McMillan Investment Holdings Pty Ltd v Mangos

HIS HONOUR: By a third further amended statement of claim (“TFASC”) filed 26 April 2019, McMillian Investment Holdings Ltd (“MIH”) brought proceedings against John Bernard Mangos, the first defendant; Natalie Vivienne Mangos, the second defendant (collectively, “the Mangos’”); and Christopher Wallace, the third defendant, in their capacity as debtors, guarantors and/or mortgagors for monies claimed to be owed under various instruments.

On 20 June 2019, the Mangos’ filed a defence to the TFASC (“the amended defence”). There were cross-claims brought by the Mr Mangos (“the Mangos’ cross-claim”), Mr Wallace (“the Wallace cross-claim”) and what were described in the proceedings as the “McMillan Entities” (the cross-claimants consisted of MIH, Julie-Anne McMillan and Robert McMillan (“the Third cross-claim”).

As I will explain, these proceedings involve a dispute between a lender (MIH) and guarantors (the Mangos’) about loan facilities that were secured over the guarantors’ property. Pursuant to consent orders entered in February 2019, MIH and the Mangos’ reached an interim arrangement whereby the property was sold and funds were paid into court. In April 2019, they reached a further interim agreement reflected in consent orders whereby some of the funds were released to MIH, some funds were released to the Mangos’ to allow them to purchase another property in exchange for the provision of an agreed amount of security of the new property and some funds remained in court. Now, as the costs of the litigation have risen and economic circumstances have changed, MIH brought a motion seeking an order that the Mangos’ provide further security over the new property (“the MIH motion”), and the Mangos’ have brought a motion seeking orders for payment of their costs on an interim basis or, in the alternative, a release of further funds to allow them to fund their defence (“the Mangos’ motion”). As I will explain, the Court has no authority to rewrite the parties’ agreement about the provision of security. The only orders that the Court could make is for the release of funds and no proper basis for that to occur has been shown.

These proceedings address two notices of motion brought by the Mangos’ and MIH, respectively.

By an amended notice of motion, filed 18 June 2020 (hereinafter, “the Mangos’ amended motion”) the Mangos’ sought, inter alia, the following relief:

By an amended notice of motion, filed 28 June 2020 (hereinafter, “the MIH amended motion”), MIH sought the following relief:

It may be noted at the outset that there was voluminous evidence relied upon in these proceedings, principally in the form of five court books.

The evidence relied upon by MIH was as follows:

The material primarily relied upon by the Mangos' was two affidavits of Mr Farshad Amirbeaggi, the solicitor for the Mangos’, dated 11 December 2019 and 18 June 2020, respectively, together with Annexure D, Corelogic lntelliVal Automated Valuation Estimate ("the CoreLogic Report").

It was contended by MIH that the Mangos' did not put on affidavits or give evidence but rather produced a solicitor's affidavit incorporating some second hand or third hand conclusory evidence without setting out a proper basis for the same. It was further contended that Mr Amirbeaggi had an economic interest in the Mangos’ amended motion in that the solicitor for the mortgagor and chargor was seeking the “Court place his past and future fees ahead of the secured rights of MIH”. The Court should not, it was submitted, allow the Mangos' to defeat the secured rights of MIH as mortgagee and the registered Illawong Property mortgagee.

Out of that submission, it was contended that the Court should draw a Jones v Dunkel inference adverse to the Mangos’, namely, that their evidence would not have assisted them on contested issues before the Court.

It is not apparent how the issues raised by MIH may attract a Jones v Dunkel point in these proceedings, given they are interlocutory proceedings in which no witnesses were required for cross-examination. The affidavits of Mr Amirbeaggi were admitted without objection and the weight attached to the evidence will vary depending upon its form and content (similar to those passages of Mr Ryckman's evidence for MIH, which were of a similar character).

MIH also advanced a submission regarding the CoreLogic Report (Annexure D to Mr Amirbeaggi's affidavit of 18 June 2020) as follows:

The CoreLogic Report clearly has, in my view, a reduced probative value because of the express limitation or caveat within the report as to the use which may be made of the report and the value of estimates made. However, the report was introduced without objection and, in part, relied upon by MIH. It does have some weight and apart from the purchase price for the property (in relevantly recent times) it is the only other evidence as to the current market value of the property.

MIH’s statement of claim was filed on 16 July 2018.

There were a series of amendments leading to the TFASC, which MIH described as follows:

Relevant aspects of the pleadings in the TFASC should be brought to attention at the outset.

MIH pleaded that, on about 27 March 2015, Mr Mangos and Mr Wallace, as guarantors and indemnifiers, entered into a facility agreement (“the facility agreement”), the other parties to which were MIH and Sydney Allen Manufacturing Pty Ltd (in liquidation) (“SAM”) and Sydney Allen Printers Pty Ltd (in liquidation) (“SAP”), as joint and several borrowers.

It was further pleaded that under the facility agreement that MIH agreed to advance SAM and/or SAP the “principal money” (as defined in the facility agreement), on the terms and conditions in the facility agreement, and that Mr Mangos and Mr Wallace provided a joint and several guarantee and indemnity to MIH in respect of the “principal money” and MIH’s costs and expenses, permitting MIH to call on them as guarantors without calling on SAM and/or SAP as the borrowers.

It was pleaded that the obligations under the facility agreement were secured by a collateral security including a general security deed. On or about 27 March 2015, MIH, SAM, SAP, Mr Mangos and Mr Wallace, as guarantors, entered into a general security deed which granted MIH, as the secured party, a “PPSA Security Interest”, “PPSA Personal Property” and a “Fixed Charge” over all other property to secure the payment of the secured money. (“PPSA” is defined in the general security deed to mean the Personal Property Securities Act 2009 (Cth)).

In the period 5 March 2015 to about 6 July 2016, MIH advanced $1,460,876.61 (“the principal money”). It was further pleaded that interest was payable on the principal money.

It was further pleaded that MIH received payment of $1,039,564.28, at various dates between 8 September 2015 to 1 August 2017, plus an additional amount of about $300,000 (which was brought to account from a payment of $330,000 by Warehouse Australia Pty Ltd). The payments were made for payment of interest and then principal reductions (in the sum of $227,869.91).

Nonetheless, it was pleaded that, as at 1 April 2016, default occurred under the facility agreement and, as at 7 April 2016, voluntary administrations were appointed to SAM and SAP. From 2 August 2017 to the filing of the TFASC, no payments under the facility agreement were repaid to principal or interest were made to MIH. (As at 25 February 2019, the principal and interest owed was $298,360.38).

It was further pleaded that, on 27 March 2015, the Mangos’, in their capacity as mortgagor, granted a mortgage in a registrable form in respect of a property in Illawong, NSW (the then home of the Mangos’, and hereinafter, “the Illawong Property”) to MIH in its capacity as mortgagee (the Mangos’ were the registered proprietors of the Illawong Property). That mortgage shall hereinafter be referred to as “the Registered MIH-Illawong Property Mortgage”.

Under the Registered MIH-Illawong Property Mortgage, the Mangos’ promised to pay, it was pleaded, the principal amount as agreed between the Mangos’ and MIH and that interest accrued daily on the principal money in the rates in the facility agreement. It was further pleaded that the Registered MIH-Illawong Property Mortgage was a security granted by the Mangos’ for payment to MIH for the secured money, which consisted of the principal money and all interest, and for the performance of their obligations under the mortgage and under any collateral security, which was defined as including the facility agreement and the general security deed.

On or about 27 January 2016, MIH, as lender, and the Mangos’ entered into the 27 January 2016 MIH/Mangos’ $150,000 Loan Agreement (“the $150,000 Loan Agreement”) whereby MIH agreed to lend Mr Mangos $150,000.

On or about 28 January 2016, pursuant to the $150,000 Loan Agreement, MIH lent $150,000 to Mr Mangos or alternatively to Mr Mangos and Mrs Mangos. (Mr Mangos caused MIH/Mangos’ $150,000 Loan to be paid to or to the benefit of SAP pursuant to the 27 January 2016 Mr Mangos/SAP Loan Agreement).

MIH pleaded the $150,000 Loan:

It was pleaded that on 26 March 2019, the Mangos’ owed MIH $241,077.82 in relation to the $150,000 Loan (excluding legal fees therein).

It was further pleaded that the Mangos’ were liable to pay the $150,000 Loan and all interest calculated on it in accordance with the Facility Agreement Interest Provisions including “McMillan’s costs and expenses”.

On or about 21 November 2007, Westpac, as lender, and the Mangos’, as borrower, entered into the 21 November 2007 Westpac/Mangos’ Loan whereby Westpac agreed to lend, and lent, to the Mangos’ $490,000.

The 21 November 2007 Westpac/Mangos’ Loan was constituted by:

MIH pleaded that, on 28 August 2015, MIH entered into a Westpac-MIH-Mangos’ Debt and Securities Assignment under which MIH would pay $354,183.22 to Westpac for Westpac to assign to MIH the debt and other obligations owed by the Mangos’ to Westpac under a 21 November 2018 Westpac-Mangos’ Loan. On 28 August 2018, as part of and associated with the Westpac-MIH-Mangos’ Debt and Securities Assignment, Westpac transferred MIH the registered first and second mortgages over the Illawong Property held by Westpac as mortgagee.

It was further pleaded:

Between 10 November 2016 and 27 September 2018, MIH made demands upon the Mangos’ for payments of monies owing under the facility agreement, the general security deed, the MIH-Illawong Property Mortgage and other debts or loans.

It was pleaded that:

Particular reliance was placed by MIH upon the facility agreement, guarantees under the facility agreement, the general security deed, the mortgage over the Illawong property and the Woolooware mortgage. I will set out some of the detail of these instruments as found in the evidence.

As mentioned, the parties were MIH, as lender, and SAP and SAM, as borrowers.

There are a number of key terms in the facility agreement which created the asserted Mangos’ liability to MIH under the facility agreement. Key terms include “principal money”, “McMillan’s costs and expenses”, and the interest provisions.

“Principal money” was defined broadly in the facility agreement to include but not limited to, at any time all money (unless otherwise agreed in writing by MIH) which was represented as follows:

The facility agreement also defined “McMillan’s costs and expenses” as:

Interest payable under the facility agreement was 15% per annum, when it is not paid on or before the due date, on the basis of a 360-day year and actual days elapsed.

Under the facility agreement, the “principal money” outstanding from time to time, includes unpaid interest (it is then capitalised and forms part of the “principal money”).

MIH contended that Mr Mangos and Mr Wallace provided a joint and several guarantee and indemnity to MIH in respect of the “principal money” and “McMillan’s costs and expenses”, permitting MIH to call on them as guarantors without calling upon SAM and/or SAP as the borrowers.

MIH contended that Mr Mangos, as one of the guarantors under the facility agreement, was liable to pay MIH:

Mrs Mangos was not a party to the facility agreement.

On or about 27 March 2015, MIH, SAM, SAP, Mr Mangos and Mr Wallace, as Grantor, entered into the general security deed.

Under the General Security Deed, Mr Mangos, inter alia, as a Grantor, granted to MIH, as the Secured Party:

MIH contended that the amount of $492,186.82 which had been paid into, and remains in, Court in accordance with order 3 of the 2 April 2019 Orders, inter alia, is subject to MIH’s secured rights against Mr Mangos under the General Security Deed.

On 27 March 2015, the Mangos’, in their capacity as mortgagor, granted a mortgage in a registrable form in respect of the Illawong Property (the then home of the Mangos’) to MIH, in its capacity as mortgagee.

The Registered MIH-Illawong Property Mortgage was a “collateral security” within the meaning and for the purposes of the facility agreement.

Under the Registered MIH-Illawong Property Mortgage, the Mangos’ promised to pay the “principal money” as agreed between them and MIH; otherwise when MIH demands it.

Interest accrued daily on the “principal money” at the rates in the facility agreement.

“Principal money” included “McMillan’s costs and expenses”.

As mentioned, on 28 August 2015, as part of, and associated with the Westpac-MIH-Mangos’ Debt and Securities Assignment, Westpac transferred to MIH the registered first and second mortgages over the Illawong Property held by Westpac, as mortgagee.

On 8 February 2019, the Mangos’ approached the Common Law Duty Judge seeking an order that MIH deliver up an original certificate of title of the Illawong Property and discharge of the mortgages which MIH held over the Illawong Property in its capacity as mortgagee to secure the monies owed by the Mangos’ to MIH.

MIH pleaded that on, 26 February 2019, the Mangos’ notified it of an exchange on a Woolooware Property purchase by the Mangos’ (the contract having been exchanged on 29 January 2019).

On 27 February 2019, MIH and the Mangos’ reached a settlement of the interlocutory proceedings concerning the Illawong Property sale contract in, relevantly, the following terms:

On 12 March 2019, settlement of the Illawong Property Sale Contract occurred and, pursuant to the 27 February 2019 Orders and Terms of Settlement, $1,863,141.87 of the net proceeds from the sale of the Illawong Property was paid into Court by MIH.

At 9.09am, on 1 April 2019, Ms Gleeson, solicitor for the Mangos’, sent to the Common Law Registrar an email seeking to relist the proceedings before the Common Law Duty Judge by exercise of the liberty to apply on 24 hours’ notice contained in the orders made on 21 March 2019.

That email, relevantly, stated:

On 2 April 2019, the Mangos’ served on MIH a notice of motion (“the 2 April 2019 Motion”). Further, the Mangos’ informed MIH that they would:

On 2 April 2019, prior to court, MIH served on the Mangos’ an affidavit of Ms McMillan of 2 April 2019, together with exhibit JM-10 (comprising 41 pages).

On 2 April 2019, orders were made in these proceedings by Davies J. In the affidavit of Ms McMillan of 2 April 2019, it was asserted there was a financial entitlement comprised $862,265.31 (including interest and about $247,957.00 of legal costs).

In the 2 April 2019 Motion, the Mangos’ sought, inter alia, the following orders:

On 2 April 2019, Davies J, as Common Law Duty Judge, made, inter alia, the following orders (the “2 April 2019 Orders”) (the orders have been converted into the short forms used in this judgment):

In the result, the funds held in Court were dealt with as follows:

On 2 April 2019 the parties presented Davies J with a document entitled “Terms of Order made by the Court by consent” which has his Honour duly made and which provided as follows:

The first three of these orders concern the distribution and retention of monies paid into Court. The fourth “order” is not in substance an order at all but instead the Mangos’ proffering an undertaking to the Court concerning the provision of a mortgage.

MIH contended in written submissions that the effect of the 2 April Orders was to provide MIH payment or security of $1,345,305.75. The $1,345,305.75 comprised:

In substance, however, the security now held by MIH comprises $1,029,357.83 plus interest as accrued on funds held in Court (a position accepted elsewhere in the MIH submissions). Mr Amirbeaggi in his affidavit of 17 June 2020 stated that the security reflects the amount MIH states is due and owed under the facility agreement (principal plus interest to 25 February 2021), being $397,551.95 plus incurred on future legal fees expected to 25 February 2021 being a combined sum of $631,805.88. The Woolooware Property mortgage is the only security interest in title.

Thus, to reiterate, the situation, at the hearing of the 2 April 2019 Motion was that:

As to the 2 April 2019 Orders, MIH contended that those orders were:

Because the Woolooware Property Purchase Contract had to settle on 5 April 2019, the Mangos’ had the proceedings urgently listed before the Common Law Duty Judge at 3pm on 4 April 2019 to resolve a dispute that had arisen over the terms of the proposed MIH Woolooware Property Mortgage.

The legal representatives for MIH and Mrs Mangos then engaged in further discussions and at 5.12pm on 4 April 2019, Campbell J noted the agreement of MIH and Mrs Mangos contained in the memorandum filed and initialled by Justice Campbell.

The memorandum which was initialled by Campbell J was a document of 3 pages:

On 5 April 2019, $315,947.93 was paid by electronic fund transfer out of the Supreme Court of NSW into the account of MIH at the ANZ.

Ms McMillan gave evidence that the amount of $315,947.93 in order 2 of the 2 April 2019 Orders comprised a total of:

In the proceedings the Mangos’ have not sought to recover from MIH the amount of $74,870.11 in respect of the Westpac/Mangos Rocket IPL Loan paid out of Court to MIH as part of the $315,947.93 on 5 April 2019.

MIH contend that in these circumstances, as the amount of $74,870.11 did not include legal fees paid by MIH to recover the amount of $74,870.11 as owing to MIH under the:

Ms McMillan, estimated that MIH legal costs and expenses from early 2017 (when FD Legal first commenced providing legal services in relation to MIH recovery from the Mangos’) to 5 April 2019 to somewhere between $40,000 to $80,000 in relation to recovering from the Mangos’ the amount of $74,870.11 owing under the:

MIH would engage an expert costs consultant to undertake the task of calculating these legal costs and expenses of MIH. MIH estimated that the cost consultant’s costs would be an additional $10,000 to $20,000.

The Mangos’ disputed that they were liable to pay the $241,077.82 in relation to the $150,000 Loan, which amount included interest, which, as mentioned, comprised part of the amount of $315,947.93 paid to MIH out of Court on 5 April 2019. This is set out in their amended defence.

MIH submitted that it is entitled to have its legal costs and expenses secured in respect of the attempt by the Mangos’ to recover or set off the amount of $241,077.82 by reason of MIH rights under the:

The core reason for the claim was that, to date, the Mangos’ have incurred significant expenses already in respect of these proceedings (including in responding to multiple iterations of MIH’s claim) and, if they do not obtain access to funds (whether it be by way of an interim costs order or access to monies they contend are their own), then they will be deprived of their present legal representatives.

It was further contended the Mangos’ have:

As to the first prayer for relief of the Mangos’ amended motion it was submitted:

As to the second prayer for relief:

The MIH produced a lengthy written submission as to the Mangos’ amended Motion which was encapsulated as follows (with supplementary submissions and particular overall submissions as to the MIH amended motion):

As to the first enumerated contention by MIH it was submitted:

As to contentions regarding costs thrown away, MIH submitted as follows:

In summary, the MIH submission in this respect is as follows:

The Mangos’ contended that the MIH amended motion was extraordinary for three reasons:

The MIH amended motion ought to be dismissed with costs.

MIH advanced three supplementary submissions regarding superannuation and the Woolooware Property as follows.

Paragraph 9(b)(iii) of affidavit of Mr Amirbeaggi of 18 June 2020 stated that the Mangos’ only assets, inter alia, are: “their respective superannuation entitlements that have not reached maturity”.

MIH issued two Notices to Produce to the Mangos’ and a Subpoena to Produce to YBL seeking information as to the superannuation entitlements of the Mangos’.

Documents were produced by YBL in response to the Subpoena to Produce and by the Mangos’ under the Notices to Produce. However, information in relation to the superannuation entitlements had not been provided.

MIH sent a letter to the Mangos’ which sought, inter alia, the provision of the information relating to the Mangos’ superannuation entitlements.

While the solicitors for the Mangos’ replied that they had sought instructions from their clients, the information requested by MIH had never been provided by the Mangos’.

The Mangos’ had not provided any documents to:

In circumstances where the Mangos’ sought an order that money in Court which was paid into Court as security for MIH, as mortgagee, be paid to the Mangos’ for legal costs, it was incumbent upon the Mangos’ to put this evidence before the Court and to personally swear the affidavit.

The Mangos’ have not been frank with MIH, as mortgagee, or the Court on this issue.

The Mangos’ have never resided in the Woolooware Property. It has been rented out and used for investment purposes.

There is evidence that the rent for the Woolooware Property was not paid to the Mangos’ but to Courtney Mangos, presumably a relative of the Mangos’.

MIH sought information as to the reasons why the rent in relation to the Woolooware Property has not been paid to Mrs Mangos as the registered proprietor and lessor of the Woolooware Property.

While the solicitors for the Mangos’ replied that they had sought instructions from their clients, the information requested by MIH has never been provided by the Mangos’.

The Mangos’ have not provided full and frank disclosure in relation to their dealings regarding the Woolooware Property to MIH, as mortgagee, or the Court.

Once again, the Mangos’ have not sworn the affidavits and have not been frank with MIH, as mortgagee and the Court on this issue.

It remains, however, how MIH would employ this contention in relation to either of the amended motions.

Due to the uncertainty of the market and the progressive lessening of MIH’s security, inter alia, as the debt is ever increasing, the Woolooware Property should be sold and MIH’s outstanding amounts claimed in the proceedings and legal costs to the end of the trial should be paid out firstly from the money held in Court in the amount of approximately $449,000 and then from the proceeds of sale of the Woolooware Property. If necessary, the proceeding can be stayed pending the sale of the Woolooware Property.

The other benefit of the sale of the Woolooware Property is that the interest which accrues at 15% per annum, charged monthly and then capitalised, under the various instruments will stop running once the outstanding debts as well as legal costs are paid to MIH. Interest is charged on both the principal sums plus legal fees. The longer they remain unpaid the greater the debt becomes. It is conceivable that there could be about $150,000 to $200,000 or more extra interest. If the Woolooware Property is not sold, then MIH should be fully secured over the Woolooware Property and the $449,000 paid into Court.

In the event that the Mangos’ succeed on any part of their defence/cross-claim, which has the effect of MIH being overpaid, then MIH will pay that amount to the Mangos’.

MIH is good for the money. The Mangos’ know this. If the Mangos’ had had any concern about MIH’s financial capacity, they would have made an application for security for costs.

Putting aside interlocutory orders and terms of settlement, and without limiting the foregoing factual analysis of the material before the Court, the following aspects of the factual matters should be mentioned at the outset of the determination of the motions:

Mr Amirbeaggi stated that since the commencement of the proceedings, the Mangos’ have incurred $523,135.15 in legal fees and disbursements (of which $118,654.29 remains outstanding). Counsel fees and additional solicitor fees by YBL are within the range of $40,000. The amount presently unpaid is approximately $160,000 for legal work. Further legal fees were estimated to be $300,000 to $400,000. The costs for Mr Wallace are additional. Counsel for MIH contended that counsel fees of $80,000 needed to be added to the above sum but that presently remains unclear on the evidence. Ms Rosati indicated that the charge out rates for YBL included $770 (inclusive of GST) for a Solicitor/Director, $660 (inclusive of GST) for a Senior Associate and $550 (inclusive of GST) for an Associate. MIH submitted that these charges and rates were excessive. Ms Rosati also opined that a significant amount of the work undertaken by YBL did not relate to the amended pleadings and would not properly be classified as costs thrown away.

As to the various interlocutory orders and relevant terms of settlement, the position was as follows:

The issues ventilated by the Mangos’ in the proceeding were articulated by Mr Amirbeaggi, as follows:

It may be observed that in the amended defence it was admitted by the Mangos’ that Mr Mangos entered into the facility agreement and noted that no allegation is made against Mrs Mangos in that respect. However, it was denied that MIH made payment of about $1.46 million or that any such payment was principal money under that agreement. It was admitted the interest was payable on “Principal Money” (the amount of which required further inquiry).

It was further denied that a default occurred upon the facility agreement or that no payments were made from 2 August 2017 to date. Specifically, it is denied that Mr Mangos is liable to pay $227,869.91 with interest under the facility agreement (and pleaded that MIH released or discharged Mr Mangos as guarantor by, inter alia, misleading conduct by Mr and Mrs McMillan.

MIH contended that a fundamental principle is that a mortgagee, when asked by the mortgagor, to redeem the mortgage is entitled to security of the amount secured for probable costs of any contest with the mortgagor, irrespective of whether the contest relates to an account or a challenge to the validity of the mortgager.

Reliance was placed by MIH upon the judgment of Hodgson J (with whom Handley and Stein JJA agreed) in Overton Investments Pty Ltd v Cuzeno RVM Pty Ltd [2003] NSWCA 27 at [63] as follows:

The plaintiff relied, in this respect, upon the challenge by the Mangos’ challenging the validity of the Registered MIH-Illawong Property Mortgage and the amounts owing.

A difficulty with that submission is that, pursuant to the 2 April 2019 Orders, the Registered MIH-Illawong Property Mortgage was discharged and orders made for security based, in part, upon MIH’s estimate as to costs.

Relevant to the determination of this matter is the judgment of White J in KBL Mining Limited v Kidman Resources Limited [2015] NSWSC 515 at [203] and [206] which was in the following terms:

Reference should also be made to the judgment of Beazley JA (with whom Hodgson and Ipp JJA agreed) in Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87 at [9]-[14], as follows:

Finally, reference may be made to the judgment of Palmer J in Liberty Funding Pty Limited v Steele-Smith [2004] NSWSC 1100 at [25], as follows:

Prayer 1 of the Mangos’ amended motion seeks an order for the interim payment of the Mangos’ costs.

Whilst there is some substance to the contention of the Mangos’ that the amendments to the TFASC are, in some respects, of substance and potentially constitute costs thrown away (citing the observations in Ziliotto v Dr Hakim (No 2) [2012] NSWSC 1079 at [41]-[44]) and that costs in the proceedings have been substantial. I accept the submissions by MIH that it is too difficult, and ultimately inappropriate to disentangle, at this stage, costs of the Mangos’ associated MIH amendments with other aspects of these proceedings including the amended defence, cross-claims (which expanded the scope of the proceedings) and concurrent issues arising under the redemption suit.

It may be observed that Davies J did not make any order for costs thrown away in relation to the amendments (other than an order of 15 August 2019) and the cost of redemption proceedings have been reserved.

I also accept the submission of MIH that the Court ought to be cautious about disturbing contracted and secured rights at this stage of the proceedings. A similar issue will arise with respect to secured rights issues under the remainder of the rights sought under this amended motion and the MIH amended motion.

Overall, and subject to further significant developments in the proceedings, I consider that costs in these proceedings should now be resolved when the proceedings are concluded (see Oswall v Commissioner of Taxation (No 5) [2016] FCA 916 at [9] (per Pagone J) and Cassimatis v Australian Securities and Investments Commission (2016) 334 ALR 350; [2016] FCA 131 at [75] (per Edelman J).

I dismiss the Mangos’ amended motion with respect to the first prayer for relief. It is convenient, given the issues raised, to turn to the MIH amended motion before dealing with the second prayer for relief in the Mangos’ amended motion as similar issues will arise in the Mangos’ amended motion as will be found with respect to the MIH amended motion.

The Mangos’ do not dispute that Mr Mangos entered into the facility agreement, the terms of which are set out earlier in this judgment (although the agreement does not bind Mrs Mangos). However, the Mangos’ deny default under the agreement or monies owed under the guarantee or the general security deed upon various wide-ranging bases.

In the ordinary course, MIH, as a mortgagee/secured creditor of the Mangos’ would be entitled, in these circumstances, to the protection by payment for security for its right for monies secured under the mortgage and security for probable costs. However, as the Mangos’ submitted that broad proposition is subject to the mortgage itself and in this case the effect upon rights under the mortgage under various interlocutory proceedings until hearing of the respective claims.

The Registered MIH-Illawong Property Mortgage was discharged in consequence of the 27 February 2019 Orders and Terms of Settlement. The property rights held by MIH were then effectively merged in consequence of 2 April 2019 Orders.

The 27 February 2019 Orders and Terms of Settlement were cognisant of the Woolooware Property Purchase and the 2 April 2019 Orders expressly provided for the same by Mrs Mangos giving MIH the first ranking registered mortgage over that property. Further, the 2 April 2019 Orders were predicated upon the anticipated expenses for the eligible offer by MIH. The fact that a best estimate was given does not alter the fact that the orders were predicated upon those amounts.

It is quite a leap to suggest, as MIH does, that a mere liberty to apply provision to the Common Law Registrar would constitute a vehicle for MIH to access to further security, notwithstanding the terms of the orders and no separately identified basis for an improved security interest under the orders.

Further, as to the MIH amended motion, I accept that the logic of MIH’s position, namely, that it should be secured to the full extent of its costs claim, even if it was to succeed is questionable. In any event the amount of $1,441,346.91 is, in all likelihood, an unrealistic estimate of MIH’s costs in a wholly successful prosecution of the TFASC and/or prosecution of cross-claims by MIH entities and Mr McMillan, to the extent relevant.

Further, there would appear to remain adequate security under the current security arrangements unless, against the conclusions that I have reached, the material value of the Woolooware Property was estimated to have fallen.

In any event, the MIH amended motion is entirely misconceived. It is predicated on the combination of orders 4 and 6 made by Davies J somehow conferring power on this Court to require the Mangos’ to provide further security over the Woolooware Property. As noted, so called “order 4” in substance involved the Mangos’ proffering an undertaking to the Court to provide security for a limited amount as part of the interim settlement of various motions that was effected on 2 April 2019. This Court has no authority to rewrite the terms of that settlement much less to compel the Mangos’ to provide further security beyond that which they undertook. The only rights that MIH acquired in respect of the Woolooware Property was those conferred by the consent orders made on 2 April 2019.

The MIH amended motion should be dismissed.

Similar considerations to those just identified in relation to the MIH amended motion arise in respect of the prayer 2 of the Mangos’ amended motion. In substance, prayer 2 seeks an order for release of a further $300,000 held in Court to the Mangos’ to allow them to fund their defence. To secure MIH’s position, they agree to provide additional security. The critical question is: what is the legal basis upon which such relief can be granted? This Court has no authority to rearrange settlements, even interim ones, to allow one party to lend funds to another to conduct litigation. Instead the only basis upon which on an interlocutory basis further funds held in Court could be released to the Mangos’ (without agreement) is if they established a sufficiently strong case for final relief to warrant that course. They have not done so.

There is no dispute Mr Mangos entered into the facility agreement and gave guarantees.

Redemption or equivalent proceedings occurred before Davies J in order that the Mangos’ may complete the sale of the Illawong Property and proceed with the Woolooware Property Purchase. Both were entered into without consent by or notice to MIH.

After substantial proceedings a settlement was reached in the form of the 2 April 2019 Orders. This represented the balance of the parties’ interests in circumstances where, as least since the filing of the Mangos’ amended defence and cross-claim there are substantially contested proceedings including claims under the Corporations Act and as to breaches of statutory, fiduciary and equitable duties.

MIH’s rights, now established under the 2 April 2019 Orders, should be protected to that extend by the 2 April 2019 orders, which, as the Mangos’ submitted, leaves a residue of equity from the Woolooware Property, although the margin depends upon property estimates. The Mangos’ contention that they are merely realigning how the security is held omits consideration of this fundamental consideration.

It is true that the Mangos’ may lose legal representation but that position must have been known at the time that the Mangos’ acquiesced in the 2 April 2019 Order and later filed an amended defence and cross-claims with solicitors who (and I do not say this critically) are charging at fairly substantial rates. I have also taken into account the potential for the Mangos’ to potentially access superannuation funds in that respect. In my view, the second prayer for relief should be refused.

In the circumstances, I consider that the Mangos’ amended motion and the MIH amended motion should be dismissed with each party to pay their own costs.

The Court makes the following orders: