Priority One Home Loans Ltd & Anor v. Amplitude Investments Pty Ltd & Ors [2007] NSWSC 845

New South Wales Supreme Court

CITATION : Priority One Home Loans Ltd & Anor v. Amplitude Investments Pty Ltd & Ors [2007] NSWSC 845

HEARING DATE(S) : 26 July 2007

JUDGMENT DATE : 26 July 2007

JURISDICTION : Equity Division

JUDGMENT OF : Palmer J

EX TEMPORE JUDGMENT DATE : 26 July 2007

DECISION : Upon certain undertakings by Plaintiffs, Receivers removed.

CATCHWORDS : INTERLOCUTORY ORDERS – RECEIVERS AND MANAGERS – REMOVAL – Receivers and Managers appointed under charge securing debt which is disputed – serious question to be trued as to whether debt payable – Plaintiffs offer undertaking to preserve fund – whether balance of convenience requires removal of receivers.

Priority One Home Loans Ltd – First Plaintiff Gerd Rolf Mertes – Second Plaintiff PARTIES : Amplitude Investments Pty Ltd – First Defendant Property Solutions 4U Pty Ltd – Second Defendant Richard Albarran – Third Defendant Blair Pleash – Fourth Defendant

FILE NUMBER(S) : SC 3519/07

M. Southwick – Plaintiffs COUNSEL : B.F. Katekar – 1st & 2nd Defendants J.E. O'Sullivan – 3rd & 4th Defendants

SOLICITORS : North Shore Lawyers – Plaintiffs Etienne Lawyers – Defendants

3519/07 Priority One Home Loans Ltd & Anor v Amplitude Investments Pty Ltd & Ors

JUDGMENT – Ex tempore 26 July, 2007

1 By a Statement of Claim filed on 6 July 2007, Priority One Home Loans Pty Ltd ("Priority") and Mr Mertes commenced proceedings against Amplitude Investments Pty Ltd ("Amplitude") and Mr Lynch, a director of that company, claiming that Amplitude had repudiated a Consultancy Agreement between Priority and Mr Lynch, dated 23 October 2006. 2 The Statement of Claim also sought declarations to the effect that Priority had accepted the repudiation and had terminated the Consultancy Agreement on 1 June 2007, so that Priority ceased to have any further liability to Amplitude under a certain Deed of Charge entered into between the parties, also dated 23 October 2006, whereby the obligations of Priority to Amplitude under the Consultancy Agreement were secured. 3 Further ancillary relief was sought, including orders for damages against Amplitude for breach of the Consultancy Agreement and damages against Mr Lynch for trespass and wrongful detention of assets of Priority. 4 Slightly less than two weeks after the filing of that Statement of Claim and before any defence had been entered, Amplitude purported to appoint Receivers and Managers to Priority, pursuant to the Deed of Charge which secured the obligations of Priority under the consultancy agreement. 5 Priority and Mr Mertes now, by Notice of Motion filed 19 July, seek orders that the Receivers and Managers appointed by Amplitude to Priority, be joined as defendants in the proceedings, and an order restraining the Receivers and Managers from taking any further step in the proceedings until further order. Mr Southwick of Counsel, who appears for the Plaintiffs, now also seeks an order for the removal of the Receivers and Managers pending determination of the proceedings, upon the basis of a certain undertaking, which the Plaintiffs offers and to which I will come shortly. 6 The circumstances in which the application is made may be briefly recounted. Priority carried on a business of mortgage broking. The sole shareholder was the Second Defendant, Mr Lynch, who was also its director. Priority was entitled to certain trail fees from lenders in respect of mortgage loans which it had brokered. 7 On 23 October 2006, a company controlled by Mr Mertes, SC Investments & Finance Pty Ltd ("SCI"), entered into a Share Acquisition Agreement with Mr Lynch, whereby Mr Lynch agreed to sell all of the shares in Priority to SCI. Completion of the transfer of shares was deferred under the terms of the Agreement and, upon completion, Mr Lynch was to retire as a director. 8 It appears that, on the same day as the Share Acquisition Agreement was entered into, Priority entered into a Consulting Agreement with Amplitude, which is a company controlled by Mr Lynch. Under that agreement, Priority agreed to engage Amplitude as its consultant for a term of four years. Clause 3 of the agreement provided for the payment of a consultancy fee in accordance with item 4 of the schedule. The fee, as provided in the schedule, is as follows: " 4. Fee