COMMUNICATIONS GROUP (AUSTRALIA) PTY LTD v BRIEN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL HANDLEY J 23 January 1992 [1992] NSWCA 45 Handley J This is an application by the claimants, Communications Group (Australia) Pty Ltd, for interlocutory relief pending the hearing of an appeal from a decision of Cole J as the vacation judge sitting in Equity which was given on Friday 17 January this year. It is not in dispute and not in doubt that the claimant has an appeal as of right to this Court from the decision of Cole J, his Honour having dismissed absolutely the claimant's summons for relief and not merely refused interlocutory relief pending the hearing of the proceedings. The circumstances in which this Court will grant interlocutory relief pending the hearing of an appeal as of right, are not in dispute and are not dissimilar to the circumstances in which the interlocutory relief will be granted by a judge in a Division pending the hearing of proceedings for final relief in the Division. The moving party must establish that there is a serious question to be determined and once this issue has been decided in favour of the moving party then questions of irreparable injury and the balance of convenience have to be weighed and call for the exercise of an active discretion on the part of the Court. So far I have only heard argument on the question whether there is a serious issue to be determined in the appeal pending from the decision of Cole J. The proceedings arise out of the sale of a business by the second opponents to the claimants. The sale took place late last year and part of the purchase price was secured to the vendors, the second opponents, by a mortgage debenture granted by the claimants over the assets of the business. These include retail clothing shops located in O'Connell Street in the city and at Neutral Bay. Under the mortgage debenture instalments of interest were due on 11 November 1991, 11 December 1991 and 11 January 1992 and the principal sum secured by the debenture $75,088.78 also fell due for payment on 11 January 1992. There is no dispute that the present claimants are in default in payment of the instalments of interest due on 11 November, 11 December and 11 January and are also in default in the payment of the principal due on 11 January this year. On 16 January the second opponents, purporting to act pursuant to a power to appoint a receiver conferred by the mortgage debenture, appointed the first opponent as receiver and manager of the property, the subject of the mortgage debenture. The validity of this appointment was challenged by the claimants in the proceedings in the Equity Division which came before Cole J for hearing on 17 January. His Honour refused interlocutory relief and also dismissed the summons absolutely as I have already mentioned. As presently advised it would seem likely that his Honour's order dismissing the summons absolutely cannot be supported and to that extent the appeal would appear to have significant prospects of success. However, the important question is whether there is sufficient prospect of the claimants establishing that the 2 UNREPORTED JUDGMENTS appointment of the receiver and manager was invalid, to warrant the grant of interlocutory relief by this Court pending the hearing of the appeal. Mr Burchett, who appeared for the claimants, presented a clear but technical argument that the power of appointing a receiver under the debenture was not exercisable because of the combined operation of the relevant clauses of the debenture and s111(5) of the Conveyancing Act. The point arises thus. CL3 of the debenture provides: "That at any time and from time to time if the moneys hereby secured shall become payable the mortgagee may appoint in writing any person to be a receiver and manager... of the mortgaged premises...". Mr Burchett's submission was that interest for the five days between 11 and 16 January formed part of the moneys "hereby secured" and that they had not become payable in the ordinary course prior to the appointment of the receiver and were only payable on 16 January if other provisions in the mortgage debenture had accelerated their payment. It is clear from the terms of the covenant to pay interest contained in CL(a)(ii) of the debenture that interest for those five days was not ordinarily payable until 11 February. Accordingly, it is only if payment of that interest for those five days has been accelerated in some way that, in his submission, the power of appointing a receiver became exercisable on 16 January when the second opponents purported to exercise that power. The acceleration provision relied upon by Mr. Burchett is contained in CL2(i) of the debenture, which provides: "That the moneys hereby secured shall at the option of the mortgagee... immediately become payable without demand or notice in any of the following events: (i) If the mortgagor shall default in whole or in part in payment of the principal sum and/or interest and/or any other moneys payable hereunder at any of the times appointed for payment hereof." It seems to me that thus far Mr Burchett's argument is fairly open on the language of the debenture and thus far the claimants have established a sufficiently arguable case to warrant the grant of interlocutory relief. The final step in Mr Burchett's argument is that the interest for the five days in question formed part of the "moneys hereby secured" within the meaning of the debenture. The debenture so far as relevant contained a provision that the mortgagor as beneficial owner: DOES HEREBY CHARGE all its undertaking and its assets... with payment to the mortgagee of the principal sum and interest thereon as herein provided and also all other moneys which the mortgagor has or shall hereafter become liable to pay to the mortgagee under the terms hereof... (all of which principal sum, interest and other moneys are hereinafter referred to as 'moneys hereby secured')." It seems clear to me that future interest on the principal sum, for example, interest which would accrue between 11 February and 11 March, was not part of "the moneys hereby secured" for the purpose of this debenture as at 16 January when the second opponents purported to exercise the power to appoint a receiver under the debenture. It is equally clear that if the principal sum remains due and unpaid, or some part thereof remains due and unpaid as at 11 March 1992 interest for the previous month would then become part of "the moneys hereby secured". URJ COMMUNICATIONS GROUP (AUSTRALIA) PTY LTD v BRIEN (Handley J) 3 It seems to me that the moneys which fall due in the future, although potentially part of "the moneys hereby secured", are not actually moneys "hereby secured" for the purpose of the debenture at any earlier point of time. That, however, still leave for decision the present question which relates to interest for the five days which had accrued due on the principal sum between 11 and 16 January but which apart from the acceleration provision earlier referred to would not be due for payment until 11 February this year. The question is whether interest for those five days or interest for any other greater period of less than a month forms part of the "moneys hereby secured" for the purpose of the debenture prior to that interest becoming payable. The question turns on the effect of the words "charge.. its undertaking... with payment... of the interest thereon as herein provided." It is these words which must determine the present question. I have to ask myself whether the claimants have a fairly arguable case that interest due but not yet payable forms part of "the moneys hereby secured" pursuant to that language. The question would not arise if the interest clause in the debenture was in the usual form. The problem only arises in this case because interest on the principal sum, which is now overdue, still only becomes payable monthly. The normal clause providing for payment of interest on overdue principal does not provide for any postponement of the liability to pay interest in this way. Giving the argument of Mr Burchett the best consideration that I can, it seems to me that under the language previously quoted, interest only becomes part of the "moneys hereby secured" when payment of that interest is due "as herein provided" namely on the 11th of each month. If the words "as herein provided" were not there it would be clear that the charge for the moneys "hereby secured" covered interest as and when it accrued due even though it was not presently payable. However, the clause provides that the undertaking of the mortgagor is charged with "payment of the interest as herein provided" and that necessarily seems to me to tie the definition of the moneys hereby secured to the covenant for payment which provides for interest to fall due on the 11th of each month. It seems to me, therefore, that only interest which is due for payment forms part of the moneys "hereby secured" and that interest for the five days in question is in the same position as future interest for example for the months of February or March. I, therefore, have formed the view that the claimants have not established that there is a serious question to be argued that the "moneys hereby secured" include interest for the five days in question. I have given serious consideration to the question whether notwithstanding the clear view I have formed, other minds might come to a different view. In that event I would be justified in hearing argument on the discretionary aspects of the issues relating to the grant or refusal of interlocutors relief. However, giving the matter the best consideration I can, it seems to me that there is in truth no serious question to be determined in relation to the five days of interest and because of the language to which I have drawn attention this interest does not become part of the "moneys hereby secured" and would not become part of the "moneys hereby secured" unless and until the interest fell due for payment on 11 February. 4 UNREPORTED JUDGMENTS In these circumstances I have concluded, despite the clear and admirable argument of Mr. Burchett for the claimants, that they have not established the necessary foundation for the granting of interlocutory relief pending the hearing of this appeal. I, therefore, decline to grant interlocutory relief and the motion for interlocutory relief will be dismissed. The order I will make is motion dismissed with costs.