Federal Court of Australia Russell v Desi Nominees Pty Limited [2023] FCA 1249 File number(s): ACD 60 of 2023 Judgment of: CHEESEMAN J Date of judgment: 18 October 2023 Date of publication of reasons: 19 October 2023 Catchwords: EQUITY – where the plaintiff seeks an interlocutory injunction against a grantee from exercising a power of sale arising from a guarantee – where the contract giving rise to the power of sale is alleged to be liable to be set aside in accordance with the principles in Garcia v National Australia Bank Ltd [1998] HCA 48; 194 CLR 395 or pursuant to the Australian Securities and Investments Commissions Act 2001 (Cth) – where the existence of a prima facie case is conceded for the purpose of this application – where there is a question as to the substance of the usual undertaking as to damages – where the plaintiff seeks to sell the secured property herself – Held: application dismissed with costs. Cases cited: Australian Broadcasting Corporation v O'Neill [2006] HCA 46; 227 CLR 57 Commonwealth Bank of Australia v Hadfield [2004] NSWCA 350 Garcia v National Australia Bank Ltd [1998] HCA 48; 194 CLR 395 Heavener v Loomes [1924] HCA 10; 34 CLR 306, 326 Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; 217 FCR 238 Division: General Division Registry: Australian Capital Territory National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 70 Date of hearing: 17, 18 October 2023 Counsel for the plaintiff: Mr D Allen Solicitor for the plaintiff: Baker Deane & Nutt Lawyers Counsel for the defendants: Mr R Size Solicitor for the defendants HWL Ebsworth Lawyers ORDERS ACD 60 of 2023 BETWEEN: MELISSA RUSSELL Plaintiff AND: DESI NOMINEES PTY. LIMITED ACN 008 601 330 First Defendant ROVERA INVESTMENT FUND PTY LTD ACN 151 726 073 Second Defendant SOFIA (ACT) PTY LIMITED ACN 151 041 262 (and another named in the Schedule) Third Defendant order made by: CHEESEMAN J DATE OF ORDER: 18 OCTOBER 2023 THE COURT ORDERS THAT: 1. Prayers 1 and 2 in relation to interlocutory relief contained in the originating process dated 16 October 2023 be dismissed. 2. Subject to further order, the proceeds of any sale of the shares numbered 11 to 20 in Pialligo Horticulture Pty Ltd ACN 139 772 464 (Lot 2 shares), net of the amount required to discharge the first registered mortgage and the costs of selling the Lot 2 shares, be held in the defendants' solicitors' controlled monies account for a period of 21 calendar days from the date of receipt of the proceeds before being released to the defendants. 3. The defendants keep the plaintiff informed in relation to the sale of the Lot 2 shares and the timing of the receipt of any proceeds. 4. Liberty to apply on 2 days' notice, such liberty to be exercised either before the relevant duty Judge or the docket Judge once a docket Judge has been identified. 5. The proceeding be referred to the National Operations Registrar for allocation to a docket Judge. 6. The proceeding be listed for case management at a time to be advised by the Associate to docket Judge. 7. The plaintiff pay the defendants' costs of the interlocutory application heard on 17 and 18 October 2023. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT CHEESEMAN J INTRODUCTION 1 These reasons concern an inter partes application for an interim injunction to restrain the sale by auction of shares conferring the right to exclusive occupation of Crown leasehold property located in the Australian Capital Territory. I made orders on 18 October 2023, inter alia, dismissing the application. These are my reasons for doing so. BACKGROUND 2 Melissa Russell (nee Awburn), the plaintiff, owns shares in Pialligo Horticulture Pty Ltd ACN 139 772 464 and is married to John Russell. Those shares, pursuant to the Constitution of Pialligo Horticulture, grant the plaintiff an exclusive right to occupy, use and enjoy the leasehold property described as Lot 2, 18 Kallaroo Road, Pialligo ACT 2609. Lot 2 is one of four adjoining lots in which Pialligo Horticulture holds an interest pursuant to a Crown lease. There are four shareholders in Pialligo Horticulture. Each shareholder has corresponding exclusive rights conferred in relation to one of the lots, with such rights being conferred by the Constitution. I will refer to the plaintiff's shares as the Lot 2 shares. 3 The plaintiff's evidence is that in about 2010, her husband set up Pialligo Horticulture as the company that owned the land located at 18 Kallaroo Road, Pialligo. She said her husband used the main commercial lot to operate the Pialligo Estate business. An orchard, olive grove and winery are located on the Pialligo Estate lot, and are referred to as "the farm". The remaining three lots were residential. The plaintiff says she did not take too much notice of "the lease agreements and things." The current directors of Pialligo Horticulture, [REDACTED], are the owners directly or indirectly of the two residential lots other than Lot 2. Her husband was previously a director of Pialligo Horticulture. The plaintiff has never been a director of Pialligo Horticulture. 4 The plaintiff deposes that her husband organised a loan with St George (now part of Westpac) and "all that sort of thing" to fund the purchase, of what she refers to as Lot 2. The plaintiff says that Lot 2 was intended to be "the house lot for our family" and that they had obtained development approval for plans to build. She says that after financial setbacks, including the effect of the COVID-19 pandemic on the Pialligo Estate business, "there was a real strain on everything and we couldn't build". She says that: … in order to get an extension to the DA we dug a third of a basement so that some work had been done. That was fenced off and has remained fenced off since. The lot has just been sitting there. There is a big electric gate for access to the residential lots next to the Pialligo Estate lot. The people living at Lot 1 have access to the electronic gate. Another lender has taken possession of the commercial lot that had the Pialligo Estate business. This lot has not been maintained for 6 months, it is on the market and currently for sale. 5 The first three defendants, Desi Nominees Pty Limited ACN 008 601 330, Rovera Investment Fund Pty Ltd ACN 151 726 073 and Sofia (ACT) Pty Limited ACN 151 041 262 are the grantees of security interests in the Lot 2 shares created under three Specific Security Agreements (SSAs) executed in 2020 and 2022 and of guarantees and indemnities included in certain loan agreements executed by the plaintiff as guarantor in 2020 and amended with the signed consent of the plaintiff in 2022. The fourth defendant, MilDesi Security Holdings Pty Limited ACN 636 039 766, is a non-trading entity created as the security trustee for the first to third defendants collectively. 6 The first three defendants are each lenders who have provided funding to various businesses associated with the plaintiff's husband, conducted under the names of Pialligo Estate and Pialligo Farm (the Loans). The detail of the loan arrangements are as follows. 7 Desi Nominees is the trading trustee for the Desi Nominees Pty Ltd Superannuation Fund. In June 2020, Desi Nominees gave a loan facility pursuant to an agreement titled "Desi Loan Agreement – Pialligo Estate Facility". This loan agreement was signed by the plaintiff. It was secured by a SSA (Estate SSA). There is an equivalent loan agreement by which Desi Nominees provided the Pialligo Farm Facility, which was also secured by a SSA (Farm SSA). 8 Rovera was previously named Skela ACT Pty Ltd. In June 2020, Rovera gave a loan facility pursuant to an agreement titled "Skela Loan Agreement – Pialligo Estate Facility". This agreement was signed by the plaintiff. It too was secured by the Estate SSA. There is an equivalent loan agreement by which Rovera gave the Pialligo Farm loan facility. This facility was also secured by the Farm SSA. 9 Sofia is the trading trustee for the Rovera Construction Pty Superannuation Fund. In June 2020, Sofia gave a loan facility pursuant to an agreement titled "Sofia Loan Agreement – Pialligo Estate Facility". This agreement was signed by the plaintiff. The Sofia Loan Agreement – Pialligo Estate Facility was secured by the Estate SSA. There is an equivalent loan agreement by which Sofia gave the Pialligo Farm loan facility. This facility was also secured by the Farm SSA. There is also a SSA granting security over the Lot 2 Shares to MilDesi. 10 Westpac Banking Corporation is the mortgagee, with the mortgage presently securing a debt of approximately $1.3 million plus interest. The defendants' security interests rank second after Westpac. Both Westpac's and the defendants' security interests are caveated on the title of Lot 2. The defendants have also registered interests on the Personal Property Securities Act 2009 (Cth) (PPSA). 11 A letter of demand dated 25 May 2023 addressed to the plaintiff states on its face that it was sent by hand and express post as well as by email. The letter of demand called on the plaintiff's guarantees in respect of the loan agreements and alleges that collective debt remaining on the Loans is $8,190,488.62 (principal and interest). The letter of demand notes that whilst the plaintiff's guarantee is limited to the Lot 2 shares, that limitation is subject to exceptions including for incidences of fraud, gross negligence, unlawful act, unlawful omissions or wilful default. The plaintiff deposes that she did not receive the letter in May 2023 and that the defendants did not have any contact details for the plaintiff. I note that the email address for service under the loan agreements for the plaintiff was the email address to which the letter of demand purports to have been sent. That email address appears to be the plaintiff's husband's email address. The same email address is nominated in the Loan Agreements in respect of both the plaintiff and her husband. 12 The plaintiff explains that the timing of her application, on in effect the eve of the auction, as follows: (1) the defendants did not provide a substantive response to the email of the plaintiff's solicitor of 20 June 2023 until 9 August 2023; (2) the plaintiff spent September 2023 raising money from family and friends to instruct lawyers and a detailed letter was sent to the defendants on 19 September 2023; and (3) on 9 October 2023 the defendants provided nine calendar days' notice of the online auction of Lot 2. 13 In July 2023, Westpac agreed to an interim hardship arrangement as a result of which the plaintiff's loan repayment amounts were reduced to interest only in the sum of $8,899 (estimated, until further notice) for the months from 31 July 2023 to 31 December 2023. Once all the scheduled varied loan repayment amounts are made, Westpac agreed to adjust the loan account so that it was no longer in arrears on the basis that arrears will be incorporated into the loan and loan repayments and the loan expiry term will be adjusted accordingly. In the event that the conditions of the hardship arrangement are not met, Westpac reserves its rights, including, in certain circumstances, to require full repayment of the balance of the loan. The evidence is silent as whether the plaintiff has complied with the hardship arrangement. 14 The plaintiff tendered an email from Westpac in which Westpac confirmed that its position was that if the sale of the Lot 2 shares occurs as a result of the defendants' exercise of their purported power of sale and the debt owing to it is repaid from the sale proceeds, then it will comply with any request to produce the share certificates at the settlement. 15 The SSAs provide for, in effect, a power of sale which may be exercised when an event of default, as defined in the guarantees, (EOD) has occurred. On this application, on the assumption, which is otherwise disputed, that the SSAs and guarantees are enforceable against the plaintiff, it was not in dispute between the parties that an EOD has occurred and the power of sale has been enlivened. 16 The defendants have caused a real estate agent to list the Lot 2 shares for sale via an online auction that was due to be held at 1pm, 18 October 2023. The marketing which preceded the auction being set down has essentially comprised two phases. 17 First, on 24 August 2023, a sale by expressions of interest with a closing date of 19 September 2023 (EOI process) was advertised on Bidder.com.au, view.com.au, Realtair, Homely, On The House, Allbids.com.au, Agentpoint / Canberra Weekly, Rate My Agent, Domain.com.au and Realestate.com.au. No expressions of interest (offers) were received. Ten contracts, being agreements for the sale of the Lot 2 shares, were distributed. By 12 October 2023, five of the recipients had confirmed they were no longer interested. 18 Secondly, on 5 October 2023, a sale by public online auction on 18 October 2023 was advertised by the same means as the EOI process had been advertised. As at 6.01pm, 17 October 2023, there were no registered bidders. By 6.59pm, 17 October 2023, there was one registered bidder. There is no evidence from the defendants' real estate agent as to whether the sole registered bidder is known to the agent with conduct of the sale or that there is a basis for believing that the registered bidder is considered to be an interested buyer with capacity to bid. 19 The defendants submit that the apparent lack of interest in the auction does not support an inference that the steps taken by the defendants to market the shares have been inadequate. The defendants submit that the more likely inference is that the apparent lack of interest reflects the reality that the "property" being auctioned is in the form of shares in a private company conferring exclusive rights in relation to the leasehold of a vacant lot, the primary feature of which is a "hole in the ground". As noted above the "hole in the ground" is a remnant of steps taken to commence works on a development application which has not otherwise been substantially progressed. Relatedly, I note that the provisions of the Constitution, which is annexed to the sale agreement, are somewhat complex and include some apparent internal inconsistencies which may also be a factor in the level of interest that has been shown in the property to date. 20 The plaintiff has led evidence from two experienced real estate agents to the effect that the manner in which the sale of the Lot 2 shares has been marketed falls below reasonable market practice in a number of respects, including critically the following. First, in relation to allowing sufficient time for steps to be taken to educate potential buyers about the somewhat uncommon nature of the transaction whereby the property being transmitted comprise shares in a company and although the Constitution is annexed to the contract, there is no information as to the company's financials. In this respect, I note that there is in evidence a letter from a director of Pialligo Horticulture which asserts that the Lot 2 shares are subject to a lien in favour of the company for unpaid dues (in an unspecified amount). Secondly, the evidence of the real estate agents relied on by the plaintiff suggests that reasonable market practice would require a method of sale other than by online auction and allow for a greater investment in advertising. In this respect, I note the evidence on this application is that to date the quantified outlay for advertising has been approximately $1,300. The real estate agent retained by the defendants has confirmed that the choice of an online auction as the method of sale was at the sellers' request. 21 The plaintiff deposes to her concerns arising from her understanding of the manner in which the defendants have marketed the shares as follows: That makes me think the Defendants want the lot for themselves. My concern is the Defendants sell the property for $1.3 million and a dollar to someone associated with themselves. I want to sell the property to get the better value for it. The Defendants are not doing justice to the lot. 22 The recent evidence led by the defendants on this application sheds light on the steps taken to date in marketing the property and correct a number of misapprehensions about the process that were held by the plaintiff at the time she gave her affidavit. 23 By originating application, the plaintiff seeks, as her primary claim, to set aside the SSAs on the equitable principles stated in Garcia v National Australia Bank Ltd [1998] HCA 48; 194 CLR 395. The plaintiff as a fallback, seeks relief pursuant to various provisions under the Australian Securities and Investments Commissions Act 2001 (Cth) for the SSAs to be declared as being void ab intio on the basis of unconscionable conduct. As noted above, the plaintiff does not dispute that she signed the relevant documents. She maintains that she is entitled to equitable relief because she alleges that the defendants knew or should have known that she was married to their customer, Mr Russell; she did not understand the purport or effect of the 2020 or 2022 SSAs or guarantees and that her husband obtained her signature through the trust and confidence that she reposed in him; the defendants did not take any steps to explain the 2020 or 2022 transactions to the plaintiff and did not require or encourage her to obtain independent legal advice; and the plaintiff was a volunteer. The claim for final relief falls to be determined on another day. For present purposes the exercise of a prima facie case is not in dispute. 24 The plaintiff undertakes that if the interlocutory injunction is granted she will herself move to market and sell the Lot 2 shares in accordance with the advice she has received from experienced real estate agents as to the best way in which to maximise the sale price that may be achieved. She deposes to having already engaged an agent for this purpose. 25 In the alternative to an injunction, the plaintiff seeks an order that the proceeds of the sale of the Lot 2 shares, net of payments to Westpac necessary to discharge the mortgage and the costs of the sale, be paid into a solicitor's controlled monies account, pending resolution of her claim against the defendants. 26 At the hearing, the plaintiff did not press prayers 3 and 4 of the originating application. 27 The interlocutory application came before me on 17 and 18 October 2023 in my capacity as the Commercial and Corporations Duty Judge. The plaintiff initially sought to proceed on an ex parte basis. I directed the plaintiff to immediately notify the defendants of the application, as well as the entities named as interested parties in the originating process, Westpac and Pialligo Horticulture. On being notified of the application the defendants appeared by counsel to contest the application, seeking time to adduce evidence during the course of 17 October 2023, which evidence was supplemented overnight. Neither Westpac or Pialligo Horticulture sought to be heard. LEGAL PRINCIPLES 28 The applicable principles in relation to granting an interlocutory injunction are well-established and are explained in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; 227 CLR 57, at [19] (per Gleeson CJ and Crennan J) and at [65] to [72] (per Gummow and Hayne JJ); and Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; 217 FCR 238, at [44] to [74] (per Dowsett, Foster and Yates JJ). 29 Depending on the nature of the plaintiff's claim, the plaintiff must show that: there is a serious question to be tried as to the plaintiff's entitlement to relief (a prima facie case); the plaintiff is likely to suffer injury for which damages will not be an adequate remedy; and the balance of convenience favours the granting of an injunction. These are the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed. O'Neill at [19]. EVIDENCE 30 The plaintiffs relied on the following materials: (1) the affidavit of the plaintiff, affirmed on 16 October 2023 and the accompanying exhibit MR-1 thereto; (2) the affidavit of Brett Barton, licensed real estate agent, sworn on 16 October 2023; (3) the affidavit of Stan Platis, licensed real estate agent, sworn on 16 October 2023; (4) exhibit 1 being company searches of the defendants, extracted on 31 August 2023; (5) exhibit 2 being a letter from St. George to the plaintiff dated 18 July 2023; (6) exhibit 3 being an email from Jarrad Martin of St. George Bank to the plaintiff dated 15 August 2023 at 9:53am. 31 The Defendants relied on the following materials: (1) the affidavit of Liam Patrick Gilligan, solicitor, affirmed on 17 October 2023 and its annexures thereto; and (2) the affidavit of Stephen James Coyle, solicitor on record for the defendants, affirmed on 17 October 2023 and its annexures thereto. 32 There was no cross-examination. CONSIDERATION Injunction Prima facie case 33 As mentioned, the defendants conceded the existence of a prima facie case for the purposes of the interlocutory application. The requirement to establish a prima facie case is a relatively low bar. I will return to the issue of prima facie case when considering the balance of convenience. Live issues 34 It emerged in the course of the hearing, as the evidence evolved, that the principal issues in dispute were: (1) whether damages would be an adequate remedy for the plaintiff if she is ultimately successful in her substantive claim; (2) whether the usual undertaking as to damages proffered by the plaintiff was sufficient to support the grant of the injunction sought; and (3) whether the balance of convenience favoured the grant of an injunction. Whether damages are an adequate remedy 35 The thrust of the plaintiff's submission was that the plaintiff's claim for final relief is for the SSAs and guarantees to be set aside against her, not for compensation. Counsel for the plaintiff submitted that if the auction is permitted to proceed then the plaintiff's right to conduct the sale as owner of the shares will be destroyed. The plaintiff submitted that if the shares are sold by the defendants via the online auction process, then the plaintiff will be prejudiced by having to establish that the defendants had acted recklessly or otherwise not in good faith in exercising their purported power of sale, in addition to establishing that the SSA and guarantees should be set aside. As mentioned above, the plaintiff's concern is that the defendants will "sell the property for $1.3 million and a dollar to someone associated to themselves". In effect, the complaint is that the shares might be sold at an undervalue to a related party and that she would face difficulties in proving that to be the case at a future time. 36 I am not persuaded by the plaintiff's submissions. The plaintiff deposes to her intention to sell the shares through her desired marketing and share sale process. This is not a case where the plaintiff asserts that there is some unique feature of Lot 2, which if transferred through the sales of the shares cannot be properly compensated by a monetary sum. Her concern is that the shares may be sold at an undervalue. On the whole of the evidence led on this application, I do not regard her concern in relation to the property being sold to a related party at undervalue to rise above suspicion. The obligations of a mortgagee exercising a power of sale were summarised in Commonwealth Bank of Australia v Hadfield [2004] NSWCA 350 at [14], (Bryson JA with whom Giles and Tobias JJA agreed): 14. Exercise of the power of sale is undertaken by a mortgagee in the interest of the mortgagee, although the mortgagee is confined to exercise of the power in good faith for the purpose for which it was conferred; the mortgagee cannot act for any extraneous purpose or bye-motive, and cannot sacrifice the interest of the mortgagor; to do so would be to depart from good-faith exercise of the power, and from the concept of a sale in the exercise of the power. The sale must bona fide be a sale, not a sacrifice, and the mortgagee cannot be indifferent to the price provided only that its debt is paid. In the pursuit of its own interest the mortgagee is entitled to choose the time at which it sells the property. 37 The defendants submit that in circumstances where they anticipate that there will be a shortfall in the security that they hold in support of the Loans they have advanced, they have an interest in maximising the sale price of the Lot 2 shares. The plaintiff's submissions focussed on what she contended was the defendants' failure to adopt the approach to the sale of the Lot 2 shares that accorded with the evidence given by Mr Platis and Mr Barton. The defendants submit that the plaintiff has not addressed the good faith test. The defendants maintain that the evidence establishes that they have acted in good faith. They engaged a real estate agent on 4 August 2023. The real estate agent conducted an EOI Process between 24 August 2023 and 19 September 2023 which involved print and online advertising. It resulted in ten contacts being sent to potential buyers but no offers being made. On 5 October 2023, the defendants listed the shares for an auction to be held on 18 October 2023. At the time of the 18 October 2023 hearing there was one registered bidder and more may register before the auction. 38 If the plaintiff's concern about sale at undervalue to a related party manifests, and the plaintiff succeeds in setting aside the SSAs and the guarantees, then the plaintiff will have a claim for equitable compensation or statutory damages against defendants for the unauthorised sale of her shares, independent of any allegations about the manner in which the power of sale was exercised. She will be able to lead expert evidence as to what she asserts is the true value of Lot 2 and therefore the loss that she has suffered. Such evidence may or may not demonstrate that the true value of the shares was more than was received by the defendants at auction, if the auction results in a sale. 39 The plaintiff also attacked the defendants' capacity to pay any judgment that may ultimately be awarded to the plaintiff. The plaintiff submitted based on company searches of the defendant companies that the shares in each of the defendants were of nominal paid up value and that they appeared to be small family companies, some of which were acting in a trustee capacity. Accordingly, it was submitted that, in circumstances where the defendants had not led evidence as to their capacity to meet a judgment, I should infer that the defendants lacked the capacity to meet any future judgment the plaintiff may obtain and so damages would be an inadequate remedy. 40 As this issue was not raised until submissions were made at the hearing, the defendants sought to reopen and lead evidence of their financial capacity. I provided the defendants with that opportunity and they read a further affidavit, prepared after the hearing on 17 October 2023, of Stephen Coyle, their solicitor on record. Mr Coyle deposes to the financial status of the defendants and annexes relevant draft financial statements. Having reviewed the further evidence, to the extent it is relevant, I am satisfied that the defendants have demonstrated for the purpose of this application that they collectively are capable of meeting a future judgment which the plaintiff may obtain if she makes good her allegations. 41 In any event, here the plaintiff sues, inter alia, in equity's exclusive relying on the principles in Garcia and the Court's focus is necessarily directed to the existence of a prima facie case and the balance of convenience, not the requirement to demonstrate that the damages would be inadequate: Heavener v Loomes [1924] HCA 10; 34 CLR 306, 326. Is the undertaking as to damages adequate to support the grant of an injunction? 42 The plaintiff proffered through her counsel the usual undertaking as to damages. She did not seek to argue that she should be excused from providing the usual undertaking as to damages in the circumstances of this case. On her own evidence, there is a real issue as to the utility of the undertaking offered by the plaintiff. 43 The plaintiff deposes to her financial position as follows: (1) she does not own any real estate or superannuation of substance; (2) her only asset of substance is the Lot 2 shares; (3) she and her family are living in rented accommodation on which friends are paying the rent; (4) she is employed in a casual role that pays $40 per hour plus superannuation — she does not disclose how many hours she works as a casual; (5) she estimates that her personal effects that she owns, including jewellery and furniture, have a value of around $50,000; (6) she believes that she has good prospects of obtaining full time employment as a project manager with a public sector contractor which would command an annual salary of upwards of $110,000 per year — she does not disclose the basis for her belief or provide any information as to the nature of her target role beyond what has been stated; (7) her three children are financially dependent on her and her husband and that she would use the proceeds of the sale of Lot 2 shares if available to her to pay for her family to live; and (8) she believes that she could raise through the support of family and friends $50,000 if needed to meet a call on an undertaking for damages. 44 It can be inferred from the hardship arrangement that interest is accruing at around $8,900 per month on the Westpac mortgage. Mr Platis describes a marketing process which would include two to three weeks to develop the marketing strategy which would then run for four weeks. Mr Barton outlines a five week process for the marketing campaign. As a consequence, if the plaintiff's preferred sale strategy were implemented in the estimated time, and was successful, a minimum of $11,000 to $15,000 in additional interest will be incurred on the Westpac mortgage. Further interest will accrue in the period between the agreement being executed and completion, although this may also be the case if the shares are sold by the defendants. 45 I am not persuaded on the plaintiff's own evidence that the plaintiff's undertaking as to damages is capable of weighing in favour of the grant of an interim injunction for the following reasons: (1) apart from the Lot 2 shares, which are in dispute, and potentially illiquid, the plaintiff does not depose to having any existing substantial sources of funds or real estate; (2) the plaintiff's personal effects are self-valued and no detail is given that supports the estimated value being accurate or that the goods are capable of being readily liquidated if that proves necessary; (3) the plaintiff candidly acknowledges that she intends to use the proceeds of the sale of the Lot 2 shares (if available to her) to fund the expenses of her family; (4) the plaintiff is currently in casual employment but she has not disclosed nor substantiated her average earnings on an ongoing basis; (5) the plaintiff deposes to a belief that she "could" raise about $50,000 in funds from family and friends at a future time if needed to meet a call on her undertaking as to damages but has not actually attempted to raise such funds and can point to no firm commitments in that regard; and (6) the plaintiff deposes to a belief as to being able to obtain full time employment with annual remuneration of over $110,000 but has given no detail to substantiate that belief and has not pointed to any steps she has taken to achieve that outcome. 46 In the circumstances, the plaintiff's own evidence causes me to conclude that she is in dire financial straits and the undertaking she has given, despite her hopes and beliefs, will likely prove to be ineffective in offsetting the prejudice that the defendants will suffer if restrained. That conclusion is reinforced by the real risk that even if she sells her personal effects and appeals to the charity of friends and family she may ultimately face bankruptcy. Balance of convenience 47 This consideration requires that the prejudice that would be suffered by the plaintiff if the injunction is not granted be weighed against the prejudice that would be suffered by the defendants if the injunction is granted. Prejudice to the plaintiff 48 If the injunction is not granted and the Lot 2 shares are sold at auction, the plaintiff will not be able to sell the shares following her preferred marketing campaign. For the reasons I set out above, I do not accept that the plaintiff's contention that she will suffer prejudice because she will face a higher burden in needing to bring a suit alleging that the power of sale was exercised in a reckless fashion or not in good faith by the defendants, is a factor that should be given other than minimal weight in assessing the balance of convenience. The plaintiff's concern is speculative. It was based on an incomplete understanding of the manner in which the defendants have marketed the Lot 2 shares. After the defendants' evidence became available, the plaintiff did not attempt to grapple with it. I accept that the plaintiff would like to control the sale process in accordance with the recommendations of Mr Barton and Mr Platis but she has not demonstrated for the purpose of this application that the defendants are acting, or that there is a real risk that they are acting, otherwise than in good faith. 49 Mr Barton deposes that in his opinion Lot 2 is worth approximately $2.25 million in today's economic environment to a high net worth individual on the basis that the adjoining site is slightly superior and was sold in 2022 for $2.5 million. The qualified nature of Mr Barton's estimate of the value of Lot 2 is immediately apparent based as it is on a market limited to "high net worth" individuals and a comparison with only one other property. Mr Barton also deposes based on his experience that a sale by a "mortgage in possession" will generally sell for 10% less than the market value, particularly if there is limited interest in the property. The plaintiff submits that she faces a potential prejudice of approximately $225,000 diminution in sale price if she makes out her claim. Even if I take these figures at face value, notwithstanding the qualified nature of the valuation figure, the difficulty I have with the plaintiff's submission as to likely reduction in sale price based on a sale by the defendants being in effect a sale by a mortgagee in possession is that the information in relation to the distressed nature of the sale is already in the public domain. 50 The defendants point to an article published in the Canberra Times on 17 October 2023 in relation to the sale of Lot 2. The article opens by observing that: Another slice of failed hospitality empire Pialligo Estate is up for sale. 51 The article continues: Blackshaw Corporate is listing lot 2 of 18 Kallaroo Road, Pialligo, for online auction on Wednesday at 1pm. A title search suggests the 6.5-acre block of land is half-owned by the former director John Russell and his wife Melissa. Pialligo Estate was liquidated early this year, owing nearly 600 people, businesses and government departments more than $10.6 million. These creditors are not expected to receive funds from the sale of the land. … Lot 2 is marketed as a "truly unbeatable" location for buyers looking for a private block to build their "dream home". "With a blank canvas before [you, you] have the freedom to envision and create a home that perfectly suits your style and needs," the ad says. It includes a hole in the ground, which is understood to be the beginnings of an abandoned house, and part of a vineyard. … The lot is one of four on a bigger block, which already has at least one residence. All four lots are owned by one company, Pialligo Horticulture. Through a series of companies, Pialligo Horticulture has four separate owners, who The Canberra Times understands have responsibility for one lot each. … The land is listed on ACTmapi as mixed-use zoned, with Broadacre and River Corridor zoning codes. According to the lease, seen by The Canberra Times, only three residential dwellings can be built on the entire 19 hectare block. The Blackshaw real estate agent selling lot 2 declined to comment. Pialligo Estate next door It is the second lot within 18 Kallaroo Road to be listed for sale this year. Lot 4 was listed for sale in April and was expected to sell for more than $30 million, the selling agent told this masthead. Spanning nearly 13 hectares, lot 4 is the site of the former Pialligo Estate wedding venues and restaurant. 52 The plaintiff in her affidavit confirms that another lender has taken possession of lot 4, the lot on which the Pialligo Estate business operated, and that this lot has not been maintained for 6 months and that it remains on the market. 53 In these circumstances, there appears to be some notoriety as to the distressed circumstances in which the various groups of shares in Pialligo Horticulture and the related leasehold property interests are being offered for sale. That notoriety would pertain even if the plaintiff was undertaking the sale directly. The interests of Westpac and the defendants are caveated or otherwise registered and would be readily ascertained by any potential purchaser. 54 The plaintiff's written submissions also asserted that defendants' draft contract for sale did not comply with certain requirements ASIC Corporations (Real Estate Companies) Instrument 2015/1049. That submission was withdrawn by counsel for the plaintiff during the hearing on 17 October 2023. Counsel for the plaintiff nonetheless pressed the submission that the features he had indicated were missing from the contract of sale was a factor relevant to the manner in which the sale of the shares was conducted despite abandoning the submission that there was a legislative requirement for those features to be present. 55 The plaintiff was in the best position to lead evidence as to any matters relating to the affairs of the Company that may impact the sale of the Lot 2 shares. The only evidence led by the plaintiff was a letter from a director of the company in which it was asserted, inter alia, that the Lot 2 shares were subject to a lien in favour of the company for unpaid dues in an amount that was not quantified. I do not follow how this adds to the prejudice the plaintiff asserts would flow from refusing to grant the injunction. 56 The Constitution which is annexed to the agreement for sale of the Lot 2 shares makes provision inter alia in respect of encumbering shares, the imposition of first ranking liens on shares (and the proceeds of sale of shares) in favour of the Company, the circumstances in which the Company may refuse to register a transfer of a Group of Shares including where the Company has a lien on the shares and the right of appeal in respect of such a refusal. The parties did not address any submissions to the impact of the share transfer-related provisions of the Constitution on the sale process. A potential purchaser who obtains a copy of the agreement for sale of the shares annexing the Constitution would be free to make such further enquiries as thought fit based on their review of the Constitution. 57 In weighing the prejudice to the plaintiff and assuming that she ultimately succeeds in setting aside the SSAs and guarantees, I have also taken into account that until such time as the Westpac debt is repaid, she will continue to incur interest which will further impact her financial plight. That may be for a limited period if a quick sale is achieved but achieving a quick sale at an advantageous price is far from certain. Prejudice to the respondents 58 If the defendants are injuncted from proceeding with the auction to allow for the plaintiff to conduct her preferred marketing campaign, the mortgage will likely increase by at least $11,000 to $15,000 by reason of interest accruals, and that is assuming that the plaintiff's preferred process results in a sale in the minimum time forecast. Assuming that the property is eventually sold following the marketing campaign, any sum recoverable by the defendants from the proceeds of sale will necessarily be reduced by the increased amount that will be payable to the first ranking mortgagee. Further, the additional costs of running the marketing campaign will need to be incurred and deducted from the sums recoverable by the defendants. In the event that the marketing campaign and sales process run by the plaintiff does not eventuate in a sale of the property, then interest will continue to accrue on the mortgaged sum and further erode the balance of the proceeds from which the defendants seek to recover. The rate of any such erosion is likely to increase after expiration of the hardship arrangement when the Westpac loan presumably reverts to principal and interest, possibly at a higher interest rate if the loan is still in arrears at that time. 59 I raised with counsel for the defendants that on the evidence led by the defendants at the hearing on 17 October 2023 there was no evidence that there had in fact been any registrations for the auction in circumstances where there had not been any offers made during the EOI process and therefore it was not clear that the defendants would be prejudiced if they were injuncted from holding the auction as planned. Counsel for the defendants sought and obtained an opportunity to provide further evidence as to registrations for the auction. Mr Coyle deposed to being informed that as at approximately 7pm on 17 October 2023, there had been one registration for the auction but that it was open for potential purchasers to register at any time prior to the auction. In these circumstances, I accept that there is a possibility that the shares may sell at the auction and if the defendants are injuncted that in addition to the prejudice arising from the additional costs set out in the preceding paragraph, they would also lose the opportunity to sell the shares at the auction, or in the aftermath of the auction, and the costs incurred in promoting and holding the auction would be lost. Prima facie case 60 The plaintiff submitted that the strength of the prima facie case was such that it weighed strongly in favour of the grant of an injunction as a consideration relevant to the balance of convenience. The defendants disputed the asserted strength of the case, and submitted that the facts in Garcia are different from this case in many respects including as to the nature and use of the property in issue (vacant lot versus family home) and the overall commercial context in which the guarantees were given. 61 In supplementary tender and submissions, the defendants point to the underlying loan agreements, which the plaintiff did not tender, which contain express, prominent warnings that as a guarantor, the plaintiff should obtain independent legal advice and independent financial advice and satisfy herself as to, inter alia, the borrowers' capacity to pay. The defendants' evidence potentially cuts across one of the central tenets of the plaintiff's allegations. 62 By way of example, the cover page of the Desi Loan Agreement – Pialligo Estate Facility includes the following: WARNING TO THE GUARANTORS – PLEASE READ This is a very important agreement. There are financial risks involved in signing this Agreement in your capacity as a guarantor. You may have to pay money owed by a Borrower or an Obligor referred to in this Agreement. You can refuse to sign this Agreement. BEFORE YOU SIGN THIS AGREEMENT: You should read it carefully. You should check for yourself whether each other Obligor can and will pay its debts. You can ask for information about the Finance Documents. You should see your own lawyer and financial adviser for advice on this Agreement and give them the information given to you by the Lender. If you do not, you should wait a day before you sign it. 63 The relevant warnings also appear on the signature page of this agreement, immediately above the plaintiff's signature: IMPORTANT BEFORE YOU SIGN THINGS YOU MUST KNOW • READ THIS PRINCIPAL AGREEMENT AND OTHER FINANCE DOCUMENTS. • Understand that, by signing this Agreement, you may become personally responsible instead of, or as well as, the Borrowers to pay the amounts which the Borrowers owe and the expenses of the Lender in enforcing the guarantee. • You should obtain independent legal advice. • If the Borrowers do not pay, you must pay. This could mean you lose everything you own including your home. • You should also obtain independent financial advice. • You should make your own inquiries about the credit worthiness, financial position and honesty of the Borrowers and the other Obligors. 64 The defendants' submissions are of considerable force, but this point need not and should not be decided on this interlocutory application. For present purposes, it is sufficient to observe that I do not regard the strength of the prima facie case as being other than a neutral factor when considering the balance of convenience. Delay 65 For completeness, I note that notwithstanding that there was some delay on the part of the plaintiff in bringing this application, I am satisfied by her explanation for that delay and accordingly have not weighed the delay as a disentitling factor on this application. Conclusion - injunction 66 Taking into account the competing prejudice to the plaintiff and the defendants and having taken into account the limited comfort provided by the plaintiff's undertaking as to damages, I have concluded that the balance of convenience favours refusing the plaintiff's application. For these reasons, at the conclusion of the resumption of the interlocutory hearing on the morning of 18 October 2023, I made orders that the plaintiff's application for an injunction be dismissed. Alternative form of relief 67 As an alternative to the prayer for an injunction, counsel for the plaintiff sought an order that the net proceeds of the share sale be held in a solicitor's controlled monies account, pending resolution of the substantive proceeding. The defendants objected, submitting that to so order would amount in effect to a freezing order against the defendants in respect of the net proceeds and would impermissibly operate as security for any future judgment obtained by the plaintiff. I agree. The plaintiff has not sought on this application to establish the relevant risk of dissipation for the purpose of frustrating the administration of justice such that it would be appropriate to make a freezing order. 68 For this reason, I indicated that if an injunction was not granted, I would be minded to order that the net proceeds of any sale of the Lot 2 shares be held in the defendants' solicitors' controlled monies account for a limited period of time to enable the plaintiff to bring a freezing order application if she wishes to pursue that course. An order in the nature of a freezing order is not an order that the Court would lightly make without a proper evidentiary basis. Having decided that it was not appropriate to grant the interlocutory injunction, I made orders preserving the net proceeds of sale for a limited period in the defendants' solicitors' controlled monies account and related orders of a mechanical nature. CONCLUSION 69 At the conclusion of the hearing, I made orders in accordance with the reasons I have set out above. 70 The plaintiff did not proffer any reason as to why costs should not follow the event. Accordingly, I also ordered that the plaintiff pay the defendants' costs of the interlocutory application. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman. Associate: Dated: 19 October 2023 SCHEDULE OF PARTIES ACD 60 of 2023 Defendants Fourth Defendant: MILDESI SECURITY HOLDINGS PTY LIMITED ACN 636 039 766