Supreme Court New South Wales Medium Neutral Citation: Rural Security Holdings Pty Ltd v Acropolis Holdings Pty Ltd [2011] NSWSC 750 Hearing dates: 8, 11 July 2011 Decision date: 11 July 2011 Jurisdiction: Equity Division - Duty List Before: Rein J Decision: Plaintiff to pay the defendant's costs. Catchwords: PRACTICE AND PROCEDURE - costs - where the plaintiff brought an urgent application to remove a caveat lodged by the defendant and the defendant challenged the urgency - the plaintiff abandoned its application for urgent relief on the second day of the hearing Category: Costs Parties: Rural Security Holdings Pty Ltd (plaintiff) Acropolis Holdings Pty Ltd (defendant) Representation: F Assaf (plaintiff) R Francois (defendant) Bailey Compton Leverage Australia Pty Ltd (plaintiff) Brown Wright Stein (defendant) File Number(s): SC 2011/206625 EX TEMPORE Judgment 1In these proceedings the plaintiff, Rural Security Holdings Pty Ltd ( "Rural" ), seeks, as mortgagee in possession of a property at Watanobbi in New South Wales, the removal of a caveat lodged by Acropolis Holdings Pty Ltd ( "Acropolis" ), the defendant, on 19 February 2010. Rural claims to have entered into a contract for sale with SLN Developments Pty Ltd ( "SLN" ) for $1.1 million in March this year ( "SLN Contract" ) and the position was that the Acropolis caveat was holding up the transaction and that SLN would not proceed with the sale unless the caveat was removed immediately. I was told on Friday afternoon that if it was not removed by 12 noon today the sale would fall through and that the plaintiff was concerned that it not lose the benefit of the SLN Contract. 2This matter came before me as duty judge on Friday. I commenced hearing the matter at approximately 12.30pm and the matter continued until 4.40pm on Friday afternoon. 3The caveat that was lodged by Acropolis is one which was lodged after a contract of sale for a price of $750,000 had been entered into by the vendor, the owner of the property, EPI Developers Pty Ltd ( "EPI "), and Acropolis in February 2010 ( "Acropolis Contract" ). At that stage there had been receivers and managers appointed to EPI and they were acting in relation to the sale and then instructed solicitors to act on behalf of EPI as vendor. 4The matter is quite complicated. The position of the plaintiff, which was proceeding by way of summons, was that the caveat had to be removed because the Acropolis Contract had been validly rescinded in April this year. It also asserted that the caveat was bad in form and too wide in scope and that even if the contract had not been validly rescinded, it was entitled to exercise its rights as mortgagee in possession which could not be overcome by any caveatable interest of Acropolis. 5Ms R Francois of counsel, who appears for the defendant, advised the Court that her client, Acropolis, claims that Rural was not acting bona fide as mortgagee and that the supposedly urgent sale was actually not what it appeared to be. At one point she sought an adjournment to put on further evidence which was opposed by Mr F Assaf of counsel appearing on behalf of the plaintiff. The matter proceeded. 6Towards the end of Friday afternoon when almost all the evidence had been read and tendered, certainly by the plaintiff in its case in chief and by the defendant in its case, there remained one further document which Ms Francois sought to tender on behalf of the defendant. It was not in fact tendered due to objection by Mr Assaf but I have a copy of it and I proposed to receive it as Exhibit 4. It contains two emails dated 27 May 2011 and 26 May 2011. Both emails are from Mr Dennis Mirosevich to "edh1" who I infer, given the salutation of "Dear Mark" in the email of 26 May 2011, is a reference to Mr Mark Eastham who is a director of the defendant company (see the affidavit of Mr David Raymond Platt of 7 July 2011). In any event, the first email at the bottom of the page is sent by Mr Dennis Mirosevich and confirms that he has been appointed as the authorised agent by the mortgagee in possession. He invites Mr Eastham, on behalf of Acropolis, to "submit your offer including any accompanying terms by way of return mail by COB today." The second e-mail at the top of the page is a confirmation that on behalf of Rural as the mortgagee of the subject property, he has confirmation to sell the property for $600,000 plus $250,000 vendor finance. SLN, the company which is said to be the purchaser of the property for $1.1 million, is a company owned by Mr Dennis Mirosevich. There is also evidence before the Court that in 2010, Mr Richard Mirosevich was previously the selling agent for the property, that Mr Dennis Mirosevich took over from Mr Richard Mirosevich and that Mr Richard Mirosevich was then reappointed in place of Mr Dennis Mirosevich. 7This is connected to the defendant's case that there have been matters in the history of this contract with Acropolis and following that bring into question the bona fides of Mr Ian Lazar, a director of a company called Syndicate Mortgage Securities Pty Ltd (" SMS ") and SMSCF Pty Ltd (" SMSCF" ) with which he also has a connection and which companies were jointly a mortgagee by assignment from the original mortgagee and who subsequently assigned their interest to Rural. Those companies, or at least SMS, appointed the receivers who entered into the Acropolis Contract on behalf of EPI. 8The doubts engendered as to the genuineness of the SLN Contract and the urgency of the matter are not limited to that topic but link to the defendant's wider argument that the conduct of SMS and SMSCF through its director Mr Lazar was not a bona fide exercise of a mortgagee's powers and is linked to the question of whether or not the Acropolis Contract was validly rescinded and hence whether Acropolis can obtain specific performance of that contract. I think there is sufficient material in the evidence tendered before me to establish that there is a serious question to be tried. I do not, given what has occurred, need to express any view about the strength of that evidence. 9On Friday afternoon in the course of discussion on the balance of convenience, I enquired whether Mr Dennis Mirosevich could attend so that he could appraise the Court of the precise degree of and reason for urgency, there having been no direct evidence from SLN about this and nothing in writing to support Mr Lazar's evidence on this topic. Mr Assaf said that arrangements would be made to have Mr Mirosevich present at 10 am today. Mr Assaf also sought time to put on some evidence in reply to the defendant's case and there was an agreement about the appropriate timetable for that to occur prior to resumption of the hearing today. 10When the matter was called this morning, Mr Assaf indicated his client needed more time to meet the allegations of the defendant. He did not seek to call Mr Dennis Mirosevich and he did not assert that Mr Mirosevich was not available to give evidence or that he could not be contacted. The plaintiff seeks a timetable for the further steps to be taken in this case and no longer presses for the removal of the caveat. Ms Francois submitted that this demonstrates, particularly when supported by other material, that the plaintiff's assertions that there was a genuine sale to SLN, that the matter was genuinely urgent and that the sale would fall through by 12 o'clock today were bogus claims by the plaintiff. 11There are a number of matters which do call into question the legitimacy of this sale. The two emails to which I have referred as Exhibit 4 really call into question how genuine the sale was given that Mr Dennis Mirosevich accepted instructions after the supposed date of the contract for sale to act as agent for sale and then to communicate an offer on behalf of Rural to Acropolis for the sale of the property at $850,000. 12There are some other indications in the material which might tend to support the proposition that the sale was not what it purported to be, including the fact that although the contract referred to a deposit of $110,000, that amount was not paid by the purchaser and that an amount of $80,000 which Mr Lazar said has been paid by SLN (and of which there was no corroborative evidence) was described by him as a "good faith deposit". 13There was an issue raised about the precise status of the proceedings, with Ms Francois asserting that the case was really heard on a final basis and that if there was to be an adjournment it should be on the basis that I, as the judge having been seized of the matter, am part-heard. 14It is true that the plaintiff wished to have the caveat removed but to avoid this result the defendant had to establish that there was arguably a serious question to be tried and, if there was, for this Court to determine on the balance of convenience whether or not the caveat should be removed. 15Based upon the evidence before the Court, I had come to the view that there was a serious question to be tried and that the only issue remaining was whether the balance of convenience favoured the removal of the caveat. This depended to a significant degree on the genuineness of the SLN Contract and a consideration of the fact that not only was there no evidence that Acropolis could meet any claim for damages if it is unsuccessful in its claims to be able to specifically enforce the Acropolis Contract, but the directors of Acropolis declined to offer any security in support of Acropolis to meet such eventuality. 16In the circumstances which have transpired I now of course cannot be satisfied that the balance of convenience requires the removal of the caveat and I am not asked by the plaintiff to take such a step, and this is in a context where the Court could have granted the relief sought by the plaintiff this morning had the plaintiff wished to proceed with its claim. 17Mr Assaf also contended that the defendant had only notified the plaintiff of its real position on Friday. Ms Francois' explanation for that is not without foundation because the defendant had sought and only obtained subpoenaed material last Wednesday and needed to examine that material before being able to fully articulate its case, although much of that material would be matters well within the provenance of the plaintiff's knowledge. Importantly, when Ms Francois did articulate her position on Friday morning, no application for an adjournment was made by Mr Assaf on behalf of the plaintiff at that point in time and the matter proceeded. 18In those circumstances although it is unfortunate that the details of the case were only fully provided to the plaintiff on Friday it was part of the process made urgent by reason of the plaintiff's contention that there was a sale about to fall through. 19The usual rule is that costs follow the event. Mr Assaf submitted that no event has occurred from which costs can follow because the Court has not determined the matter. I am satisfied, however, that in the circumstances of this case, which are somewhat unusual, the defendant who resisted the urgent summons has been successful in its resistance and accordingly the plaintiff should pay the costs of the defendant of the hearing on Friday and today. The plaintiff has in effect abandoned the application to have the caveat removed on an urgent basis. ********** 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. Decision last updated: 19 July 2011