FEDERAL COURT OF AUSTRALIA Naxatu Pty Limited v Perpetual Trustee Company Limited; In the Matter of Sterling Estates Development Corporation Pty Ltd (Receivers and Managers Appointed) (Subject to a Deed of Company Arrangement) [2009] FCA 867 Corporations Act 2001 (Cth), s 423 IN THE MATTER OF STERLING ESTATES DEVELOPMENT CORPORATION PTY LTD (ACN 083 002 171) (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) NAXATU PTY LTD (ACN 002 197 131) v PERPETUAL TRUSTEE COMPANY LIMITED (ACN 000 001 007) NSD 493 of 2009 FOSTER J 11 AUGUST 2009 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY general division NSD 493 of 2009 IN THE MATTER OF STERLING ESTATES DEVELOPMENT CORPORATION PTY LTD (ACN 083 002 171) (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) BETWEEN: NAXATU PTY LTD (ACN 002 197 131) Plaintiff AND: PERPETUAL TRUSTEE COMPANY LIMITED (ACN 000 001 007) Defendant JUDGE: FOSTER J DATE OF ORDER: 11 AUGUST 2009 WHERE MADE: SYDNEY THE COURT: 1. DIRECTS the plaintiff to file and serve by no later than 21 August 2009 a document in which the plaintiff: (a) sets out the duties which it alleges were breached by the defendant; (b) specifies the source of or basis upon which such duties are said to be owed by the defendant to the plaintiff; (c) specifies the breach or breaches of such duties upon which it intends to rely at the hearing with sufficient particularity to enable the defendant and the Court to understand precisely what conduct, either by act or omission, is said to constitute each alleged breach of duty; and (d) as clearly and precisely as is presently possible, specifies the financial consequence of each such breach as far as the plaintiff is concerned. 2. DIRECTS that the proceeding stand over for directions to 27 August 2009 at 9.30 am before Foster J. 3. ORDERS that the Notice of Motion filed by the defendant on 31 July 2009 be dismissed. 4. ORDERS that the defendant pay the plaintiff's costs of and incidental to that Notice of Motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 493 of 2009 IN THE MATTER OF STERLING ESTATES DEVELOPMENT CORPORATION PTY LTD (ACN 083 002 171) (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) BETWEEN: NAXATU PTY LTD (ACN 002 197 131) Plaintiff AND: PERPETUAL TRUSTEE COMPANY LIMITED (ACN 000 001 007) Defendant JUDGE: FOSTER J DATE: 11 AUGUST 2009 PLACE: SYDNEY REASONS FOR JUDGMENT 1 In the proceedings, the plaintiff claims, pursuant to s 423 of the Corporations Act 2001 (Cth) (the Act), an order for an inquiry and other appropriate orders in respect of the actions of the defendant as mortgagee in possession of certain units in a home unit development at 10 Pyrmont Bridge Road, Camperdown (the home unit development). The plaintiff also relies upon traditional equitable remedies in that it seeks an account as against the defendant not only on the ordinary basis but on the basis of wilful default. 2 The defendant has brought an application to strike out the Statement of Claim filed by the plaintiff, not upon the basis that there is no conceivable cause of action or proceeding that could be brought, but rather on the basis that the plaintiff has failed to articulate in any sensible or appropriate way the case which it seeks to bring before the Court. 3 During the course of argument today, I suggested to Counsel that perhaps the arguable shortcomings in the pleading could be addressed by taking a practical approach rather than by going down the traditional path of striking out the whole or part of the pleading or, alternatively, of leaving the pleading as it is. 4 The plaintiff is the registered proprietor of a second ranking mortgage over five units in the home unit development. It previously held a second ranking mortgage over a further unit but this unit has now been sold by the defendant. The defendant is the assignee of a first registered mortgage over the units in respect of which the plaintiff has an interest and also over other units in the development. A third party, Bridgecorp Finance Limited (Bridgecorp), formerly held a registered second mortgage over a number of home unit properties in the development over which the defendant held the first registered mortgage and in respect of which the plaintiff had no mortgage interest. 5 The plaintiff complains that the defendant has breached its duty as mortgagee in possession and/or as mortgagee exercising its power of sale and has failed to perform its functions within the meaning of s 423 of the Act in a number of different ways. Examples are that it has failed properly to deal with the question of GST; that it has in some instances preferred the interests of Bridgecorp; that it has paid out moneys inappropriately or improperly to a company that appears to be related to the mortgagor; and that it has paid to itself more than it is entitled to receive under its mortgage. 6 It seems to me that the best course of action at the moment is for me to direct the plaintiff to file a document in the terms of a document which I will describe in a moment, with a view to supplementing and amplifying the case that has been propounded in the Statement of Claim read with the Originating Process. 7 The defendant's complaints about the Statement of Claim are many and have been detailed in Written Submissions which have been filed. In those submissions, the defendant makes some general criticisms of the pleading and then descends into detailed criticisms directed to many paragraphs of the pleading. Given the approach which I have decided to take, it is not necessary for me to go through the specific complaints made by the defendant, paragraph by paragraph. In general terms, I do not think that the defendant has made out a case for striking out the pleading and, at best, has highlighted some deficiencies which may be described as a lack of particulars for the most part. 8 What I propose to do is to direct the plaintiff to file and serve a document in which the plaintiff: (a) sets out the duties which it alleges were breached by the defendant; (b) specifies the source of or basis upon which such duties are said to be owed by the defendant to the plaintiff; (c) specifies the breach or breaches of such duties upon which it intends to rely at the hearing with sufficient particularity to enable the defendant and the Court to understand precisely what conduct, either by act or omission, is said to constitute each alleged breach of duty; and (d) as clearly and precisely as is presently possible, specifies the financial consequence of each such breach as far as the plaintiff is concerned. I have in mind that there be a reference to the general law duties as mortgagee as well as to any statutory basis under s 423 of the Act which is relied upon. The document can be in semi-narrative form but it should address all questions of breach and loss with precision and particularity. 9 Counsel for the plaintiff has informed me that he can provide such a document within seven days. What I propose to do is to direct that it be provided to the solicitors for the defendant and filed by no later than 21 August 2009. I propose to stand over the proceedings to 27 August 2009, or to some other date which is convenient to Counsel, with a view to considering the document that I have directed be filed and to looking at how best to require the defendant to answer with precision the various allegations made against it. I have in mind that there will need to be a response which is meaningful to the particular allegations which I expect will be articulated in the document which I have directed to be filed. 10 Counsel for the plaintiff has sought the costs of the Motion. Counsel for the defendant has submitted that the Motion was properly and usefully brought in that it has produced a result which is of assistance to everyone, including the Court. Whilst that is true, I think that the defendant cannot escape the general view which I have formed that the Motion for strike out would have been largely unsuccessful. In those circumstances I propose to order that the defendant pay the plaintiff's costs of that Motion. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate: Dated: 12 August 2009 Counsel for the Plaintiff: Mr JE Thomson Solicitor for the Plaintiff: Cara Marasco & Company Counsel for the Defendant: Mr P Dowdy Solicitor for the Defendant: Deacons Date of Hearing: 11 August 2009 Date of Judgment: 11 August 2009