the matter of Cyprus Community of N.S.W. Limited (No 2)

1. [1]

   By Amended Interlocutory Process filed 3 February 2025, the Administrators of Cyprus Community of N.S.W. Limited seek various orders in respect of a proposed refinancing of the company’s debt.

2. [2]

   I refer to my previous judgment in this matter on 18 February 2025, which sets out the background to this application: In the matter of Cyprus Community of N.S.W. Limited [2025] NSWSC 87. I will adopt defined terms from that judgment.

3. [3]

   In compliance with the orders made on 18 February 2025, Cyprus Capital provided the Administrators, prior to 4pm on 20 February 2025, with a payout figure in respect of its facilities as at 25 February 2025. The solicitors for Cyprus Capital stated that the total payout amount in respect of all secured monies is $6,938,926.37 (the Payout Amount).

4. [4]

   In respect of this Payout Amount, Cyprus Community does not admit that the amount of $1,092,323.86 (the Disputed Amount) is payable by it to Cyprus Capital or the Receivers under the securities held by Cyprus Capital. The balance of the Payout Amount, being the amount of $5,846,602.51, is not disputed (the Undisputed Amount).

5. [5]

   Against that background, the Administrators today seek orders requiring Cyprus Capital and the Receivers to execute all documents necessary to redeem the securities, with such documents being provided to the solicitors for the Administrators and Cyprus Community by 4pm on 24 February 2025, and being held in escrow until:

   1. (1)

      the Undisputed Amount is paid to Cyprus Capital; and

   2. (2)

      the Disputed Amount is paid into the trust account of the Applicants’ solicitors in order for that sum to be paid into Court.

6. [6]

   It is proposed that the proceeding then returns for directions in relation to the Disputed Amount.

7. [7]

   Further, the Administrators and Cyprus Community seek orders that, in the event that Cyprus Capital does not comply with the orders to deliver executed copies of the documents necessary to redeem the securities, such documents be executed by a Registrar of the Court, with the Registrar in Equity being appointed to act for this purpose.

8. [8]

   Cyprus Capital has been provided with the proposed deed poll of release and discharge of mortgage. It confirmed that there is no issue with the terms or form of those documents.

9. [9]

   However, Cyprus Capital opposed the relief sought, for the reasons set out below.

Power to make orders

1. [10]

   There was no dispute that this Court has the power to make the orders sought by the Administrators. In their submissions, the Administrators identified various sources of power to compel the execution of documents.

2. [11]

   First, the Court has a general power under section 90-15 of sch 2 of the Act to make such orders as it thinks fit in relation to the external administration of a company.

3. [12]

   Secondly, Cyprus Community has an express contractual right under the terms of the facilities to redeem the securities, and Cyprus Capital is subject to an implied contractual duty to do all things as are necessary for Cyprus Community to have the benefit of its right to redeem the securities: Mackay v Dick (1881) 6 App Cas 251, Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596. This would include the release of securities upon repayment of the amount owing, and the retirement of the Receivers.

4. [13]

   Thirdly, orders may be made in aid of the exercise of a right of redemption, including interlocutory orders requiring the mortgagee to give up the mortgaged property while accounts have not been settled and the amount payable to the mortgagee has not been ascertained, provided that the mortgagee's interests are adequately protected: Rowe v National Australia Bank [2019] WASCA 140. In that case, Murphy JA and Sofronoff AJA observed at [120] that:

5. [14]

   As set out above, it is proposed that, by means of the Undisputed Amount being paid to Cyprus Capital and the Disputed Amount being paid into Court, the whole of the Payout Amount is to be paid by Cyprus Community prior to the release of the securities. The Applicants submitted that, by this means, the total amount claimed to be owing will either be in the hands of Cyprus Community or in the control of the Court, and in those circumstances orders should be made requiring the securities to be redeemed upon such steps being taken.

6. [15]

   In Equus Financial Services Ltd v RMBL Investments Pty Ltd [1996] 22 ACSR 744 (which was cited in Rowe at [120] for the propositions set out above), Bryson J made the following observations (at 748) regarding such an application:

7. [16]

   The issue which therefore arises for determination is whether the interests of justice require that an order for the release of the securities be made on payment of the Payout Amount by the means described above.

Determination

1. [17]

   Cyprus Community brought this application in circumstances where one of Cyprus Capital’s facilities was due to mature on 25 February 2025, and where Cyprus Capital had not made any offer of forbearance. Further, Cyprus Capital had indicated that it would not provide its bank account details for any payment to be made in respect of its facilities unless the whole of the Payout Amount was to be paid.

2. [18]

   Against that background, Cyprus Community submitted that it required orders to be made, in aid of the exercise of its right of redemption, for the securities to be redeemed on 25 February 2025, provided that the Payout Amount was paid by that date, by the means outlined above.

3. [19]

   In response, Cyprus Capital submitted that such a course would cause it prejudice, in that it would be giving up its securities in circumstances where further significant costs and interest may be incurred as a result of litigation in relation to the Disputed Amount, being amounts that otherwise would have been secured by those securities.

4. [20]

   It is unnecessary, for present purposes, to express any view on whether or not the securities would cover such costs and expenses or the extent to which it would cover them. The present application is able to be determined on the basis that the securities may cover such costs.

5. [21]

   In Equus, in order to address such a concern, the Court ordered that an additional amount be paid into Court to cover costs and expenses which may be incurred in litigation regarding the disputed amount. However, in that case, significantly, the debtor was impecunious, such that the creditor was exposed to a real risk in giving up its security where further costs would likely be incurred.

6. [22]

   In contrast, in the present case:

   1. (1)

      insofar as the costs are incurred in any litigation about the Disputed Amount, the Administrators will be personally liable for such costs, subject to their indemnity from Cyprus Community; and

   2. (2)

      insofar as further interest becomes due (for which the Administrators would not be liable), there is no reason to think that Cyprus Community would be unable to pay that amount. This is not a situation of an impecunious debtor. Rather, it is common ground that the assets of Cyprus Community far exceed its liabilities.

7. [23]

   In those circumstances, I do not consider that there is any need to require any further amount to be paid into Court to cover the costs of the dispute regarding the Disputed Amount.

8. [24]

   I am satisfied that the interests of justice require interlocutory orders to be made in the terms proposed by Cyprus Community. Cyprus Capital's interests are adequately protected by those orders, which will ensure that the securities are not discharged until the Payout Amount has been paid in full, with the Undisputed Amount being paid directly to Cyprus Capital, and the Disputed Amount being paid into Court by the Applicant's solicitors and thereby being subject to the control of the Court.

9. [25]

   Further, I am satisfied that there is a basis to make orders appointing a Registrar to execute the documents necessary to discharge the securities if Cyprus Capital fails to do so within a specified time. There is power to make such an order pursuant to section 94 of the Civil Procedure Act 2005 (NSW). That section provides relevantly, that if any person does not comply with an order directing the person to execute any document, the Court may order that the document be executed by such person as the Court may nominate for that purpose.

10. [26]

    It is not necessary that non-compliance have occurred before such an order is made. The Court can make an order that, if execution does not occur by a particular date and time, a Registrar is appointed to execute such a document, particularly in circumstances where it is probable that there may be a failure to comply with this requirement: see Commonwealth Bank of Australia v Dariusz Adam Gaszewski [2006] NSWSC 772 (Brereton J); referred to with approval in Thumbiran v Silver Chef Rentals Pty Ltd [2022] NSWCA 148. I am satisfied that this has been established, having regard to the past conduct of Cyprus Capital and, in particular, its repeated failure to provide a payout figure for redemption of its securities despite requests being made over the course of several months and its refusal to provide bank account details for the payment of moneys unless the whole of the Payout Amount was to be paid.

11. [27]

    Finally, the Administrators sought, in the Amended Interlocutory Process, orders requiring the Receivers to execute certain documents and take other related steps in order to effect their retirement as Receivers. In the course of the hearing, it emerged that a notice of termination had already been provided by Cyprus Capital to the Receivers. There was an issue as to when this termination would take effect. However, the Receivers indicated, through their counsel, that they were willing to proceed on the basis that this termination would take effect on 25 February 2025, and Cyprus Capital indicated, through its solicitor, that it was willing to execute a deed of termination to take effect as at 25 February 2025. In those circumstances, the Applicants did not press their application for orders requiring the Receivers to execute any documents, or take any step.

ORDERS

1. [28]

   For those reasons, I make the following orders.

   1. (1)

      on 20 February 2025 the First Respondent provided to the First and Second Applicants a payout amount (Payout Amount) of $6,938,926.37 said to have been calculated as at 25 February 2025 of the:

   2. (2)

      in respect of the Payout Amount, the Second Applicant does not admit that the amount of $1,092,323.86 (Disputed Amount) is payable by it to the First Respondent or Second Respondents under the Securities.

   3. (1)

      The First Respondent is to do all things necessary and sign all documents reasonably required by the First Applicants so that the Second Applicant can, subject to Orders 2 and 3 below, pay the Payout Amount to the First Respondent or into Court from a secured loan to be provided by Avari and redeem the Securities, including to take the steps specified in Order 3 below.

   4. (2)

      The First Respondent is to execute the following documents:

   5. (3)

      The First Respondent is to provide by 12pm on 24 February 2025 details of the bank account into which the payment referred to in Order 2(d) is to be made.

   6. (4)

      That the Second Applicant by its solicitors is to pay the Disputed Amount into Court in accordance with Order 2 above to abide any further order or the written agreement of the Applicants and the First Respondent.

   7. (5)

      That, if the First Respondent fails to execute any document in accordance with orders 1 or 2 above, that such document be executed by the Registrar of the Court.

   8. (6)

      Directs that the Registrar in Equity be appointed to act in accordance with order 5 above.

   9. (7)

      That upon each of the events specified in Order 2 (d), (e) and (f) occurring, the First Respondent must register a financing change statement with the Personal Property Securities Register removing its registrations 202408190009908 and 202408190010304 with 5 business days.

   10. (8)

       Reserves for further consideration what orders should be made with respect to the Disputed Amount.

   11. (9)

       Lists the Amended Interlocutory Process in the Corporations Directions List at 10.00am on Monday, 3 March 2025 for directions in respect of the Disputed Amount.

   12. (10)

       Costs reserved.

   13. (11)

       Liberty to apply on 24 hours’ notice.