Jaken Properties Australia Pty Ltd v Anthony Naaman

1. [1]

   Before the Court is a notice of motion filed on 15 November 2023 by which the applicants seek to set aside certain asset preservation orders made by the Court on 3 November 2020 and on 24 March 2023 and also the removal of a caveat lodged on the title to the land on which the Royal Hotel Granville is situated by Mr Anthony Naaman, the defendant and cross-claimant in these proceedings.

2. [2]

   The applicants on the motion are the plaintiff, Jaken Properties Australia Pty Ltd as trustee for the Sly Fox Family Trust (Jaken), Peter Sleiman, Tony Sleiman and certain persons referred to in paragraph 1 of the notice of motion as the “Drawdown Parties”, including Powerhouse Corporation Pty Ltd (Powerhouse) and RHG Nominees Pty Ltd (RHG Nominees) which is the registered proprietor of the land on which the Royal Hotel Granville is situated. Each of the applicants (apart from one, Mr Jake Sleiman) is either a party to these proceedings or to the related proceedings 2022/310019 commenced by Mr Naaman in October 2022.

3. [3]

   The persons named as defendants to the notice of motion are Mr Naaman and National Australia Bank Limited (NAB). The plaintiff informed the solicitors of NAB of the date of the hearing of the Notice of Motion who replied that they were not instructed to appear at the hearing, but rather would attend as an observer only. The Court was informed at the hearing that there was a representative of NAB present in court.

4. [4]

   A number of issues in these proceedings were determined by Kunc J in the decision reported as Jaken Properties Australia Pty Ltd v Naaman [2022] NSWSC 517 (Primary Judgment). The applicants bring the notice of motion on the basis that the overturning by the Court of Appeal of a number of the orders made by the primary judge constitutes exceptional circumstances justifying the relief sought.

Relief claimed

1. [5]

   The Notice of Motion seeks the following principal relief:

2. [6]

   The “Drawdown Parties” referred to prayer 1 are Powerhouse Corporation Pty Ltd, RHG Nominees Pty Ltd, RHG Properties Pty Ltd, Connells Point Holdings Pty Ltd, Angela Michael, Jake Sleiman, Grand Royal Nominees Pty Ltd, RGH Trading Pty Ltd, Hotel Grand Holdings Pty Ltd and Royal Granville Operations Pty Ltd (being the fourth to thirteenth applicants respectively).

3. [7]

   The orders made on 3 November 2020 referred to in prayer 1(b) are set out Jaken Properties Australia Pty Ltd v Naaman [2023] NSWSC 268 (the March Judgment) at [12] and are relevantly as follows (November Orders):

4. [8]

   The orders made on 24 March 2023 following the March Judgment which are referred in prayer 1(c) are relevantly as follows (March Orders):

Change of circumstances

1. [9]

   Since the November and March orders were made, the appeal from the decision of the primary Judge, Kunc J, has been determined by the Court of Appeal: see Jaken Properties Australia Pty Ltd v Naaman [2023] NSWCA 214 (1st CA Decision) and Jaken Properties Australia Pty Ltd v Naaman (No 2) [2023] NSWCA 254. The Court of Appeal set aside some of the answers given by Kunc J to the questions set out in the Primary Judgment and a number of orders made by his Honour on 1 July 2022.

2. [10]

   The High Court granted special leave to appeal from the decision of the Court of Appeal on 8 February 2024, limited to the question of whether the Court of Appeal erred in concluding that Jaken as successor trustee did not owe a fiduciary duty to the former trustee not to deal with trust assets so as to destroy, diminish or jeopardise the former trustee’s right of indemnity or exoneration from those assets.

3. [11]

   The basis for the application before the Court to discharge the March and November orders is that there has been a relevant change in circumstances as a result of the Court of Appeal’s decision. That change was identified in the submissions for the applicants as follows:

Background

1. [12]

   Mr Naaman has a judgment debt for $3,446,755.55 against Jaken Property Group Pty Ltd (JPG) as trustee of the Sly Fox Family Trust (Trust) which he obtained in 2016. It is not in dispute that he is entitled through subrogation to the right of JPG to be indemnified out of the assets of the Trust. JPG was replaced as trustee of the Trust by Jaken in 2007.

2. [13]

   In September 2014, Jaken and Powerhouse entered into a number of transactions which were referred to by the primary judge as the “$3.6 Million Drawdown” and are summarised in the March Judgment at [15(21)]. The transactions are described in more detail in the 1st CA Decision at [169]–[177].

3. [14]

   In December 2019, Powerhouse (and a related entity) entered into a transaction by which they sold the property known as the Kings Head Tavern and the associated business assets for a total price of $27 million to a third party and, in an interconnected transaction, RHG Nominees (and related entities) entered into a transaction whereby RHG Nominees acquired the property known as the Royal Hotel Granville and RHG Trading Pty Ltd acquired the associated business assets, for a total purchase price of $51 million. These transactions are summarised in the March Judgment at [15(29)].

4. [15]

   The November Orders and the March Orders relate to the transactions described in the previous paragraph:

5. [16]

   Mr Naaman’s claims in the proceedings before Kunc J and dealt with in the Primary Judgment include that: (a) various transactions entered into by Jaken, including the transactions referred to as the “$3.6 Million Drawdown” were in breach of Jaken’s fiduciary duty to JPG, giving JPG (and through the right of subrogation, Mr Naaman) a proprietary remedy against the parties who knowingly received or participated in that breach of duty under either or both limbs of Barnes v Addy (1874) LR 9 Ch App 244; (b) the “$3.6 Million Drawdown” transaction involved an alienation of property in breach of s 37A of the Conveyancing Act 1919 (NSW) and was rendered void under that section.

6. [17]

   In October 2022, Mr Naaman commenced new proceedings against the parties involved in the transactions in December 2019 relating to the Kings Head Tavern and the Royal Hotel Granville claiming that they were effected with the intention to defraud creditors and are voidable pursuant to s 37A of the Conveyancing Act, and were in breach of Powerhouse’s fiduciary duty and that RHG Nominees and RHG Trading Pty Ltd knowingly received that property obtained in breach of Powerhouse’s fiduciary duty and hold the Royal Hotel Granville and its associated business assets on constructive trust for JPG (to which rights Mr Naaman is subrogated).

7. [18]

   At the time of the March Judgment, Mr Naaman had findings of Kunc J in the Primary Judgment which supported the claims referred to at [16] above. In the March Judgment I concluded at [45] that he had a seriously arguable case in respect of the claims referred to at [17] above.

8. [19]

   On 8 September 2023, the Court of Appeal allowed Jaken’s appeal in part. Relevantly for present purposes, the Court of Appeal decided two issues in favour of Jaken. First, it was held by majority (Leeming JA with whom Kirk JA agreed; Bell CJ dissenting) that while JPG as a former trustee of the Trust has at all relevant times had a proprietary interest in the assets of the Trust, taking priority over the rights of the beneficiaries, the successor trustee (Jaken) did not owe a fiduciary obligation to JPG not to deal with the assets of the Trust so as to destroy, diminish or jeopardise the former trustee’s right of indemnity or exoneration from those assets: 1st CA Decision at [141], [228]. As noted above, the High Court has granted Mr Naaman special leave to appeal on that question.

9. [20]

   As a consequence of the Court of Appeal’s conclusion that no fiduciary obligation was owed by Jaken to JPG, it followed that the findings in the Primary Judgment against the recipients of the property of the Trust transferred in breach of fiduciary duty could not stand. In effect, the only remedies available to JPG in aid of its right of indemnity for liabilities properly incurred by it as trustee against assets of the Trust, to which Mr Naaman was subrogated, are judicial sale and the appointment of a receiver to the property of the Trust (and associated interlocutory relief): 1st CA Decision at [116], [121], [141] and [228]. However, this conclusion is subject to the outcome of the High Court appeal.

10. [21]

    Second, it was held unanimously by the Court of Appeal that the findings in the Primary Judgment that the “$3.6 Million Drawdown” involved a transaction which was voidable under s 37A of the Conveyancing Act could not stand for two reasons. The first was that the description of the transaction in this way was insufficiently precise to enable the identification of the relevant “alienation of property” required by s 37A: 1st CA Decision at [210]–[218]. However, Leeming JA accepted that it would be open to conclude that there was an alienation of property to which s 37A applied: [215]–[216].

11. [22]

    The second reason was that the application of s 37A to the “$3.6 Million Drawdown” should not be determined finally in the absence of NAB, which as the lender to the transaction was potentially affected by the application of s 37A to it and was entitled to be heard against a claim by Mr Naaman or JPG that a contract between NAB and Jaken was voidable: 1st CA Decision at [210], [220].

12. [23]

    The Court of Appeal held that the matter should be remitted to the Equity Division for the determination of both of these issues concerning s 37A and all remaining issues. In relation to the remitter, Leeming JA said at [224]: “…the bank will be entitled to be heard, including on such evidence as it is minded to adduce, on (a) the finding that the “$3.6 Million Drawdown” was an alienation of property to defraud creditors, and (b) whether any orders should be made consequent upon that finding”. The observation in (b) as to whether “any orders” should be made consequent upon any finding that there was an alienation of property to which s 37A applied appears to be a reference to the earlier observation made at [192] that if NAB takes priority over Mr Naaman exercising his right of subrogation and the bank is not fully repaid, then nothing would turn on the claim relating to the $3.6 Million Drawdown. His Honour took this matter up again at [217], where he stated that “as previously noted, it may well be that the matters addressed above are entirely academic”.

13. [24]

    These observations relate to the fact that NAB has a claim against Jaken and Powerhouse for an outstanding debt in excess of $3.6 million secured by unlimited first-ranking fixed and floating charges given by Jaken and Powerhouse to NAB in 2011, each securing the repayment of the other’s indebtedness to NAB. It is not in dispute that the effect of the $3.6 Million Drawdown transaction was that Jaken’s indebtedness to NAB increased by $3.6 million and Powerhouse’s indebtedness decreased.

14. [25]

    In 2021, NAB exercised its power of sale over the assets of Jaken, the most significant of which was O’Malley’s Hotel (referred to as the Kings Cross Property in the March Judgment). The sale proceeds did not fully discharge the amount owing to NAB. It appears that as at 16 November 2023, the outstanding balance owing to NAB was $3,674,075 and it can be expected that this will have increased since that date as a result of accruing interest. There is the potential therefore for Mr Naaman’s claim against Powerhouse (and subsequent transferees of the property of the Trust) will be defeated by the priority conferred on NAB by its first ranking charges.

15. [26]

    However, there is a live issue between Mr Naaman and NAB as to whether NAB had actual notice of the caveats which had been registered by each of JPG and Mr Naaman prior to the $3.6 Million Drawdown transaction so that Mr Naaman would take priority over NAB under the rule against tacking: Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293. Mr Naaman has brought proceedings in this Court against NAB (2020/00260302) claiming that he does have priority over NAB under the ruling against tacking, on the basis that it had actual notice of the two caveats, which NAB denies in its defence. No evidence has been filed in relation to these proceedings between Mr Naaman and NAB. In my view, the Court cannot, and should not, on this interlocutory application attempt to form a view either way on the matter, particularly as it turns to a significant extent on a factual dispute and was only referred to in passing by the Court of Appeal.

16. [27]

    It is also relevant that the Court was taken to a letter sent by the applicants’ solicitor to Mr Naaman’s solicitor on 16 June 2022 stating that Jaken has brought a claim against NAB that the Kings Cross Property was sold by the receivers in 2021 at a gross undervalue. Depending on the outcome of this claim, Jaken may not owe NAB any amount, or a lesser amount than the amount it claims.

Proposed refinancing of the ANZ facility

1. [28]

   RHG Nominees, which is the registered proprietor of the land on which the Royal Hotel Granville is situated, gave a first registered real property mortgage of the land to the Australia and New Zealand Banking Group Limited (ANZ) as part of the security for an advance of $31.2 million made by ANZ to fund the purchase.

2. [29]

   On 6 April 2023 ANZ entered into the deed entitled “Deed of Forbearance” with each borrower and security provider under the facility, including RHG Nominees in which ANZ agreed not to take any steps to enforce its rights arising from any existing default prior to the end of the “forbearance period”. The forbearance period expired on 30 June 2023 and consequently the amounts owing under the ANZ facility are currently due and payable.

3. [30]

   On 21 July 2023, RHG Nominees moved the Court for orders varying the freezing orders in order to enable the refinancing of the ANZ facility with another facility to be provided by NAB. The matter was heard by the Equity Duty Judge, Hammerschlag CJ in Eq, who made orders varying the freezing orders to allow the refinancing to occur but they were stayed in light of the fact that Mr Naaman had not been given the opportunity to be heard. The matter came back before Hammerschlag CJ in Eq on 26 July 2023 for a further hearing in which Mr Naaman was represented. However, the position of RHG Nominees had now changed and it proposed that instead of varying the freezing orders the plaintiffs would pay the sum of $4,783,343 into court. His Honour noted that the effect of the freezing orders (paras 5(a) and 11(a)(i)) was that the freezing orders would cease to have effect if that amount, unencumbered, was paid into court. Given the change of circumstances, his Honour vacated the orders previously made on 21 July 2023.

4. [31]

   Also on 26 July 2023, Mr Naaman lodged the caveat, and Mr Burnett, the solicitor for Mr Naaman, sent a letter to Mr Nasr, solicitor for the applicants, setting out Mr Naaman’s position on the proposal to refinance the ANZ facility with a loan provided by NAB. In summary, the letter states that Mr Naaman would not oppose a refinance of the ANZ loans by the NAB if the transaction effects a true refinance of the indebtedness to the ANZ, in that the amount of the indebtedness is not increased so substantially (and if there is to be an increase there is a bona fide reason for it) where all the parties to and the terms of the arrangements with NAB are the same or similar to the parties and terms currently in place; Mr Naaman’s claimed equitable interest in the properties held by the parties that are subject to the freezing orders is protected; the proposed transaction does not breach the November and March Orders; and to the extent that money is to be paid into court to discharge the freezing orders, the provenance of the moneys to be paid into court needed to be established to demonstrate the funds were unencumbered. No response has ever been provided to this letter.

5. [32]

   Mr Nasr states in his affidavit that following the lodgement of the caveat, NAB withdrew its offer of funding for the refinance of the ANZ facility on around 28 July 2023 and no amount was paid into court. It was accepted by senior counsel for the applicants that Mr Nasr’s statement goes no higher than what is stated by Norton Rose Fulbright, the solicitors for NAB, in their letter to Mr Nasr dated 28 July 2023 which states that NAB has formed the reasonable opinion that the proposed transaction would have been in contravention of the terms of the November and March Orders and that it was entitled to be provided with clear and irrefutable comfort that the proposed transaction is not in contravention of those orders, which it had not received and then continues:

6. [33]

   In my view, the proper inference from this letter, and the absence of any evidence of any later correspondence with NAB regarding the availability of a refinancing facility, there is currently no offer by NAB to provide finance to RHG Nominees and its related entities to refinance the ANZ facility.

7. [34]

   On 31 January 2024, Minter Ellison, the solicitors for ANZ, sent a letter to Mr Nasr stating relevantly as follows:

Issues

1. [35]

   The issues which arise are:

   1. (1)

      Whether the November and March Orders should be discharged and an order made to remove the caveat upon the payment into court of the sum of $3.6 million;

   2. (2)

      Whether as an alternative to discharging the asset preservation orders they should be varied and the caveat lifted to permit RHG Nominees to discharge the mortgage over the Royal Hotel Granville and register a replacement mortgage to the same face value as that mortgage, on such terms as the Court thinks fit.

Proposal to discharge of the relevant November and March Orders

1. [36]

   As the November and March Orders are interlocutory orders, they can be varied or discharged if there has been a material change of circumstances since the orders were made or new facts have been discovered that could not have reasonably have been put before the Court on the hearing of the original application: Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at 46; National Australia Bank v Human Group Pty Ltd (No 2) [2020] NSWSC 1900 at [104]; Thevarajah v Riordan [2015] UKSC 78 at [18]. In the present case the applicants rely on the first alternative, on the basis that the Court of Appeal’s decision undermines the basis on which the November Orders and the March Orders were made.

2. [37]

   The applicants submit that the Court of Appeal’s decision is a change of circumstances, which requires that the November and March orders be vacated and instead the applicants should be required to pay the sum of $3.6 million into Court as that is the impugned payment by Jaken to Powerhouse, and the caveat lodged by Mr Naaman on the title of the Royal Hotel Granville should be removed so that a refinancing of the ANZ facility can occur. The reason given for discharging the asset protection orders and instead paying the sum of $3.6 million into Court is that this would allow all relevant claimants to that fund (including NAB, Mr Naaman and any other creditor of the Trust) to bring their claim. The applicants submit that this is the correct approach because asset preservation orders are not intended to be security for a claim, but rather are designed to preserve and protect the disputed fund which in this case is $3.6 million.

3. [38]

   It is correct that the purpose of the March and November Orders is not to provide security for Mr Naaman’s claim: Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 619, 625; [1987] HCA 23. But it is not correct to say that the purpose of those orders is to preserve and protect the disputed fund of $3.6 million. Rather, it is to prevent the abuse or frustration of the Court’s processes. In any event, it does not follow that an appropriate alternative to operate in place of the November and March Orders is for the “Drawdown Parties” to pay the “disputed fund” of $3.6 million into Court. This is because Mr Naaman’s claim is not limited to $3.6 million. The relief he seeks in his cross-claim in relation to both equitable compensation for breach of fiduciary duty and breach of s 37A of the Conveyancing Act includes pre-judgment interest under s 100(1) of the Civil Procedure Act 2005. The Court can order pre-judgment interest in respect of both claims. In relation to equitable compensation, see eg Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15 at [31], [71]. Recent examples of pre-judgment interest being awarded in relation to claims under s 37A of the Conveyancing Act are Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (in liq) [2022] NSWSC 394 at [62]; Rheem Australia Pty Ltd v McInnes (No 2) [2020] NSWSC 1665 at [5]. The relief claimed by Mr Naaman for both equitable compensation and under s 37A when pre-judgment interest is taken into account exceeds $5 million.

4. [39]

   I accept that there has been a material change of circumstances which justifies an application to vary or discharge the November and March Orders by reason of the 1st CA Decision. However, the reasons given for seeking the discharge of those orders need to be tested against the criteria which are applied to determine whether such orders should be made. There is no dispute that the principles to be applied to determine that question are correctly stated in the March Judgment at [22]–[24]. In essence they are, first, whether Mr Naaman has a good arguable case; second, whether there is a danger that an actual or prospective judgment debt will be wholly or partly unsatisfied because of any of the prescribed events in UCPR r 25.14(4) or (5) might occur and third, whether the interests of justice (taking into account the balance of convenience) justify the continuance of the orders.

5. [40]

   As to the first matter, I consider that Mr Naaman still has a good arguable case. Insofar as the fiduciary duty issue is concerned, Jaken’s appeal was upheld but this was subject to a strong dissent by Bell CJ and the High Court has granted special leave to appeal. The grant of special leave suggests that the appellant has a good arguable case on the appeal as the High Court does not, generally, grant special leave where it is satisfied that the result arrived by the Court below was plainly correct (as reflected in the common reason for rejecting special leave applications that the judgment appealed from is not attended with sufficient doubt). Insofar as the claim based on s 37A of the Conveyancing Act is concerned, I do not read the 1st CA Decision as indicating that it is likely to fail; rather, it is necessary for the question to be reconsidered in light of the need to properly identify the relevant alienation of property and for NAB to be heard (in particular, as to the final relief to be granted).

6. [41]

   As to the second matter, in my view nothing has changed from the time the March Orders were made. The considerations set out in the March Judgment at [46] continue, in my view, to apply.

7. [42]

   As to the third matter, the applicants submitted that here the balance of convenience justifies the discharge of the orders. Reliance is placed in particular on the fact that the ANZ facility is currently in default with the risk that ANZ will enforce its security, including by sale of the Royal Hotel Granville. The Court is hampered in this regard by the failure of the entities which are subject to the freezing orders (including RHG Nominees) to provide the affidavit setting out their assets as required by order 9 of Annexure A to the March and November Orders. However, a valuation of the Royal Hotel Granville prepared on the instructions of the applicants for lending purposes places its value as at 8 November 2022 at approximately $83 million. While the valuation is not put forward as evidence of the property’s current value, it suggests that the value of the property well exceeds the amount currently owing to ANZ.

8. [43]

   Consequently, it is possible that the refinancing of the ANZ facility can be achieved by a new facility from NAB (or another lender) which will be cheaper than the current ANZ facility and avoid the risk of enforcement of the existing ANZ mortgage. In my view, the change in circumstances (being the decisions of the Court of Appeal) does not justify the discharge of the November and March orders notwithstanding the proposal to pay into court $3.6 million (a sum which is, in itself, inadequate as explained above). However, bearing in mind that the jurisdiction to grant (and continue) asset preservation orders must be exercised with caution given their drastic nature, the balance of convenience favours varying the asset preservation orders to permit the applicants to refinance the ANZ facility if this can be done while preserving the status quo as between the applicants and Mr Naaman. I will return to this below in the context of the application to remove the caveat.

Caveat

1. [44]

   The relief sought under prayer 1(d) of the motion relies on s 74MA of the Real Property Act 1900 (NSW) which provides that any person who is, or claims to be, entitled to an estate or an interest in land described in a caveat lodged under s 74F may apply to the Court for an order that the caveat be withdrawn. In determining whether to order removal of a caveat under s 74MA, the matter is to be approached by asking whether an interlocutory injunction would be granted to protect the interest claimed in the caveat, which in turn raises two questions: first, whether there is a serious question to be tried concerning the interest claimed in the property that is sought to be protected by the caveat and second, whether the balance of convenience is in favour of maintaining the caveat: Hanson Constructions Materials Pty Ltd v Roberts (2016) 93 NSWLR 1; [2016] NSWCA 240 at [77]. As to the second question, a Court will order a withdrawal of a caveat which is valid where the balance of convenience favours that course: Hanson Constructions at [72].

2. [45]

   The caveat was registered on 26 July 2023. It seeks to protect a claim or interest described as “charge” by virtue of “charge of estate in fee simple dated 10 March 2020 between Anthony Naaman and RHG Nominees Pty Ltd”. The details supporting the claim state that the claim is for an equitable interest or equitable charge or lien by virtue of the facts stated below:

3. [46]

   By “serious question to be tried” is meant that the caveator must make out a prima facie case in the sense that, if the evidence remains as it is, there is a probability that at the trial of the action, the plaintiff will be entitled to relief: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at [620]. This does not mean that the Court must conclude that there is greater than an even chance of the plaintiff succeeding at trial; rather the degree or probability of success required is simply that which the Court thinks sufficient, in the particular case, to warrant preservation of the status quo: Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 at 737; Australian Broadcasting Corporation v Neill (2006) 227 CLR 57; [2006] HCA 46 at [65]. In my view, that test is satisfied in the present case for the same reasons that lead to the conclusion that Mr Naaman still has a good arguable case in respect of both his claim for equitable compensation based on breach of fiduciary duty and his claim based on s 37A of the Conveyancing Act.

4. [47]

   While, as the applicants point out, it is true that the findings of Kunc J referred to in paragraphs 1-4 of the “Facts” in the annexure to the caveat have been set aside, they are still claims which Mr Naaman maintains and seeks to vindicate on appeal.

5. [48]

   In relation to the balance of convenience, in essence the question is whether the inconvenience which the caveator would be likely to suffer if the caveat is withdrawn outweighs or is outweighed by the inconvenience or injury which the registered proprietor would suffer if the caveat remains on the title. One situation where the balance of convenience may favour the removal of a caveat is where it is necessary to enable a first mortgage to be refinanced on similar terms to an existing first mortgage: Finlayson v Bagala [2024] NSWSC 94 at [20]; Australian Property & Management Pty Ltd v Devefi Pty Ltd (1997) 7 BPR 15,255 at 15,257. In particular, the Court can, in an appropriate case, require the caveator to temporarily lift the caveat to allow a refinancing.

Alternative proposal in prayer 2

1. [49]

   What the applicants seek in prayer 2 of the notice of motion is the removal of the caveat and the variation of the March and November Orders to permit RHG Nominees to register a mortgage to a new lender replacing the mortgage held by ANZ over the Royal Hotel Granville to the same face value as that mortgage. By “same face value” I assume it is meant that the new mortgage will secure the same amount as the ANZ facility at the time of discharge of the ANZ mortgage.

2. [50]

   It was submitted for the applicants that no first or second tier lender (including the major banks) will consider an application to refinance existing debt where a caveat or freezing order is in place. However, I am satisfied based on the evidence of Mr Robert Gordon, a retired banker who was employed by Macquarie Bank for 23 years, that this is not the case. The effect of his evidence, which I accept, is that first and second tier lenders will review the position of the applicants on the merits, despite the present existence of the freezing orders and caveat, and will consider a proposal to refinance the ANZ facility if satisfied that the orders will be varied, and the caveat lifted, to enable the refinancing to occur.

3. [51]

   I accept the applicants’ submission that the prejudice to the applicants if the vesting orders are not varied, and the caveat lifted, to allow a refinancing of the ANZ facility is potentially very significant. I infer from the evidence at [34] above that there is a material risk that ANZ will enforce its security over the Royal Hotel Granville and recover its outstanding debt which is in the order of $31 million. Given that it is likely that the value of that property is significantly greater than the amount secured, in my view, the balance of convenience justifies the lifting of the caveat and the variation of the November and March Orders to permit a refinancing to occur on similar terms to the ANZ facility on the condition that the new mortgage over the Royal Hotel Granville does not secure a greater amount than the ANZ facility and on the basis that Mr Naaman will be given leave to lodge a further caveat, with respect to the same interest in the property as is claimed in the current caveat, immediately after registration of the new mortgage.

4. [52]

   I will hear the parties as to the appropriate form of orders, including what additional conditions, if any, should be imposed on the applicants, for the temporary lifting of the caveat and variation of the November and March Orders to allow a refinancing to occur.

Conclusion

1. [53]

   Prayer 1 of the notice of motion is dismissed.

2. [54]

   In relation to prayer 2, the Court will list the matter for directions three weeks from today for the purpose of hearing submissions from the parties as to the form of orders to allow a refinancing to occur.

3. [55]

   The Court will also list the other related matters referred to at [2] and [26] above for directions before the Registrar along with the present proceedings with a view to case management directions being made to enable the matters to be heard and determined together. Both parties agreed at the hearing that this was necessary.

4. [56]

   The parties did not make submissions on costs. In my view the appropriate order is that the costs of the motion be costs in the cause.