New South Wales Supreme Court CITATION : Elite Apartments Pty Ltd v Arab Bank Australia Ltd [2007] NSWSC 521 HEARING DATE(S) : 17/05/07 JURISDICTION : Equity Division JUDGMENT OF : Young CJ in Eq EX TEMPORE JUDGMENT DATE : 17 May 2007 DECISION : The notice of motion is dismissed with costs. CATCHWORDS : MORTGAGES [50]- Remedies of mortgagee- Power to sell- Statutory notice before exercise- Mortgagor in default because of insolvency- Mortgage provides that on such default mortgagee may sell without notice- Held clause sufficient to activate s 58A of the Real Property Act 1900- Mortgagee can exercise power of sale without notice. LEGISLATION CITED : Corporations Act 2001 (Cth) Real Property Act 1900, ss 57(2)(b), 58A CASES CITED : Project Research Pty Ltd v Permanent Trustee of Aust Ltd (1990) 5 BPR 11, 225 PARTIES : Elite Apartments Pty Ltd (P) Arab Bank Australia Limited (D) FILE NUMBER(S) : SC 5248/06 COUNSEL : H Woods (P) G Lucarelli (D) SOLICITORS : Consolidated Lawyers (P) Dibbs Abbott Stillman (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Thursday 17 May 2007 5248/07 – ELITE APARTMENTS PTY LTD v ARAB BANK AUSTRALIA LTD JUDGMENT 1 HIS HONOUR: This is a motion to prevent a mortgagee sale of some units at Vaucluse which is scheduled for next Saturday. 2 The plaintiff is the registered proprietor of the land comprised in Folio Identifier 1/SP72110 to 5/SP72110 being units 1 to 5 at 18-20 Old South Head Road, Vaucluse. Three of those units are up for sale by auction next Saturday as a mortgagee sale. 3 The concession has been made that there is no complaint made about the arrangements made for the sale or anything else in connection with it. However, there are three matters which I might have to determine viz: (a) whether a notice under s 57(2)(b) of the Real Property Act 1900, dated 12 July 2006, is of any validity; (b) questions of the balance of convenience; and (c) questions as to whether in any event there is a non-monetary default so that because of s 58A of that Act it is immaterial whether the section 57(2)(b) notice is valid or invalid. 4 The relevant mortgage is Exhibit PX07. Its provisions are in what lawyers of an earlier generation would think a strange form, the jargon being something that is currently known as "Plain English". Be that as it may, cl 23 of the mortgage informs the mortgagor that it will be in default if: "(f) you (if you are a corporation) are or become ... insolvent or steps are taken to make you ... insolvent." 5 The definition clause, cl 43, defines "insolvent" as including a company having a controller appointed, being in receivership, under administration, being wound up and the like. Accordingly, steps taken to make a debtor insolvent include the issue of a statutory demand under the Corporations Act 2001 (Cth). 6 There is no doubt that a statutory demand was issued on the plaintiff corporation in March 2006, no steps were taken to set it aside and nothing was paid under it, the plaintiff endeavouring to raise money from another source to pay out both the statutory demand creditor and also what it considers is the other defendant. 7 Going back to the mortgage, cl 24.1 says, "If you are in default the amount owing is payable on demand". Clause 26 excludes time periods and that brings in s 58A of the Real Property Act which means it is immaterial whether the s 57(2)(b) notice is correct or not. 8 I have not had to delve too deeply into the case. It would appear that the main problem for the plaintiff commercially is that there is an alleged contingent liability of $900,000 and that it is the presence of that liability which makes it difficult to assess the amount due to the mortgagee. However, unfortunately for the plaintiff, the law appears to be that that sort of dispute can only be dealt with on accounts between the parties. 9 In order to get relief, the amount reasonably demanded by the mortgagee must be paid into court or brought to account. I do not know whether the amount demanded by the mortgagee is reasonable or not, but ordinarily what the mortgagee considers reasonable is prima facie what needs to be paid; see the judgment of Hodgson J in Project Research Pty Ltd v Permanent Trustee of Aust Ltd (1990) 5 BPR 11, 225. 10 Accordingly, I can give no relief on the notice of motion and it must be dismissed with costs. ********************* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.