LIMITED DISTRIBUTION Trade Practices - misleading or deceptive conduct - representations made as to method of loan, available credit and subsequent disapproval of proposed sale - sale by mortgagee challenged - application for ainterzm injunction restraining mortqagee's use of powers, particularly power of sale Land Law - power of sale under demand mortgage Trade Practices Act 1975 s.52 Transfer of Land Act 1893 (W.A.) ss.106, 107, 108 BARRY FENTON JONES and SHIRLEY JOY JONES - _- and BARRY FENTON JONES and SHIRLEY JOY JONES - AS TRUSTEES OF THE CLIFDEN TRUST - ote — and B.F. JONES & CO. and YULLAH PTY. LTD. Vv. AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED - . . and H.C. and $.P. HALLET No. WA G2 of 1987 TOOHEY J. PERTH 12 JANUARY 1987 IN THE FEDDRAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. WA G2 of 1987 we we ee BETWEEN: BARRY FENTON JONES and SHIRLEY JOY JONES First Applicants and BARRY FENTON JONES and SHIRLEY JOY JONES AS TRUSTEES OF THE CLIFDEN TRUST Second Applicants and B.F. JONES & CO. Third Applicant and YULLAH PTY. LTD. Fourth Applicant and AUSTRALIA AND NEW ZEALAND RANKING GROUP LIMITED . ' First Respondent / and y H.C. and S.P. HALLET - Second Respondent MINUTE OF ORDER JUDGE MAKING ORDER: TOOHEY J. DATE OF ORDER: 12 January 1987 WHERE MADE: Perth THE COURT ORDERS THAT: 1. The application is dismissed. 2. The applicants pay the costs of the first respondent and the second respondent to be taxed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. of LIMITED DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. WA G2 of 1987 wee ee BETWEEN: BARRY FENTON JONES and SHIRLEY JOY JONES First Applicants and BARRY FENTON JONES and SHIRLEY JOY JONES AS TRUSTEES OF THE CLIFDEN TRUST Second Applicants and B.F. JONES & CO. Third Applicant and YULLAH PTY. LTD. Fourth Applicant and AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Pirst Respondent and H.C. and S.P. HALLET ; Second Respondent CORAM: 'TOOHEY J. 12 January 1987 REASONS FOR JUDGMENT This application came before the Court as a matter of urgency on the afternoon of Friday, 9 January. I reserved my decision over the weekend. The applicants seek an interim injunction restraining MM the first respondent from exercising any of its powers as mortgagee ot a farm at Corrigin known as "Wanganui" and in particular from completing a sale of that land to the second respondent. No substantive application has yet been filed but an affidavit sworn by Barry Fenton Jones, one of the first applicants, refers to various matters which, it 1s said, give rise to claims against the first respondent under s.52 of the Trade Practices Act 1974, The first applicants are the registered proprietors of "Wanganui" and, as second applicants, are the trustees of the Clifden Trust. The precise terms of the trust do not appear in the material before the Court but I assume it to be a family trust formed for the purpose of farming operations. "Wanganui" is farmed by the partnership of B.F. Jones & Co. which is the third applicant. The fourth applicant, Yullah Pty. Ltd., seems to have been formed by family and friends of the first applicants; at any rate the company has been used by then. The suggested claims against the first respondent arise " from the purchase by the first applicants of a farm at .Brookton known as "Millroy" for $1.65M. "Wanganui" was already the subject of a mortgage to the first respondent but a further mortgage of that land and a mortgage of "Millroy" were executed in favour of the first respondent to secure a loan made by that respondent in connection witn the purchase of "Millroy". In the light of Mr. Jones' affidavit, counsel for the applicants alleged three instances of misleading or deceptive conduct or conduct likely to mislead or deceive within s.52. The first applicants were persuaded by the manager of the Katanning branch of the first respondent to borrow $1.65M from that respondent in the form of a foreign currency loan. The branch manager, Mr. Parker, recommended such a loan, explaining by hypothetical examples that the interest rate applicable to offshore loans was considerably below the prevailing rates for other forms of finance. But, it is said, as a result of a decline in the value of the Australian dollar relative to certain overseas currencies, the cost of the loan to the first applicants was well in excess of that contemplated when the loan was made. When this situation became apparent, the first applicants decided that it would be necessary to dispose of land belonging to the Clifden Trust, in particular "Wanganui" or "Millroy". In January 1985 Rural Property Trust offered to buy both farms for $4,000,000. Interpolating, it is by -no means apparent that there was in fact a firm offer to purchase but it is clear that Rural Property Trust's proposal involved payment of about half of the purchase price in the form of units in that Trust. Mr. Jones has deposed that, on discussing the matter with the first respondent, he was told that the proposal was not acceptable to the first respondent and further that it did not have commercial merit, that it would be inadvisable to exchange trust units for first class rural land and that in the event of either B.F. Jones & Co. or the Clifden Trust - requiring further financial facilities, they would be forthcoming. Subsequently "Millroy" was sold for $1,192,000, representing a capital loss of $458,000. The purchase price was applied in reduction of the monies then owing to the first respondent but there was still an outstanding balance of $1,584,985.50 for which the first respondent made written demand. In exercise of its power of sale under the mortgage over "Wanganui" (although the exercise of that power is challenged by the applicants), the first respondent entered into an agreement to sell "Wanganui" to the second respondent. The purchase price is $400,000 for the land only; the first respondent also has a bill of sale over some plant and machinery on the farm. About this time the fourth applicant. offered to- buy "Wanganui" from the first respondent for $440,000, of which $434,000 were allocated for land, improvements, plant and machinery. The fourth applicant's offer was made about the time of the sale to the second respondent but, on the information presently available, it is not possible to say which was first in time. In any event the first respondent was not prepared to accept the fourth applicant's offer. IT am unable to see how the second or third of the matters complained of could give rise to a claim based on s.52 of the Trade Practices Act. As to the proposal by Rural Property Trust, the first respondent's consent to a sale was not required though of course nothing could be done to jeopardise 1ts security. The applicants' complaint is not that they acted on anvthing said by the first respondent at the time but that the first respondent would not permit a sale to Rural Property Trust. Such a refusal could not give rise toa claim under the Trade Practices Act. Equally, a statement said to have been made on behalf of the first respondent prior to the offer by the fourth respondent, that the first respondent was looking for an offer for land, plant and machinery rather than for land alone could not give rise to a claim of misleading or deceptive conduct in the circumstances. Again, the applicants' real complaint is that the first respondent did not accept the fourth applicant's offer. Any cause of action arising from such a refusal must lie outside the Trade Practices Act. I have great difficulty in seeing, on the material presently available, how statements made by the first respondent regarding the advantages of a foreign currency loan constitute misleading or deceptive conduct when it was the decline in the value of the Australian dollar that made such a loan ~, disadvantageous. sHdéwever one can see an argument that statements as to the advantages of a foreign currency loan might be expected to take into account currency fluctuations. I am therefore prepared to assume in favour of the applicants that, in respect of this complaint, there is a serious question to be tried. The applicants also contend that the first respondent's power of sale under the mortgage did not arise because of a failure to allow a period of one month to expire from the demand for payment of the balance of mortgage monies before exercising the power of sale. The applicants point to the fact that cl.17 of the mortgqaqe reduces only the period of continued default mentioned in s.106 of the Transfer of Land Act 1893. Demand was made pursuant to s.107 of the Act. In my view that argument misapprehends the relationship between ss.106, 107 and 108 of the Act. The mortgage in question is a demand mortgage and the notice given by the first respondent was not by reason of default (as contemplated by s.106) but was a demand for monies payable on demand (as contemplated by 5.107). In those circumstances no period of default is required before the powers conferred on a mortgagee by s.108 arise, other than a period fixed by the mortgage itself. No such period is fixed. In any event I have serious reservations whether this argument and the cause of action said to arise from it properly fall to be determined in the context of the claims made under s.52 of the Trade Practices Act. There is really no common substratum of fact. However I do not base my decision on that "Aspect of the matter. I base it on the considerations to which-I have already referred, coupled with the balance of convenience arising from the granting or refusal of an interim injunction. There have been proceedings in the Supreme Court of Western Australia since the first respondent issued a writ on 29 June 1986 claiming the balance of monies due under its mortgage and also possession of "Wanganui". By that time the first respondent had entered into the contract of sale with the second respondent, under which it would seem possession was to be fa st adiven on 12 July 1986. The onlv defence pursued by the first applicants was in relation to the claim for possession, it being arqued that B.F. Jones & Co. was 1n possession pursuant to a lease to it from the second applicants. The proceedings in the Supreme Court began before the Master and continued through to the Full Court, the outcome being favourable to the first respondent. The stay of execution originally granted by the Master on 25 August 1986 expired on 9 January 1987, the day on which this matter came before this Court. The first applicants did not, by defence or counterclaim, challenge the first respondent's entitlement to recover monies due under the mortgage or its exercise of its power of sale. The second respondent has been a purchaser of "Wanganui " since May 1986 and there was no suggestion that it had acted other : than in good faith and for valuable consideration. In 'practical | terms the second respondent has been held out of possession because of the litigation in the Supreme Court which has now come. to an end. Although the applicants' difficulties' go back at least as early as 1984, they made no approach -to this Court | until 9 January 1987 and then, it would appear, because the stay of execution on the judgment in the Supreme Court-was about to expire. The first respondent's position is that it holds- an inadequate security, the value of which is further diminishing as the mortgage debt increases. If the applicants can make good a claim under the Trade Practices Act, they have an entitlement in damages against the first respondent and there is no doubt as to the capacity of that respondent to meet any judgment for damages against 1t. In all those cigcumstances the balance of convenience 1s strongly against the granting of an injunction, even an i injunction as suggested by counsel for the applicants. For all these reasons the application is refused. I certify that this and the preceding 7 pages are a true copy of judgment the herein of the Honourable Mr. reasons for Justice Toohey. CLARA Voor Associate Dated: 12 January 1987 Counsel for the applicant: Counsel for the first respondent: Counsel for the second respondent: Date of hearing: Mr. P. Clements instructed by Michael Whyte &-Co. Mr. K.d. Martin instructed:by . Messrs. Parker & Parker Mr. D.H. Solomon instructed by Phillips Fox 9 January 1987 nterim